Eagle Point Credit Co sees recurring cash flows dip to $77 million as net investment income suffers, but proactive portfolio management drives future growth potential.

OPERATOR - (00:00:23)

Greetings and welcome to EaglePoint Credit Company's third quarter 2025 financial results conference call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press Star0 on your telephone keypad. As a reminder, this conference is being recorded at this time. I will turn the conference over to Mr. Darren Daugherty from Prosek Partners. Please go ahead.

Darren Daugherty - (00:00:55)

Thank you Operator and good morning. Welcome to Eagle Point Credit Company's earnings conference call for the third quarter of 2025. Speaking on the call today are Thomas Majewski, Chief Executive Officer and Ken Onorio, Chief Financial Officer and Chief Operating Officer. Before we begin, I would like to remind everyone that the matters discussed on this call include forward looking statements or projected financial information that involve risks and uncertainties that may cause the Company's actual results to differ materially from such projections. For further information on factors that could impact the Company and the statements and projections contained herein, please refer to the Company's filings with the securities and Exchange Commission. Each forward looking statement or projection of financial information made during this call is based on the information available to us. As of the date of this call. We disclaim any obligation to update our forward looking statements unless required by law. Earlier today we filed our third quarter 2025 financial statements and investor presentation with the securities and Exchange Commission. These are also available in the Investor Relations section of the company's website, eaglepointcreditcompany.com. A replay of this call will also be made available later today. I will now turn the call over to Thomas Majewski, Chief Executive Officer of eaglepoint Credit. Tom Thanks Darren and good morning everyone. We're glad you've joined the call today. We were very active in managing our portfolio during the quarter, both through deployment into new investments and rotation and optimization of portfolio investments. Already on the ground, we deployed almost $200 million into new investments, taking advantage of attractive opportunities in both the primary and secondary markets. The CLO equity investments that we made during the quarter had a weighted average effective yield of 16.9%. Additionally, during the quarter we proactively completed 16 refinancings and 11 resets, which strengthened our CLO equity portfolio's earning power and helped partially offset the loan repricings that we faced throughout the year. Importantly, we still have a robust pipeline of additional resets and refinancings planned into 2026. Third quarter recurring cash flows came in at $77 million or $0.59 per share. This is a decrease from $85 million or $0.69 per share in the second quarter. During the quarter, the company generated net investment income less realized losses from investments of $0.16 per share, consisting of $0.24 of net investment income and offset by $0.08 of realized losses from sales. On certain the realized losses from investments were primarily driven by rotating some of our underperforming CLO equity positions. These marks were largely already reflected in Net Asset Value (NAV) as unrealized mark to market losses and did not have a meaningful impact on our Net Asset Value (NAV). As of September 30, our Net Asset Value (NAV) stood at $7 per share, which is down 4.2% from from 731 per share as of June 30. For the third quarter, the company generated a GAAP return on equity of 1.6%. Our portfolio's weighted average remaining reinvestment period or warp, ended the quarter at 3.4 years, roughly 26% above the market average of 2.7 years. This is slightly higher than the 3.3 years as of June 30th and reflects our long term strategy to seek to maximize our portfolio's warp when the reset market is open. As I mentioned at the beginning of the call, we focused efforts during the quarter on portfolio rotation and optimization, which should ultimately enhance our cash flows and earning power going forward. Our position as a majority CLO equity holder in most cases gives us multiple levers to pull to unlock value for the company over time. As many of you know, the loan market has been facing pressure from loan repricings in recent quarters. We did see repricing activity slow down when the credit markets were spooked recently by the idiosyncratic bankruptcy of first brands. However, 42% of loans are trading above par again and we may see repricing activity return. I'd also like to point out that ECC's exposure to first Brands was small and the losses related to the name were well within our annual credit loss assumptions. In addition, we saw a pickup in LBO activity during September which is healthy for the market overall and supportive of loan spreads. In other words, an increased supply of new issue loans should help mitigate spread compression pressure, which is ultimately a good thing for our cash flows and our Net Asset Value (NAV) trajectory. During the quarter, we utilized our at the Market program selectively issuing $26 million of common stock at a premium to navigate. We also issued approximately $13 million of our 7% Series AA and AB convertible perpetual preferred stock as part of our continuous public offering. We believe this is a highly attractive cost of capital for the Company and presents a real competitive advantage for us. We are unaware of any other publicly traded entity focused primarily on investing in CLO equity that has such an attractive program. During the quarter, we paid 42 cents per share in cash distribution to our common shareholders across three monthly distributions of $0.14 per share. Earlier today, we declared regular monthly distributions of $0.14 per share for the first quarter of 2026. The company's board of Directors considers numerous factors when setting the monthly distribution level, including cash flow generated from the Company's investment portfolio, GAAP earnings, and the Company's requirement to distribute substantially all of its taxable income. Before I hand the call off to Ken, I'd like to highlight Eagle Point Income Company, which also trades on the New York Stock Exchange. It trades under the symbol EIC. That entity principally invests in junior CLO debt securities. We'll be hosting EIC's investor call today at 11:30am Eastern and invite you to join us for that call as well. Ken will now provide details on our financial results. After his remarks, I'll share additional insights on the loan and CLO markets broadly.

