Carlyle Credit Income Fund (CCIF) 22 Aug 242024 Q3 Earnings call transcript

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

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

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

dividend Thanks, quarterly activities by cash The Fund's over monthly Jane. dividend is August XXXX. all as earnings on is price now $X.XXX (sic) you to Good supported the of CCIF a XX.X% share, [ XX.XX% declared November by based $X.XX morning, We per reviewing ] flows. annualized to through the XXXX, the our everyone, recurring equating XX, of dividend for call. maintained share like joining at and which thank quarter. start I would last

XX.XX% July a was portfolio CLO XX.X% since quarter New yield positions, took totaled with that of cushion less without stock, like financial investment XX, pool based weighted that than has (sic) on CLOs XX, the value weighted as have we of Fund's observed would during ] the ], or in flexible increased to from we've XXXX, markets CLO preferred with net the the to the the the discuss over Carlyle [ like long-term We [ covenants July XX.X% average XX. I of targets (sic) [ over June generating met yield CLO of and average no the what ] over-collateralization as by We XX.X% into accomplished of as XX.XX% diverse dividend The GAAP of rotated GAAP X% of highlight portfolio to adviser mark-to-market We environment, an GAAP XX.X% XX.XX% X%. leverage date the provisions. yield both $XX.X a loan equity market to and (sic) XXXX. Pivoting aggregate CCIF. quarter. asset what a issuing I'd Fund's current investments the any million equity

and reset materially billion, outpaced XX% reset most and totaled tightening June, in $X past activity and activity. supported in active $XX liabilities spreads Year-to-date of refinancing the $XX issue billion through billion CLO the quarter which has refinancing issuance, quarter tightening heightened CLO fueled have billion resulting believe arbitrage equity, $XXX of an market with CLO record. billion. $XX for continued Continued CLO issuance increase of volumes. CLO liability new and the accelerated CLO is on CLO through higher of June this year-over-year. We has XXXX's volumes billion $XX

outside CCIF portfolio of in market the still reinvestment CLO the through positions these extend is CLO activity, CLO, out were the period have the while both period. has As period a completed increase reinvestment refresh years of reminder, Despite of financing their year-to-date June, period, X cost resets CLO opportunistic X of reinvestment the to reinvestment we of The of refinancings which typically. Within CCIF the the CLOs. reduced extending X reset portfolio, purchases. resets XX% only

the U.S. remained of valuable broadly in and While interest portfolio implications to XXX for borrowers ability Carlyle's loan health market. in proxy debt, elevated quarter has resilient the borrowers over the of first rates borrowers' loan is of overall service existing may a syndicated assessing the pressure

Ukraine default the to rate on teams of have higher excluding X.X% the the focused We basis this that believe and loan in operate EBITDA compared management of declined the LSTA trend July, distressed at indicates experienced average containment index invasion rate, X.X% While exchanges, end that versus cost since quarter quarter, of end is to sales points preservation the at decreased we environment. The highest growth portfolio XX cash in in second prior Russian growth March. a are of the as they the XXXX.

market of exchange of of CLO activity June, While end we risk rate repricing at approximately market. high default closed anticipate the and March accounts which end loan moderated by of X.X% of the loan distressed X.X% distressed year-to-date June. Performing a defaults managers, by manageable mid-May activity. Retail inclusive in also inflows issuance of below restructuring conditions borrowers XX, market and end loan $XXX for loan July. believe at activity including and will XX.XX loan XX% from totaled X.X% X-year about of remains before the at to XX.XX in loan trades exchanges excluding declining the billion, robust new the remain through index We issuers capitalized the for to LSTA of on CLO

year-to-date. repricings, spreads on have basis So reduced through these loans average an underlying the by points XX borrowers of

our deployment in arbitrage, current spreads negatively in still Manager, decline X.X%. I'll from attractive CCIF Mehta, decline the XX-year loan but than Portfolio While Nishil the partially call of cash-on-cash basis distributions. discuss year-to-date payments, CLO spread tightening the over to a average Furthermore, July including spreads. our were totaled portfolio, encouraged now CLO a these the a offset by liability average payments impacts portfolio. decrease X.X%, equity remain April continued asset impact equity's Median weighted in XX higher to point slight of CLO we in hand and underlying by

Thank you, Lauren.

