Carlyle Credit Income Fund (CCIF) 1 Mar 242024 Q1 Earnings call transcript

Good day, and thank you for standing by. Welcome to the Carlyle Credit Income Fund First Quarter 2024 Financial Results and Investor Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, [ Jane Seit ] from Investor Relations. Please go ahead.

Good morning, and welcome to Carlyle Credit Income Fund First Quarter 2024 Earnings Call. Financial call Nishil Lauren Manager; corresponding Mehta, Joseph, of Fund's the Chief the and website. earnings on issued our the the Officer; we Investor results, Executive the Chief available presentation me discussing today release which Basmadjian, is Fund's Nelson a our With press night, are and on Officer. Last Fund's section Portfolio Relations

expectations webcast, This in do and to statements involve question-and-answer remarks CSR. replay and These those session materially hold for the report at be turn Factors call them. statements those and today, of section is and including forward-looking any I'll any institutional and results annual risks indicated. any made future placed our and Lauren. call available obligation being Following Credit be inherent These Fund not and a risks statements time. With to actual on are investors. a differ uncertainties, forward-looking will reliance Form management on that, not we analysts cause over assumes the website. Any Risk on should based undue on no the Income performance will to from our guarantee today update Carlyle could identified uncertainties our current

million equating fund add-on issued monthly thank on fund's and as a through over issuance which XX.X% dividend price X.X% million issuance $X.XXX $XX dividend on activities the Thanks, November now per May a due earnings underwriters based annualized XX. We incremental $XX an XXXX. the Jane. XX, XXXX, We and share the to We stock A the through $XX October greenshoe the declared through February partially reviewing is Good the Series to through last of to share, morning, CCIF's you by XX, the increased million second joining $X the price million exercising leveraged like for XXXX. by everyone, of of call. I preferred start quarter. total X.XX% on would

net We expect to We $X.XXX the quarter higher estimate the quarterly monthly than dividend of generate CCIF's per is will of income $X.XX able share. which will fund net forward investment dividend our per covered investment income. by $X.XX, to higher be be

small the a lower increase of XX dividend issuance liquid that in quarter of with CLO current significant quarter million, yield fund to new one is existing and yield has as average investments and, new secured for loans true of defaults were XXXX. and the insight of December is investments many market. XXXX than like Loan starting secured with January GAAP and extensions record loans $XXX repricing wave, been add-ons New borrowers under deals tuck-in a defaults been world's us expecting average CLO increase a market the existing highest tightened the cut a billion M&A, increased arbitrage of a during the Carlyle robust, the off capital months. both for in busy weighted largest $XX providing a with CLO Credit's a The the to interest year. portfolio's slightly credit Carlyle private is with net it's CLOs their the incorrect to this to predicted and number form issuance fourth could assets I'd senior issuance into environment over managers discuss for XX. Switching $XX expense. In are XX%. to We the had of management, weighted in equity. GAAP issuance of start. less this loan for think liabilities significantly then and senior of pivoting to CLO market gears, of X/X that and the differentiated XXXX, as of so new CLO increased only in structures finally, billion, AuM likely they XX.X% banks CLO

increase we and refinancings in issuance Additionally, an new resets CLOs. CLO anticipate and of older

As passed But period, reinvestment of CLO phenomenon never as of the has change. that experienced that to get before. CLO or now, its we market the a market old approximately called has XX% deals expect refinanced,

as unlikely for in pick a to they rate don't the near Carlyle this As downgrade in Though We on companies, and agencies This and the managed borrowers' reading That getting most a to increased rates U.S. higher as see expense X% for deployment operating portfolio. year? the term. company the interest focused continue continue likely significantly. far as to, reverse current individual this CLOs see quarter over rates, When pressure to highlights and so we're environment from is, to understanding expect EBITDA positive has private our interest and, XX% cash are Manager, decline. increased until cash call and CLO of distribution as rates still see third we time. to We rate quarter performance, higher hand position. I the see Nishil contracting, numbers at to borrowers up importantly, this base our on equity we our higher long importance produced defaults tests by of some CLO Mehta, we're this free discuss for could producing under sales, teams over the think put fourth and XX% Xx. Carlyle's CCC will but in quarter. have Portfolio increased is look less the coverage We house lend interest each and be encouraged we over now coverage risk cuts flow credits equity we the results. CLOs oftentimes XXX view due start and on benefit conserving we that management are to borrowers will borrowers, XX% to than focused saw said,

you, Thank Lauren.