Ken Onorio - Chief Financial Officer and Chief Operating Officer - (00:07:49)

Thank you Tom and thanks everyone for joining our call today. For the third quarter of 2025, the company recorded net investment income less realized losses from investments of 21 million or 16 cents per share. Net investment income was 24 cents per share. This compares to NII less realized losses from investments of $0.16 per share in the last quarter and NII less realized losses of $0.23 per share in the third quarter of 2024. Additionally, for the third quarter of 2025, the company recorded losses from forward currency contracts of $0.01 per share, including unrealized gains. The Company recorded GAAP net income of 16 million or $0.12 per share for the quarter. This compares to a GAAP net income of $0.47 per share last quarter and and $0.04 per share in the third quarter of 2024. The Company's third quarter GAAP net income was comprised of investment income of 52 million and unrealized gains on investments and forward currency contracts of 4 million, partially offset by financing costs and operating expenses of 21 million, realized losses on investments of 10 million, distributions and amortization of costs on temporary equity of 6 million and unrealized losses on certain liabilities held at fair value of 2 million and realized losses from forward currency contracts of 1 million. As a reminder, temporary equity refers to our multiple series of perpetual preferred stock. In addition, the Company recorded another comprehensive loss of 2.5 million for the third quarter. The company's asset coverage ratios as of September 30th for preferred stock and debt calculated pursuant to Investment Company Act requirements were 239% and 529%, respectively. These measures are above the statutory requirements of 200% and 300%. During the third quarter, we deployed nearly $200 million in gross capital into new investments. Our debt and preferred securities outstanding at quarter end totaled 42% of the company's total assets, less current liabilities above our Target range of 27.5% to 37.5% when operating the Company under normal market conditions. Consistent with our long range financing strategy for the Company, all of our financing remains fixed rate and we have no maturities prior to April 2028. In addition, a significant portion of our preferred stock financing is perpetual with no set maturity date. So far in the current quarter through October 31, we've collected 70 million in recurring cash flows and expect additional collections throughout the balance of the quarter. Additionally, Management's unaudited estimate of the Company's NAV as of October month end was between $6.69 and $6.79 per share. With that, I'll turn back to Tom for a look at market insights and closing thoughts.

Thomas Majewski - Chief Executive Officer - (00:11:30)

