Eagle Point Income (EIC) 14 Nov 242024 Q3 Earnings call transcript

Ladies and gentlemen, greetings, and welcome to the Eagle Point Income Company Third Quarter 2024 Financial Results Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Garrett Edson of ICR. Thank you. Please go ahead.

morning. good and you, Thank

may As forward-looking a matters or formal the those uncertainties begin financial to actual differ materially and before on this projected we from that and discussed risks statements in that our the call company's information results such remarks, projected involve reminder, cause statements include projected information. forward-looking financial

third in the quarter and statements financial Relations within of third Investor The quarter The Exchange website. Executive investor the and over Commission. presentation with financial and the link, statements could our presentation A following the information projections Each today, the turn for with and Chairman we can investor link. I date on the based information to following by to investor replay of call this company the by third Tom www.eaglepointincome.com. Earlier the Financial available can any XX Statements further the are the Commission. impact of also be company's call company's and statements obligation Chief call be website, as update factors Securities to quarter section Securities that filings herein, disclaim Exchange can Income presentation forward-looking Events and contained now Reports to of this our days projection Officer the available Point statements call. will financial found law. and Company. information found For unless via of filed please of company's our be is refer statements XXXX made and the the and Majewski, us this accessed statement We on financial forward-looking our Eagle Presentations by during required and

Company's Earnings Company, Point Third Thank and We Income EIC. your interest Eagle Eagle or welcome, everyone, Call. Income in appreciate Quarter you, Point Garrett, to

presentation eaglepointincome.com. our presentation If to you contains portfolio. the company download you investor at already, so done about website our detailed and investment This haven't from information our we invite

far per of so cash our EIC. flows returns. gains net sheet. our after our and or million of company received income It of and quarter investment their has $XX.X dates. to of robust prior recurring strengthen The compares shareholder CLO per and highlights made cash third the junior generated during $X.XX result towards share. $XX.X for in strong portfolio flows for actively managing the new per We've million maximizing flows balance we're investments solid This Among the $X.XX quarter, been year realized debt from was to share. remains in a significant quarter demand number a or continue payment cash share a decrease quarter the

same X over the per the during paid to quarter quarters the share than quarter convexity common of with declared past were line as realize discounted purchases $X.XX third the third of quarters, net March of during repayments We gains The per of fourth generated number a gains are now per and generated our payments the at company from in in income from share realized positions $X.XX quarter. share the have the monthly sooner able distributions distributions par of previous during we and expected. In $X.XX our and investments seeing X those sales first on our investment through portfolio quarter, XXXX. realized the were we monthly

a $XX.XX decrease June X% NAV at the of XX level September per Our share, from as was XX.

the NAV programs, per and accretion million sheet to our during our of approximately share to as equity NAV. or We quarter. of shares at a X.X program, This issued $X.XX finance continue we committed stock at-the-market strengthen well. premium Through common balance ATM, generated

stock ATM. Daily average continues of B volume to Series stock second our common a and Series from C volumes than and higher third average via of volume on We tripling the more term $X.X preferred than with million basis. quarter quarter, also the increase issuances trading in the the realized for proceeds XX% additional trading year-over-year

of CLOs the called returns CLOs CLO higher to digits early. Further, for some coupons the portfolio have All in if enhance portfolio's those remain earnings and potential exposure the our double of our ability. equity continues are CLO

the As believe continued investors to focused the and our positioned for we is approach in any on cycle. a future long remain term, construct portfolio We economic weather strongly portfolio consistent to performance. rate

to recent portfolio Manager, For Portfolio commentary the Principal market overall to the Ko. additional like turn over call activity, on our and Dan and I'd Senior

Thank you, Tom.

continued elevated income lower Federal relatively We generating equity Reserve's CLO by from securities. Furthermore, EIC Leveraged CLO X.X% CLO offers debt All the debt CLO through our return other underlying environment we continue to of in equity. recent and loans the to floating investment investing to return September total portfolios. Credit defaults compared the and equal, it The a principally insulated to is equity. find in the CLO a rates on product. lead year-to-date X.X% high-yielding Suisse cuts, CLO quarter should Index continued quarter rate well, because CLO the debt still perform rate rate things fixed of in rate believe is junior to XX. spread lower arbitrage Loan in Despite movements attractive for profile an capitalize and opportunities attractive third