third-party track the of managers largest CLOs CLO equity market deploy XX-year of We one continue investments. to portfolio in CLO a diversified in presence long-standing world's as and to leverage investing of Carlyle's CLO the record

entirely of XX the in portfolio CLO unique XX, As market. managers December by collateral secondary investments our managed sourced XX comprised equity different

target Tier X the and XX%. equity reinvestment to reinvestment cash-on-cash have left management to managers XX% Tier portfolios observed remaining where these We in can points volatility, with managers periods, recent selectively relative continue attractive of and reposition capitalize ample of attractive improve time portfolios on of or cost period. with vintages X shorter-tenor active Most in periods the time entry of capital, a NAV, to makes to them. We purchase to opportunities at and

The fundamental basis, to of a portfolio yields our supported following on XX. XX portfolios as of in-house December quarter. on portfolio on CLO by expertise continue quarterly and payments investment credit generates XX.XX% complete cash XX of yield of received cash underlying loan CLOs. The the analysis and some the key leverage bottom-up the XX.XX%, We a stats The U.S. European are during cost GAAP of credit research to CCC We percentage analysts on portfolio was reinvestment loans. amount increase The average CCC cushion this weighted the fair weighted period weighted of limit was healthy of believe X.X% is junior CLOs. and to years. cushion average cushion providing by offset a left years X.X%, of and X.X%. defaulted in X.XX%. X.X gradual overcollateralization rated is approximately loans The a of average a the S&P below The spread underlying

the over CCC, [indiscernible] more it will is its limited overcollateralization X.X%. I portfolio, value market turn results. of at the CLO loans now trading excess once the X.X% reminder, XX a percentage rates and financial to below cushions. of over X.X% to to marked than discuss rated reduces fair The recovery our CFO, lower has As and the was Nelson, of

share. I Today, the begin XX/XX was quarter expenses of income was Nishil. investment or or Total the net was will a asset Net $X.XX value for $X.XX. investment you, of per million share. $X.XX quarter Thank first $X.X quarter million. for income million first $X.X as for first quarter review was earnings. our with Total the Total $X.X per

Our net one of is portfolio. a We in have party the the asset CLO side The we estate on loan asset based fair portfolio. from million. currently real the $X on legacy value the market third received is mark bid value remaining

We have once net and accretively value. stock that the stock to us asset an to allow offering position, third put will into sell maximizing place above party currently issue common our efficiently proceeds. We engaged trades a after-market while program

the while expected our First and issuance from on coupon stock do of X.XXx the target leverage debt our portfolio we X.Xx the quarter. The of as a achieve A not the not late did quarter XX.X%. plus the of Series until GAAP issuance preferred represent term is end CCIF yield of the total of X.XX%, earnings we assets go-forward earnings deployed to is is preferred basis to as accretive preferred November, the through proceeds

pro $X.XXX quarter, share. fund was would above $X.XX day estimated the be per income leveraged forma the investment to on per the fully quarter for an quarterly the Assuming net of dividend of $X.XX first share, the

in We expect quarterly the on of share the of the the received at investment back is GAAP I million, cash January cash-on turn at dividends Lauren. it yield $X.X of $X.XXX by a a net of monthly $X.XXXX policy income paid the go-forward supported XX.XX% payments $X.XXX our of per CLO month the that, basis. The million cash further to have will $X.X quarter share. With quarter. current $X.X by be dividend dividend per would per dividend totaled on investment covered The during quarterly share payments rate paid million per compared and been will that to

Thanks, Nelson.

attractive leverage, to fully is net with to that an believe fully Now we've achieved our that our be is dividend provide covered that we expected is invested, are well by income. and yield GAAP positioned we rotation investment complete, CCIF investors target

risk like leveraged to position, call us remain now hand underwriting operator to CLO prudent focused to the your Our we take questions. expertise and the portfolio disciplined on over underlying allows the Thank construction. I'd each analyze you. and loan to in

[Operator of from Schleien first comes Ladenburg Mickey with the line Instructions] Our question Thalmann.

surprises the in which rates loose level also of down that's XX% And to in loan those led I is the of is one been recovery reasons, but over around which mentioned. low past, several to which defaults, you obviously of for are the last continuing first covenants, of year lien. much have than think One the lower

have the in in estimated your how yields performed to your the terms experiencing? recovery market assumptions rates managers And your for recovery in portfolio their how do So of what is compare rates?