Thanks Ken. Stepping back to the market, loan fundamentals remain quite strong. The S&P/LSTA Leveraged Loan Index returned 1.6% for the third quarter and has continued to perform well through October, returning 30 basis points for the month. There were five leveraged loan defaults during the third quarter and as of September 30th, the trailing twelve month default rate stood at 1.5%. This is up from 1.1% as of June 30th, but well below the long term average of 2.6%. The widely reported First Brands default drove most of the increase in the default rate, though its impact on the broader CLO market was actually minimal. First brands accounted for only 30 basis points of our portfolio on a look through basis and we do not view it as a widespread indication of credit weakness. While the First Brand loan itself was large, it's important to remember that a good portion of that loan was held in BDCs, not CLOs. Our portfolios look through default exposure as of September 30 stood at 34 basis points, which is well below the broader market levels. With rates expected to fall further, we believe defaults should remain muted as loan issuers will have lower interest costs. In addition, corporate fundamentals across the loan market remain quite resilient with issuers generally continuing to grow revenue and EBITDA despite the effects of inflation, tariffs and movements in interest rates over the past years. During the quarter the market saw approximately 6.8% of the leveraged loan market or roughly 27% annualized prepaid at par. In general, loan issuers continue to be proactive in tackling their near term maturities and the maturity wall we have mentioned on prior calls continues to be pushed out. Unfortunately, while pushing out the maturity wall is good, many of these refinancings by borrowers have also included reducing the spread on loans leading to the spread compression that we've talked about over the past few quarters. On the CLO side, The market saw $53 billion of volume during the quarter. This was up slightly from $51 billion during the last quarter. Reset and refinancing activity for the third quarter was $69 billion and $36 billion respectively and both of these measures represented significant increases on a quarter over quarter basis. Our portfolio metrics continue to stand out versus the market. As of quarter end, Triple C rated exposures within our CLO equity portfolio stood at 4.6%, which is lower than the broader market average of 4.8%. Similarly, only 2.7% of the loans in our CLOs were trading below 80 and this compares to 3.4% across the market. Our weighted average junior OC cushion stood at 4.6%, well in excess of the market average of 3.7%. These are all important measures that underscore the quality of our CLO equity portfolio and overall we believe we have a higher quality portfolio than the market. More broadly, the Fed's recent rate cuts have had limited direct impact on CLO equity as our returns are largely driven by spreads, not base rates. In many respects, lower rates can be constructive for the CLO equity asset class, easing interest costs for loan issuers. It also helps increase LBO activity that contributes to new loan supply and potentially wider loan spreads in the future. Looking ahead, we're excited about our near term investment pipeline. Market conditions have continued to stabilize following the volatility earlier in this year with loan fundamentals remaining resilient. If CLO debt spreads remain flat or continue to tighten, we expect to take action on over 20% of our portfolio and unlock, reset and refinancing upside in the coming months and quarters. To wrap up, we opportunistically deployed capital at attractive levels, executed resets and refinancings that strengthened the recurring cash flows in our portfolio and maintain portfolio metrics that are favorable to the broader market, we are positioned with strong fundamentals, meaningful reinvestment, optionality within our portfolio and the flexibility to capitalize on opportunities as they arise. We thank you for your time and interest in eaglepoint Credit Company. Ken and I will now open the call to your questions operator.

OPERATOR - (00:16:15)

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press Star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press Star two if you would like to remove your question from the queue. For participants using a speaker equipment, it may be necessary to pick up your handset before pressing the star keys. And our first question will come from Gaurav Mehta with Alliance Global Partners.

Gaurav Mehta - Equity Analyst - (00:16:48)

Thank you. Good morning. I want to ask you on your. Comments around portfolio resets and refi. I think you mentioned over 20% of your portfolio reset and refi. Just want to get some more color on the timeline for that and what would the impact be?

Thomas Majewski - Chief Executive Officer - (00:17:08)

Sure. Good morning. Thank you for thank you for your questions or your question. As we laid out, we completed a ton of refis and resets during the third quarter. So very proactive with our portfolio. And when we talk about our outlook for the future, we're anticipating another 20% of the portfolio. Makes sense to have some actions taken over the next one to two quarters. Generically, it's all market conditions specific. The biggest thing I would draw your attention to in our investor deck is page 28 or 25 through 28 now where we lay out position by position, every single clo that we have and what the what the triple A's are. You'll see the weighted average triple a spread is 134 basis points over Secured Overnight Financing Rate (SOFR) right now. Generically, you should think of the market as 120 to 125, some deals wider, some deals tighter. But and then start looking through the deals that have the highest triple A spreads and those are going to be the ones that we go after. Combination of prioritizing and making an educated decision. As much of an art as a science of which CLOs will get the biggest potency for us, whether or not we're doing a refi or reset, which ones have the most upside savings or the value in lengthening the reinvestment period. You can see over the course of the year we've done, I think we're on pace for comfortably over 75 different corporate actions. So a highly, highly proactive ownership program. And I would expect that to continue, market conditions permitting, we may have even A few more slated for this year and we'll kick off into next year. So I would expect a slow and not slow, but a consistent reduction in AAA costs across the CLO portfolio and lengthening or lengthening of the reinvestment periods of those that were resetting. That said, it is all market dependent and there's been a period of time, if you look back to Q1, it was reset mania until March 1st and then we put pencils down because the market didn't cooperate proverbially. So there is always that market caveat. But we are working very hard and we'll do everything within reason to. Keep. The cost lower on the right side of our balance sheet. And I would say no one in the market has done more than us is my belief.