X.X% with index continued October in The up loans XX. year-to-date trajectory of as October its

approximately attractive In profiles of see new net markets. in into third deployed We we capital the to both the primary investments. continue $XX secondary quarter, million return and

yield effective the quarter CLO average weighted during The was purchases XX%. the new robust a of

par. of annualized focused market-wide near-term maturities by refinancing loan their During their extend the or issuers maturity third XX% repaid of to in driven further an effort leveraged the profile on quarter, approximately were loans at The prepayments debt. X% roughly

in and XXXX. third in $XXX on Regarding of to record first new pace previous $XXX billion break of billion months billion CLO X XXXX, XXXX $XX we issuance, saw new issuance for of quarter of the set the the still

have investors, us, equity including CLO market CLO third-party have tightened. returned calls, debt primary the prior our on noted to As spreads as

large in of to by and CLO increase in resets debt part CLOs, a tighter refinancings spreads. large We see continue driven

their of CLO XX weighted refinancings the equity extended CLO portfolio's reset refinancings points. EIC's our positions September reinvestment period the average equity increasing we and focus basis The of X an through and to Year-to-date, lowering period, debt by reinvestment remaining average XX, the thus for X our remains completed costs reset portfolio. the years, X of portion which our

loan purchases and convexity anticipated. being improve to sooner We lead Defaults continue quarter crystallizing past default that XX-month as our in third than resets some our to rate to September of quarters will well expect and refinancing, BB repaid the the investments CLO stood points at discounted continue leveraged the quarter at X.X%. EIC's to as historical par, X exposure of remaining XX only of the in average the with of default trailing of certain X.X%. below declining over year during basis XX the defaults end, calls

to remain for default risk expect We low time. some

BBs impacted low for we've and noted, the rates. by amount long-term volatility withstood price consistently take default a would of be downturns believe permanently coupled default As economic portfolio loan multiple past, We CLO limited loan significant average EIC's to experiencing historical with defaults, above wave. it have importantly, very in the well

returns the new deploy to risk-adjusted positioned capital compelling portfolio. into that company's well remain we forward, for additional offer investments Moving

Umnova turn results. through Officer, that, will to to our walk I our now call adviser's over With the financial Lena Chief Accounting

Dan. you, Thank

the company million of of quarter $X.XX and per the or When gains realized $X.X NII During third $X.XX XXXX. the included, compares share. third XXXX, to gains of per company unrealized for for net or of share NII of depreciation of recorded realized second quarter per share. $X quarter per This share The quarter, and company's $X.XX $X.XX net investment GAAP income of recorded portfolio $X.X on third NII was net investment realized the of recorded income of gain and is million. million million comprised the $XX.X income total and

unrealized expenses by of This fair operating investments was and $X.X held unrealized of million. of and million, liabilities million at $X.X certain financing value partially costs on on appreciation depreciation net $X.X offset

quarter, company's third attributed financial risk. specific change company value the the instrument comprehensive liabilities the fair $X.X to of recorded on for other in the million, Additionally, representing income credit

quarter, share of last common we During X monthly and the monthly week, third share, per XXXX. distributions continued distributions March paid per of $X.XX through $X.XX we declared

end, long-term expect and target preferred and requirements X,XXX%, our of quarter market facility the outstanding total end and of had equities, stock preferred respectively. from range and of borrowings were the requirements coverage ratio normal debt. comfortably XXX% above quarter company XXX% These with in is revolving for at measures ratio totaled debt to stock This company calculated credit investment are which the XX% of accordance company statutory XXX% company's within The XX% conditions. which and asset liabilities. leverage the at preferred to we the assets at As under of less current XX%, operate

asset share as per end, or value per net $XXX was of month end. share month September of June As the million $XX.XX compared company's to $XX.XX

Moving to its quarter. portfolio investments company's in our received still October, million. to flows month of activity for make payments of on the of investment the the cash that company later Note are recurring some on $XX.X expected the

we midpoint, up capacity million month end, was cash of revolver and NAV share. $XX.XX of the stood of available transactions XX and between settlements, for September NAV Management's the at As $XX.XX had over company and company's the investment. XX. October estimate of unaudited as per of $XX At net is where pending October investment

the turn before over back questions. to call remarks we to now Tom closing it I open will for up provide

the our well, cuts Despite to significant or classes to are and Thanks, well continues the perform BBs view quite we maintain believe EIC strategy rate and CLO mid-September positioned to investment in income. in our in environment. net resilient is our asset continue Lena. the of market. November, proactive most continues risk portfolio that We investment early rate generate to succeed any one economic

attributable to in you compelling is protections our EIC We that for both well shareholders. thank structural We underlying your to time This Eagle returns interest positioned Point and remain is risk-adjusted and for collateral. confident their Company. generate

Lena, now questions. Dan the will and your to call open Operator? I

[Operator Instructions]