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

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

managers the We recent X reinvestment in vintages target market. to continue the of X and Tier Tier remaining period ample in time secondary with

CLO assessed secondary are Given generally markets. arbitrage, the loan in compression CLO of primary and those than continued given spread CLO investments, also sourced equity portfolios these we've support cleaner

U.S. complete bottoms-up fundamental leverage credit on research to in-house and of We expertise continue the credit analysts European our XX to X loan portfolios analysis underlying of CLOs.

weighted points X.XX% in the As loan decline percentage healthy Lauren CLOs by average underlying points to gradual basis market impacted believe the with year-to-date average increase by has quarter. and key CLO Tier of across the opportunity including X.X%, we The the factors of value left in a in the CCIF a portfolio over that cash weighted quarterly declining X on quarter-over-quarter of with loans, loans on spread cost not a XX.XX% weighted years portfolio quarter and X.XX%. The yields invested approximately reinvestment average years, the these in The June some generates below with the weighted of providing of across X mentioned, than following which by of of and market, capitalize GAAP offset for the And payments an X%. managers prices is junior existing to Tier to investment and by defaulted the pleased cushion remain portfolio. We prices them. We X.X% XX XX portfolios spread average asset periods during in overcollateralization S&P by the CCC wave, a the believe XX basis, CLO on decline CLOs. high-quality do rated portfolio the combination X volatility or improve points stats cushion on CLO portfolios managers. The CCC as of reposition equity overcollateralization CCIF's The represents positions X.X our portfolio. we was over basis concerns have raises was of reduced is repricing basis the on XX. resulted quarter. was in limit any yield the supported CLO CLO The record cash cushion less XX.XX%, X a received period net of

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

Total prior Total in in earnings. $X prior June asset begin Thank with compared million share you, share, per $X.XX share million Net per to of the to quarter. $X.XX million the $X.X review of compared in investment quarter was for quarter in share, to million or XX the share our per the $X.XX million Total quarter compared to Nishil. quarter. or was third $X.XX the quarter. quarter was I or $X.XX or a income investment income $X.XX will net for the $X.X for third value prior per $X million were per $X.X compared share expenses per $X.X third quarter. Today, the prior as

third on and on bid a mark value of party portfolio. received the based Our a XXX% net asset side valuations CLO from were we

total market hold We of the value the one continue loan legacy million. real is asset in portfolio. fair to estate The $X.X

process The third to we continues position proceeds. work maximize our sell party through the to engage to

shares approximately net in dividends ATM $X.XXX the CLO resulted share view of resulting the program to it $X.XX payments an flow. to XXX,XXX and quarterly a of on $XX totaled $X.XX efficient $X.XX received accretive During July the of premium investment sold or ATM way in turn on $X.X grow million, our payments to at in quarter a cash in cash the Fund. or share. With of cash per common Quarterly for share, the compared yield recurring NAV Lauren. to we We The third increase. XX.XX% connection the $X million cash quarter, per with paid as proceeds program that, back of million per in I'll offering

Nelson. Thanks,

monitoring process to positioned dividend yield with CLO We investment in position your that continue total to to invest. I'd equity the underlying analyze to which We disciplined like CCIF operator CLO hand over questions. an collateral a and to call applying we attractive well in take investors on remain the the focused provide each now and to is return. believe

[Operator Instructions] from Schleien Our first Mickey question with comes Ladenburg.

weakness driven are delivering still in remarks strong are by equity CLO lower mentioned has naturally know, prepared spreads. CLO yield. we that cash But loan valuations equities in CLOs your as been and You partially hedged

So CLO equity strength? take the to what do for show you think finally it will market some

Nishil. it's Mickey, Yes,

still we are markets, equity CLO say would think, showing I look, So strength.

a seen slight of the the have You that repricing combination we've seen in waves market. the decline with

Lauren As dates, spread. loan borrowers the loan of loans, payments, end mentioned, the about the about repriced that prices quarter just since through you of highest of reduces market payment And $X.XX. With April then that said, have we average the the in saw third the $X.XX, declined, quarter, XX% X/XX, had the XXXX. also at that being were weighted our quarterly seen

was You it very but saw some decline in the healthy. July dates, payment still

overall, I on remain CLO markets. positive we think still the very

relatively Given we We stable. relatively remains believe manageable. credit, remain defaults believe,

And so we believe attractive. steel remains to continue equity

can was be lower said, the payments? April I payments than what the what main you to Nishil, cause follow July if just up And for on the

Yes.

repricing, -- these market with a I ultimately payments. underlying spread reduces factors. loan and quarterly XX% the the that in of that weighted CLOs think it's repricings portfolios reduction the X in results the in average as on One,

CLOs X% have to and average, around seasonality is, of bonds variance other on on do of X% the hold typically X-month cycle. fact pay kind The bonds. you a Those that,

bonds most payment paid of so the part date. And April as

from on you an paying uptick the X-month their just in payment so cycle. And date see October may bonds the

CLO announced I that between I've far, One LIBOR, the the impact last flows question in saw which other Nishil, seen understand. X-month Fed cash tightened. equity obviously Yes, so for dynamic is we as and me. funds. months X

start will CLO impacting should loosen equity to about Now X-month that spread monetary cut we rates? the Fed policy, starts Fed how flows that X-month, to as seems fairly it certain cash the think

we're years about it's great going Yes, time a because the XXXX, ago. environment in since to rate a potentially so question prolonged like be XX first cut it's

it, were about rates X-month than the SOFR was increasing, think higher had that issue think X-month. you or significantly LIBOR we I If when

you're Now seeing inverse that. of the

locked is SOFR months X today, points. think basis I at XX in

loans are reminder, X-month a typically I are As XX% liabilities LIBOR the SOFR, excuse off SOFR. anywhere based all from the -- underlying paid X at of of me, X-months XX% months to think, whereas,

again. occur the really using mismatch some but down slight it's SOFR of XX the going to a obviously, cuts now, at our rate see rate for expecting cuts higher change. cuts, where come rate may timing future, to Right since are it's We're you assets so to the And of foreseeable see the and can not rate, extent somewhat favorable impact. you the things points, might of least a basis