Gaurav Mehta - Equity Analyst - (00:19:45)

Thanks for that color. Second question I want to ask you on your near term investment opportunities, can you provide some color on what you guys are seeing in the primary and secondary market for CLO equity?

Thomas Majewski - Chief Executive Officer - (00:19:57)

Yeah, the market continues open and active right now. Primary market, we continue to see plenty of issuance opportunities. We have a number of loan accumulation facilities which are kind of the precursor to creating CLOsing. Some of those are ripe and ready to go into CLOs whether or not we issue any more this year. A little bit market dependent. As I'm sure you're aware, insurance companies are big buyers of a lot of the rated tranches and they often have annual budgets to deploy and they have a funny habit of deploying that budget before the end of the year. So sometimes you see things back up a little bit in the last week or two. So we may get one or two new done this year, but certainly a robust pipeline into Q1 of next year. And then on the secondary side, hundreds of millions of dollars of CLO equity trades every single week. The market's CLO equity is not cheap today by any stretch. It's CLO equity is not. Their bond equity is not being given away. That said, there are still selective opportunities out there. We have both been buying and selling in the secondary market. One of the things we made reference to in our remarks was some rebalancing and lightening on a handful of collateral managers in positions where perhaps we saw more risk than upside. That said, we've also been deploying in the secondary market in investments where we see more pass for upside. So market is open and active right now and we are an active participant in every segment of it. But we do remain very selective in the areas in the investments we're making.

Gaurav Mehta - Equity Analyst - (00:21:36)

Okay, thank you. That's all I had.

Thomas Majewski - Chief Executive Officer - (00:21:38)

Great. Thank you very much. Thank You.

OPERATOR - (00:21:41)

And our next question comes from Mickey Schleen with Clear Street.

Mickey Schleen - Equity Analyst - (00:21:47)

Good morning Tom and Ken, I hope you're well. Tom, you mentioned the impact of first grants on loan spreads. Could you characterize how trends in sealed loan asset spreads in October and maybe even through mid November relative to September?

Thomas Majewski - Chief Executive Officer - (00:22:10)

Let's see. So loan spread compression has slowed somewhat. If a few weeks doesn't make a trend, unfortunately, I wish I could say better there. When we look across our portfolio. Lots. Of people ask us about default rates. And all that stuff. You know the number one thing that I don't like right now, and you've heard it from us in earnings here for a few quarters, is spread compression. And the weighted average spread on these, on these loans is down, I'm going to say circa 50 basis points, give or take over the last year. That is not good. We're doing our part to tighten on the right side through our reset and proactive reset and refinancing program. An analogy I like to make to people and this is an analogy. If we've got well over 1,000 loans and a little over 100 CLOs, it's kind of picture a wall of sand coming at us on one side. That's the loans repricing while our team is tossing boulders on the other side. So just things move at a different pace and sometimes a different activity. To your point, there's always a silver lining in clouds. And while First Brands is certainly not the credit market's finest moment, ironically it was actually a repricing that they were working on that gave rise to figuring out the fraud and the quality of earnings. My understanding is the quality of earnings report was getting prepared. And as part of that some of the things going on at the Holdco above the borrower became known. So that has certainly put a chill on the repricing market. There are far fewer repricings right now than you'd expect with 40% of the loan market trading above par. Regrettably, I'll say it's too soon to declare a victory though and it wouldn't surprise me to see a little more pick back up. But it certainly has slowed since the first brands news by a healthy margin.

Mickey Schleen - Equity Analyst - (00:24:17)

Tom, you sort of segued into my next question which is sort of the longer term outlook for spreads, loan spreads. When I Look at page 19 of your presentation, you know, those spreads look like they're heading down to their long term average. As you said, you know, we don't know for sure. Spreads, you know, can move up and down over long Periods of time. But over the long run looking at the supply and demand capital in the loan market, you know, what is your outlook long term for loan spreads?