Matthew B. from is Riley with Securities. Howlett question first The

hear and terrific the you BB difference want out on call, about among I can you on was And the on managers? on unique call, market talk a BB of the big acquisitions, a a ECC with vehicle hear go there congrats because the over prior going covering side. first want quarter said to seeing? on on mean secondary here. the What this I I on Look, much what's I So to difference And about there. days? are the to just results about equity there Is these tiering. spreads side. -- and primary on you want tiers said you

is Ko this here. Matt, Dan

Fed the despite terms in pretty We've spreads, securities. cuts of held these BB actually rate Fed seen of terms prices rally in recent I'd despite the prices. that well has kind debt In rate say CLO CLO cuts, rate of and floating being actually

the of your But current yield. And as yields then BB certainly or floating CLO other on I less are kind than the guess, chunk kind falling. the impacted rates that, larger you Now yield have on spread is cash there, of a overall about remember other falling are of, securities certainly the little base -- I return the guess, rate to tiering. question to

X as We Tier managers seeing well. between and certainly issue compress and tiering we're are tiering also then there. seeing resets new out within But Tier X the collateral

There place have So in that to for is that resets have whereas portfolio, in a some the portfolio. much the ramped. portfolio you a portfolio assets, today, that's issued it in tail stressed no are already nice cleaner new stressed obviously, assets portfolios, while less are issue being

potentially XXX resets. versus issue kind even of of basis we're spreads terms in difference on of seeing see points do that we new So the

general if mean what on That's the primary it's reset, BB's, a new huge. just if it's I And or something? a in versus about issue not secondary

Yes.

convexity a secondary, lot up lot in we back par. of over disappeared a rallied the versus CLO past we CLO has the earlier -- BB BBs and asset the I the saw call and class within has the kind that primary So that mentioned most year that to think of of of

that ones Now some fairness. discount, there the discount to in those a obviously want are at might a but be not you at touching are that are

I today but are opportunities or bunch. discounted still secondary even think issue and so there's a issue in stuff And a premium that to -- buy between a new there's there's secondary some better some interesting as has new that at value rallied balance opportunities

much par. at the you these -- then do I those get on par, to prepays. -- at of own, Great. it's -- pay And double-edged mean, I like left I how in those they I at love have mean, like as almost it prepay and a is as look we portfolio them, think these that as how a about but of sword. contribution going mean, the gains should discounts I you you this mean, a the how yields off forward is much of sort

it's a the certainly you're those benefits of a still purchases large able we say of the on kind convexity portfolio right. that good see still come and was that gains, some wider so the Yes. gains of No, mean sooner, that the stuff. the being of discounts realized losing to I We to you point. were made I'd then I yielding see but take potential for, we guess, at we through. out do chunk realize

I of we've -- terms already in guess positions marked the of kind But of the of terms par. NAV, those kind mark at in

unrealized will guess, I those, moved when realized. a of more really to gains be it's So

you. Got Exactly. Right.

moving basically towards -- year. then a just mean, it's I the in portfolio, doubled Okay. And

vehicle, out these mean, losses, BBs. that a bit goes only low. just I cost the just It's this, as more annual so real doing lower, You're little of you you does going just it's aren't capital like in vehicle the you this like your -- X I I -- bps efficient incredible. mean, there grow. almost guys get but mean, Talk more people it's about have that efficiency is why

kind in right because me, your the I what of type to doesn't I'll and yield vehicles of there compared If it can you're risk ask cap is to? be just out this you other Maybe vehicle losses seem these exposed what put kind to Tom, that equity kind should much like requirement? you of analyst BBs. on ask

the Certainly, now, up spot is out yield comp. right of -- know high is right rate certainly cite have is you to don't in that now, way distribution there the just XXs pencils the which, -- on historic I you're kind view data to what up... that pulling on. dividend generic closest yield The right a pulled Bloomberg And opinion, credit you on a private a compared our cheap I probably BDC here

year now this BDC... Right

is at There's to going or pretty do, credit be of BDC always while a year on that's private darn and nonaccrual. take, handful this forgotten managers what now X%, problems. a The names they are Right give there's thing always XX%. many good few

well. capital doesn't our that X% have well. as We coupled structure have attractive left in just exist -- in matures book nonaccrual but that I BB still that's with we've some really our sadly, paper -- XXXX, side nothing is concept balance -- quite that our of as got outstanding sheet attractive mean, we but a very right

on between supposed to of historic a assets and distribution do structuring -- with then many the charging instance of than return still BDC. on it. Yet the compress. BDCs, less fees BDCs, about a yield far And material lower the investments favorable very we're you frankly, And difference loss there's that's the to EIC making distribution when in many the charge think here public fee typical in is more of higher-yielding EIC large versus

with, really has basis. company it things I we a increase mean with the year-over-year think the in that, of the talked we're been volume. I about tripled roughly pleased One on