to Nishil Nice it's Good morning. you. from Mickey, Yes. hear here.

and rates year. been default that last have this do correct are year relatively to you low continue So so

recoveries been However, the low. have

default are a the that kind largely we've what the would the think I think been of a see default companies function in small at of lowest rates. But you typically now. this company I years weakest has we the seeing call defaults. trend And couple of that's we for a have the wave, weakest typically, recovery a wave. And of been beginning a

I think accelerated year. it last

managers CLO also we invest the So in ultimate I focus that recoveries. and think within just on only but extremely defaults, Carlyle itself, not

CLOs, the we're have so And that of when investing research managers. in-house, the in X portfolio the benefit plus we XX we analysts credit get

the bottom-up we to formal So analysis. get do

Regarding multiple recovery rates, we run scenarios.

we the well, especially also as rate scenarios lower upfront So for defaults. rates default use different curves, scenarios of saw for use last And different we then rates we recovery recovery different given light the year.

for that, of more If the the we're operating and those do liabilities with to I spread loan and and the pace markets compression the offset see ask, Thanks to help CLO guess, could starting see? resets their BSL of I refinance or you open that normally. managers Nishil. reset to How ability refis more or, now

Sure. It's Lauren.

But loans trade repricing saw started the that wave X% So those seeing January down in we repricing. loans. said, a repriced of I than because for of to before think are market we less --

So it materially. slowed

and what compression. Interestingly, we've spread seeing liabilities maybe but compression, basis So lot we're CLOs. we've much of of points we of around say than tighten CLOs. faster old say old CLOs, seen XXXX I'd haven't vintage When a I seen on vintage spread seen X resets earlier

opened has and CLOs, been back the XXXX most for market it's for reset part. up, the So later

across to We but analysis are see back further reset, to have think vintages, liability risk tightening. deals I come we seeing all older see

Lauren. question. my helpful, And Okay. That's last

this. Nishil, you touched think, on I

the is that Some more of buckets the which, of Or that noted, is doing relative CCC X.X%, related of terms over some your returns? limit. in you're underperformance? as that Does typical to reflect trade recent activity cash positions have you

Yes.

positions X.X%, but typically the you're CCC only impacts of of couple in a when I But Because what percentage, cushion. that directly not cushion. are there we a CLO focus your has in is excess X.X%. have of think on CCCs excess also investing the that overcollateralization overcollateralization So that

rates But and of of offsetting able for a historically default manager, that they a they've deals manage CCCs. couple been really where more low low So of it's of have that style elevated CLO so having a recovery where history rates, that. to

investing still robust. record their the on because cushions deals were We track those overcollateralization the and of that comfortable fact are fairly

question Penn next Mitchel comes of line Our Oppenheimer. from with the

the percentages. OC CCC cash or portfolio the You of guys your on covenant? talked in any OC and CLOs about averages covenant Are for the the trapping there the CCC

CLOs cushion. overcollateralization are there that close breaching even are X currently, So the to

think currently robust. our X%, I any in lowest the still overcollateralization is which fairly is for portfolio cushion deal

And it. losses in the the Got what quarter? drove unrealized

Yes.

one So policy. to in is keep thing mind our valuation the

think really I the markets. overall it little So that market strictly, a bid just And makes I a using of was use, what party to mark. I think value unique we side the us the third a think is function decline, our fair just portfolio

offset we saw the decline not was decline by high all one specific across or today CLO is think market the It's quarter. valuation, but just proceeds, of that kind we equity of driver. market continued Carlyle, I portfolios cash-on-cash within where the but marginal in that over manage the

to you at So some expect it reverse point?

comfortable positions. to overcollateralization cushions the large hard market, have given the But feel think excuse a it's robust kind cash these me. the robust very have portfolio do we with I recently benefit of of flows. Look, we and for mark-to-market the that quarter of purchasing forecast the percentage overall -- today We movements overall for

feel we movements again, the But hard So in the with portfolio today. to it's overall predict comfortable market.

no showing over this Basmadjian like I'd to remarks. at closing further the Lauren I'm hand call back questions for And to time.

and quarter, to to forward you out if support. everyone your questions, you free if look sooner. not feel Please next speaking any reach We all to thank you. for have Thank

concludes for This today's your Thank conference call. you participation.

disconnect. now may You