Thomas Majewski - Chief Executive Officer - (00:24:57)

That's a tough one. We show two averages here. We show the 35 year average, give or take and the 10 year average. Obviously I like the 10 year average better than the 35 year average. What I will say when you think about the pre 2007 average, you know, in the old old days and our good friend Peter Gleisting might get, might. I might be slightly off on this. He might know better. Loans had to do two spreads, 250 and 275. Those are the two choices. When you called the loan desk at Chemical or Manufacturers Hanover a long time ago. Obviously the market's gotten a lot more sophisticated. When loan spreads were 250 back in 2006 and I remember as a CLO banker modeling 250240 spreads. That was back when AAA's were 25 and 30 basis points over. So the funding cost in the market was much much lower. The loan market and CLO market, whether we like it or not, are inextricably linked. The CLO market owns about 2/3 of the loan market, maybe even a little more right now. So while we are at the low on spreads over the last 10 years at 347I'd love to call a bottom, I can't quite call a bottom there but when I think about the long term average going back to the early 1990s that was influenced significantly by the availability of in those days London Interbank Offered Rate (LIBOR) +25AAA's. When we're up, we're 100 basis points away from that. So if I had to guess we're closer to the bottom in the ten year band then. Well certainly then the top you get one or two other credit things pop up. You know, frankly the way media cycles work, I'll use an example. Like our friends at Citibank for a while it felt like they could do nothing right. They had the mistake with the Revlon loan And that like $27 trillion wire, you know, everything that went wrong seemed to get attention. My sense is the credit markets are going to be that kind of get that focus from the media. There was some headline I saw in Bloomberg about a loan on a BlackRock BDC that took a big write down. Again it's probably one loan in a portfolio of hundreds but it got attention. The good news around that is it probably helps abate loan spreads and potentially even a path for widening one of the pieces we did share is that M and A activity does seem like it's picking up, which is good. To the extent, you know, what's been going on is a lot of the same loans are just getting repriced and handed around and refinanced and repriced tighter. To the extent we see new names coming into the market, which it feels like we are with loan spreads lower, it makes M and A a little more easy. Could we see a little new supply which would help. So can't call a bottom. I'd love to. We are at the 10 year low. If you look at this chart, hopefully that means there's some upside to go. Our, our focus from the media, the credit industry broadly probably is a good fact at least. Again, unspread compression, odd as that sounds.

Mickey Schleen - Equity Analyst - (00:28:28)

I appreciate that, Tom. It's pretty much in line with my thesis. A couple more questions if I can. On page 24 you show that your recurring cash flows dipped below the total of the distribution and your operating expenses. So I'd like to, you know, understand what drove that decline. And could you also walk us through what factors the board considered when you look at that decline in keeping the dividend stable?

Thomas Majewski - Chief Executive Officer - (00:29:01)

Yes, we have a prepared answer for the latter one. But to the, to the first one, you know, combination, the principal thing, spread compression was a non trivial factor there. I'm going to say the weighted average spread fell at 8 or so basis points, 8 basis points this quarter. So that's, you know, it's. And while we're lowering our costs on the right side of the balance sheet with resets and refis, we're, we didn't lower our weighted average 8 basis points, unfortunately, quarter over quarter. So that's the principal manifestation of it. That said, there are, and we do say this often, but there seems to be, as I was looking through it the other day, a disproportionate number of investments that haven't yet made their first payments in the portfolio. So there is some green shoots. It's not as if everything is paying yet. And not that there's a problem with those investments, just a little bit of a delay in getting in. When you make investments, sometimes it's six months before the cash flow turns on. So a little bit of that principal driver spread compression a little bit offset by some reset activity that we do. Even the reset activity hurts cash flows in the first quarter because you got to pay the bankers, the lawyers, the rating agencies and that all comes out of your distribution in the quarter. You do that so in many cases, the equity distribution comes down as for one period as a result of that activity. So those are some things going on there. In ECC, we did maintain the distribution at 14 cents a month for the first quarter. The board considers any number of factors. All factors regarding both the outlook for the company, the portfolio, the economy, taxable income, are all drivers in there. Obviously, the board reviews these matters every single quarter. No one thing is a particular driver of the decision, but a collage of all the factors went into the board's decision.

Mickey Schleen - Equity Analyst - (00:31:03)

I understand. One last question, Tom. You talked about borrowers taking advantage of tighter spreads and deal managers and equity holders like yourselves also taking advantage of tighter spreads to refinance. But if I'm not mistaken, your most expensive liability, the Series F preferreds, will become callable soon. I might be wrong, but I think I'm right.