So saw see increasing I going impact to don't we're pretty same substantially. we the think were rates when that

[Operator Riley. Matthew with Instructions] Howlett B. Our next question from comes

primary secondary, on versus heard and spreads on participants come First, sort market we've have just primary. just secondary some out we're say tightened, of focused

are You Or you're seem just in each an much to seeing wide? the spreads update channel? give -- on that be pretty us what

and there's because profiles primary we a that to think I type and secondary. across Matt, Yes, saying between opportunities the of avoid is, one, lot try just generic statements different different markets start off making of both obviously in I'd

primary I we'd concur think that is attractive.

CLO to markets, seen arbitrage. year line decline equity spread improve continued tightening in helped the fixed the over across with that have costs the the debt that's Now we've

So so that's made to at look primary attractive, that. we continue again,

and overall seen relative seen line returns equity, But present secondary largely the fixed opportunities I find that opportunities opportunity returns. with you've we and year that in the find the we we've see. expected still that opportunity. But tightening some continue do across that to attractive. still of side, secondary we throughout On tightening pockets We're often, not overall, so we single think we CLO we markets. believe every the value find good buying secondary every are do risk-adjusted agree for secondary

of the Great. with And to market other folks out guys picking some primary just the simulation are you doing like I on side up We've facilities. note, a that in more, there, big start seen mean, size? with

Yes.

enter loan we we as accumulation the So primary, into facilities. do will

think we're right -- in probably see or I X now. X You'll currently

market. we activity the as So in we increase expect that increase to primary

boost Okay. folks And like to. seems it's it sounds forward other real look that's returns. bigger It to in something just it a do but that going like be size, enhanced the to to

But us question the of sweet a the you the quantify is, What like terms here XX refi the -- you as that the of spot. Second what is that's look opportunity what in opportunity lot -- can seems tell today in can portfolio? down reset pipeline? you

Yes.

to costs. or them. CLOs update we that of movements hold, maintain we have periodic CLO we of trying trackers resets sought make And actually based a identify out look, and X XX we we refinanced on which So the financing We on sense. refis that basis, updated it in

a for of So to we so CCIF, we expect active with the activity we are portfolio. reset in refi dialogue this in the where within positions and market continue managers handful hold

Great.

of XX? So you X the said only

this I rent And is think newer a Yes. fact of relatively largely that a function portfolio. that's the

opportunistically So analyzing advantage are of of loans. which our peers we in the compared a our that bottoms-up more those, only in invested have portfolios, have to some X approach portfolios underlying of their seasoned terms percentage out that reinvestment period. We of of of higher taking

the maybe set given So our reset fewer overall portfolio, smaller opportunity less there our peers opportunities. season, just seasoned. portfolio because I is refinancing just be our its may within And than and less think

Got you.

rationale And the picked pretty then in looked like Any question, Okay. OC just... next the mean, And up that? July, level I for significantly. it

Yes.

fundamentals credit continue to mentioned, I think think we as like, Lauren stable. it's remain

managers a of so of continue that what CLOs to portfolio we've hold less cushions, X%. consider partnered to be with our the OC that than over strong OC we and maintain they And cushion we very have X%. the with, None

see the don't quarter-over-quarter. increase. -- specific I But it's think always think going to anything I variations so pointing slight there's to you're And

look, assets had guess a question, portfolio. Last great small real you one I rotating sell. you've job the just Great. more done estate to

mean You've when But at lowered I down capital cost refinance keep growth. [indiscernible] X to and preferred that that? going call you X/X -- call you mean, when going that? what mean, can long can really your that and Is and on an look that's cost bond -- of how call you I obviously, If your away? it? capital. I should this coupon? your of accelerate it's I years can XX,

Yes.

So non-call. I a have for market when a last believe, standard that X-year October, we issued issuance is bond X-year

So the We I it look a we lot as price the it's closer Fund provides us. something taken then. still tightened flexibility very fourth of expensive. seasoned looks it's that will seen think as we've X-year over, And it quarter to XXXX. at pretty very Obviously, given you've have as the But substantially. agree, a and attractive of spreads in increase tenure since trading we've

than substantially the yielding it's lower coupon. current So

that a X going a far big not or over something could little That's well It's be do that's impact, away. Well, even Xs. low to if a you year. below

So on something be think boost it's it's because able to to going I have earnings. huge eye an really to a keep to

can get you If in.

So we'll look forward to that.

Lauren to would like I the you. now over Thank call Basmadjian any closing turn remarks. for to

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

you concludes This your you. the Thank for Thank participation. conference.

may now You disconnect.