the you So can as a company but about cash opinion, generates. And time stock begets more out there. we've the is want have on stockholders one message This in compress. just We're flows BDCs ECC you yield has has obviously little to start mispriced the And knew to a to because it. favor. market to hopefully the grown. this to the have we it's more getting in got getting begin opportunity getting actively been distribution decade. in in distribution is Volume our keep no our people us trade what. underlying from themselves, EIC to takes with, our they do slowly but our for a stock volume, a supposed the matter asset at head opinion, class, the that that premium get liquid buy scale buying high investors' the versus it It of resilience that

asset but bit, big most I big it's the X% for go. X% out. a I you could of a typical mean, enough. think I itself, class mean on enough the like are It's doing got out a to CLO, guys overlooked like ways guys of Yes, a only for long said, And I mean double, just And re-rated little triple one it's I EIC. great it it's of still grow the you there, big but it's to vehicles job. yield enough it's size to you

CLO answer. of numbers, a class market, yes, $X think BB Yes. just you is market the as -- some the X%. generic throw is To U.S. about throw the short about trillion if And to

$XX So that's billion. about

or Our about assets are take. $XXX million, give

in the So X% we're this of market vehicle.

Eagle accounts at that have Now and BB. CLO vehicles other manage we Point, do

corporate billions BBs, our that the BB average we invested buy. market, my dollars stay of rating-sensitive makes what the of in the company not of collectively, might vastness own so of for think So the it dollars in buy kind bonds, in like you where opinion, insurance or to Against of CLO of something attractive, of you in the BB's like that, this is the high-yield only that, want who billions hundreds strategy. vehicle

market small of get too about. excited a to that just is This

put the the with bigger side, grade running large bigger of investment sums and to of their have, very like active in CLOs. part a and work. general capital single billion companies they're bigger if they life $XXX in billion, the the On are of tranches and $XXX account can AA you're structure A But money some

just involved getting the in opportunity a pie And well, bonds too sure the balance their BB-rated $XX on buy of lots for their as of of market chart. just small billion while is I'm they piece sheet

terms worried opportunity And important roughly only a market investment financing for large the a terms a large running $XX long gets institutional get opportunity. the it billion trillion from lot loan about a due in, EIC, part if company, involved to it's $X.X overlooked is as we that's capacity lot small of a little in by scale And in then too an big insurance So the see the that investors, of not structural is a market set to in growth slug due room again, imbalance This leveraged you're of which United of market we're of because States. to market. of the of the for while just just quality tremendous. EIC, of $X of way trillion for life

say, can all be -- math. And keep company. as some capital operating stock above An it's needless to a the But grow, we -- the bit down. going trading leverage do going there's ticking of at little NAV. your more is cost you to it's The just

I Your bit. all bonds the above I positive way? about thinking are par a this mean going that stuff Am is right forward. little

We agree completely.

Yes. up. It's you've set just incredible an vehicle

the this at done, Yes, we've outstanding. we're with what one, we revolver have

So makes little it that efficient. even more a

a it makes we have little revolver efficient. that which a more have We

So preferred stock revolver. the have we then we have the and

the anything investing. any we bit be we like the kind little that or issue this, I the run revolver to we're comments keep sometimes of way on like happen the able can keep use just to ATM, to So could drawn it down revolver, it pay -- perfectly if gets doesn't it never -- a

at as in, time that had because just the fully doing vehicle -- we keep of getting deployed were possible. is October very for the the invested. payments when to the XXth -- but our always I as quickly a We part because guess, just came cited, we're as nearly of the bit little XXst So only capital drawn of ideally

little a can volume. attractive. has too a volume lot really still every to We'd gas So with there vehicle. double-digit coming get of opportunity. for this the very, the in very our bit, BB at portfolio a in on still it point. even was pleased Even low. And it we We're -- down was higher. investment tank We're see like the the what year ago, I increase rates the a yield doing and mean, in the with we stock

a which helps there's well, of bit further. Obviously, equity CLO as little

So we here. feel prospects the quite good for

value. to forward on educated Look see more the as relative Okay. to market certainly they're -- gets the EIC, going

success, look to Tom. continued So forward

you, it. Appreciate Matt. Thank

Instructions] [Operator

Thomas there questions, to for Majewski are would As over like no closing the conference to hand further comments. I

much later Company. have your all I day. Great. appreciate Thank joining Point interest today the Lena, the for Income Thank in and questions. you office has very any around good today. Eagle and in call follow-up We're if anyone you, a Dan

Thank today's you. teleconference. This concludes

disconnect may lines this time. you You Thank at participation. for your your