Thomas Majewski - Chief Executive Officer - (00:31:32)

January comes to mind to me. Am I right on that, Ken? Yeah. Ken's smiling even when you say that. Just to. Okay, I'm right. Yeah. It's hard for me to keep track of all of them, but those are the most expensive. They're callable very soon. Under current conditions, does it make sense to refinance them? In other words, did Ken's smile just.

Mickey Schleen - Equity Analyst - (00:31:53)

Get broader and the banker smile might.

Thomas Majewski - Chief Executive Officer - (00:31:57)

Have gotten as well. Now, I'm sure if they're listening, but yeah, no, as we look at the capital structure, and this is on page 10 of the deck. A very astute observation on your part. You know, interest rates have certainly come down a bunch. You know, we're above our target leverage limit. Target leverage guidelines. I should say that we say we want to run the company and we're well within our statutory limits. And, you know, we talk about, while we're doing it very slowly right now, because of where we are, we've got that 7% perpetual preferred program that we issue through Eagle Point securities, the Series AA bb. You know that I say this, this is a meaningful competitive advantage. No other principally clo, equity oriented vehicle has such a program. I love that program. And, you know, could you see us opening up or doing something with the Series F. Obviously, the board will make the decisions on the appropriate days, but the call date is January 18, 2026. And it wouldn't surprise me if Ken has a reminder in his calendar around that day.

Mickey Schleen - Equity Analyst - (00:33:09)

Yeah, me neither. Okay, I appreciate it. That's it for me this morning. I appreciate you taking my questions. Thanks so much, Mickey.

OPERATOR - (00:33:21)

And we'll go next to Eric Zwick with Lucid Capital Markets.

Eric Zwick - Equity Analyst - (00:33:27)

Good morning, Tommy. Hey, good Morning, Tommy. Ken. So wanted to my first question, maybe just a bit of a follow up on some of kind of the kind of broader topics you've been talking about. But in terms of, you know, you've mentioned, there's quite a bit of opportunity still for some of the, you know, the borrowers, the assets that are the CLOs to refinance. You have opportunities remaining on the liability side just from quarter to quarter. One may outweigh the other, but over the long term the changes should be offsetting, so to speak, and your arbitrage opportunity remains the same. Is that the right way to think about it generically?

Thomas Majewski - Chief Executive Officer - (00:34:12)

Yes. Over the long term, any given period, it widens or tightens. You know, the days loans are widening are usually the days CLO debt is widening. You know, that's kind of a, you know, a bad fact. The good news is CLO debt is longer than loan debt. And we think these things move in cycles. Credit spreads tighten, credit spreads widen back and forth. The good part about loans being shorter term than CLO debt is when things get choppy in the credit markets. You see, if you look back historically and we have the data going back to 2014 on our website, you'll see there's periods of time where the portfolio spread on the underlying loans increases and sometimes increases quite handsomely. The AAA's we're locking in today can be around for 12 years if we need them. So your statement is absolutely correct. When you look over the long term, these things have a nice habit of balancing out. And some of it is just due to the CLO market and loan market again are so intertwined. There are periods and if you were to listen to our calls in 2018, I'm sure the recordings are gone, but the transcripts are still around. We might have lamented the same thing of spread compression beating us up. And then when, you know, it went the other way and we had the AAAs, you know, locked in place and you know, from January 2020 to the end of January 2021 was a great period. Not a straight line, but a great destination. So over time these things should all balance out. They rarely feel like they balance out on any given day.

Eric Zwick - Equity Analyst - (00:35:49)

Got it. That's helpful. And you kind of anticipated that the second part of the question there with your answer. So I won't go on there just in terms of funding activity going forward. Certainly been a re rating of not only your stock but the other CLO funds that are traded out there trading now at a discount to nav. How does that Change your thoughts about potentially shifting to a share buyback kind of strategy as opposed to using the atm.

Thomas Majewski - Chief Executive Officer - (00:36:21)

Yep. And certainly so we look at things over a long term in the vast majority of the decade plus we've been public the ecc, we've been fortunate and investors have been demanding the stock such that it's traded at a handsome premium to NAV right now it has been at a discount as I think have all of or substantially certainly all of the major CLO equity funds. It's a little bit frustrating why that, you know why that is. You know could be any number of reasons. The BDC index is down a bunch over the last kind of 60 days as well. Frankly. BDCs in my opinion are more levered to interest rates than we are and that they have floating rate loans where the floaters are falling and they have fixed rate debt which is going to have to be refinanced wider. So any number of things and then overlay the credit news in the world doesn't help matters. The impact on the major CLO equity funds arrows including IS is frustrating. We do make long term decisions about these things and our management style that Ken and I bring to the table as well as the advice and direction from our board, very much long term focused. We won't make hair triggered decisions around any stuff. That said, I will say all things are up for consideration at the company and will continue to be. But we think about these things very much on a long term basis.

Eric Zwick - Equity Analyst - (00:37:59)

And last one for me, just looking at the decline in nav, curious if you could kind of frame how much of that is related to changes in kind of market pricing and spreads versus maybe return of capital. How much of that could potentially be recaptured if there are changes in the market?

Thomas Majewski - Chief Executive Officer - (00:38:23)

Yeah, I don't have the exact split, I'll say the vast majority. We did have some realized losses from repositioning. By and large those prices were already factored into the nav. So that's more of just a reclassification from unrealized to realize not our favorite but not a big NAV impact. And then the NII was less and you know, unfortunately non trivially less than the cash distributions paid. So I don't have the exact components but I'm going to judgmentally say right now and we can check the numbers later. The largest component of the NAV move in the quarter was the excess of distributions over nii. And Ken is nodding yes with a yes, I'm right which is good or directionally right. The myriad of factors that go in there. But the biggest factor in my opinion on the NAV move frankly was the. Distribution relative to nii.

Eric Zwick - Equity Analyst - (00:39:28)

And then I guess my follow up to that would be in. I know Mickey kind of already asked about the dividend a little bit, but I guess maybe what levers or what would need to happen in the market or what can you do to potentially get the NII back above the dividend?

Thomas Majewski - Chief Executive Officer - (00:39:44)

Yeah. All things are considered at all times. Continuing to rotate the portfolio into higher earning investments is something we've been doing a lot of. We haven't used the word rotation too too much lately or in a while but we have used it recently here in terms of working on a couple of positions that have not bad but have underperformed our expectations and are rerotating into things that we think have some higher earnings potential. I think Mickey was kind enough to suggest we call the Fs and maybe replacing 8% financing with 7% financing that might, you know, that might have a nice ring to it. Obviously we'll make the decision on that day based on market conditions and continuing to optimize, you know, every aspect of our portfolio at the end of the day. I'm just looking at some numbers here. Bear with me one second. Rotation here to there. So the things we of a selection of things we exited had it looks like about an 11% effective yield and this is the, you know, 20 plus percent effective yield on things that we were putting into the ground during the past quarter. So it's rotating out of some things that were for whatever reason either late in life. I'm looking at a 2015 vintage clo that just, you know, that's one of the larger sales, largest sales we had, one of the sales we had, not the largest necessarily, but looking at a 9.5% yield. But the weighted average effective yield on the things we sold was 11 and the weighted average of the of things that of a handful of investments that were some of the kind of rotation offsets at a two handle in front of them. So doing everything we can to get more earnings into the box is part of it. We can do that through resets and refis as well as buying and selling Clos securities. We can also do it by optimizing the right side of our balance sheet. I am mindful of where we are on the leverage ratio. We're comfortably on sides with all the statutory limits but we are operating outside our target band as well. We do like to be within the target band most of the time. So that's something in the equation. But. It'S very much a collage and very much things that we think about on a long term basis. We don't, you know, while we do these calls every quarter, we think about where we want to be over multiple years, not just what are we going to say on the next quarterly call. Although we like to have good things on the next quarterly call. Of course not to dismiss it either. Of course.

Eric Zwick - Equity Analyst - (00:42:39)

Thanks for taking my question today.

Thomas Majewski - Chief Executive Officer - (00:42:40)

Thank you very much Eric. Very thoughtful questions.

OPERATOR - (00:42:44)

And we'll go next to Christopher Nolan with Ladenburg Salman.

Christopher Nolan - Equity Analyst - (00:42:49)

Hey Christopher. Hey guys, how are you doing? Tom, on your comments on the 12 month trailing default rate, I presume that's for industry and is that First Brands at all? I know First Brands is small but I'm trying to get an understanding why the trailing default rate starts creeping up. The way it is.

Thomas Majewski - Chief Executive Officer - (00:43:07)

Yeah, it picked up to. That's market wide. It's not really. I mean our default exposures relatively low. That said, you know, CLO managers have a funny habit of selling things a day before they default to keep their optical default rates low as well. So you know there's any number of factors that go into that. The pickup in defaults, I think we said there were five defaults during the quarter. First Brands was a five, roughly $5 billion loan. So that's one of the biggest Ds we've had in a long time. So that's the principal driver on a quarter over quarter basis. The good news, you know, as I good news at least for us in the CLO market, a lot of that loan was held in BDCs and it was not a CLO only loan by any stretch. It was I think a SOFR plus 500 loan which met the requirements to get into a lot of BDCs. So our exposure to it was quite low. We model significant amount of reserves for losses. Obviously we like not to use them but this was well within our tolerable band that we know we're always going to have a few problems every year. So for us it was fine. But the overall pickup, which I think we're like 130 or something, 1.3% trailing 12 months still well less than the long term average. But if we were talking six months ago, I think that was a double digit basis point number. So trending up a bit but driven by first brands at 50 basis points of a $1.5 trillion, $5 billion of a $1.5 trillion market, that one can. Move the percentage quite a bit.

Christopher Nolan - Equity Analyst - (00:44:56)

And excuse the might be a dumb Question. But in the case of fraud like first, who's responsible for vetting that fraud before the clos packaged and sold?

Thomas Majewski - Chief Executive Officer - (00:45:10)

Let's see. So an investment bank underwrote the loan and placed it. And then institutional money managers who manage the clos review the loan and Push Buy and we review those institutional money managers to determine that they have, you know, processes have the right people in place and processes in place. So it's, you know, the, the chain is somewhere in there and auditors audit things and tell you what's going on. And you know, that's, you know, that's kind of the, you know, the broad things that go on in a system like that. One of the interesting things about First Brands as best I'm aware is a lot of the things that were. That. Are raising questions for sure today. And if you read the headlines in the bankruptcy court docket, a lot of things going on were going on at a holding company above the operating company. Where this $5 billion senior secured loan was. Doesn't make it right or wrong. Obviously it was still wrong what happened. But it seemed like there were money moving up and down from Holdco to Opco. Our loan at Opco is where that $5 billion loan was facing the subsidiary of Holdco. It seems like they were getting advances from Holdco as best I'm aware, based on factoring some receivables, but it sounds like they may have been multiple factored. The company had something like a billion dollars of EBITDA a year ago. I might be slightly off on that, but directionally accurate, I believe. And on the surface, 5 billion of debt against a billion of EBITDA. That's not low, but that's not absurdly high either in the credit market. That said, and while they talk about brands and first brands, you know, things they made, you know, generic, you know, aftermarket auto parts, with limited exception. Do you know what brand windshield wipers you have on your car? You know, I mean, it's not like, you know, you think about like a J. Crew, which went bankrupt many years ago, J. Crew still exists. The brand is valuable and you know, not, you know, people, oh, I buy my stuff at J. Crew. My son likes to get his stuff there. He thinks he looks cool. A lot of the products, I think Fram is one of the brands at first brands. Maybe some people have some loyalty to that for oil filters and things like that. But there's not a lot of the biggest challenge that I see is a lot of those parts, while they're essential to the operation of your automobile. If you're a kind of person purchasing at an aftermarket shop, are you going to buy one versus the other? Who knows? And if these guys are not able to produce and get product to the stores, someone else will and they lose their shelf space. So when we look at the ultimate recovery on First Brands, which is still quite uncertain in my opinion, some clos still own it. We've got this dynamic of, okay, let's say they were at a billion of EBITDA a year ago. That doesn't mean they're going to be at a billion of EBITDA next year. I would certainly take the under on that. They did get some additional funding on their DIP facility released, but it sounded like cash was extremely tight there for a while. So my sense is it probably continues in some way, shape or form, but it's probably a much smaller company. The ultimate recovery for the creditors, the jury still out doesn't look great, but I think a lot of it will be how quickly they can get back into business. And if they're a $700 million EBITDA company versus a $300 million EBITDA company, and I'm just pulling those numbers out of the air, could be very, very different outcomes for the creditors that remain.

Christopher Nolan - Equity Analyst - (00:49:27)

Great. That's great. Color. Thank you. You're welcome. Thank you.

OPERATOR - (00:49:33)

And we have time for one final question, and that will come from Timothy d' Agostino with B. Riley securities.

Timothy d' Agostino - Equity Analyst - (00:49:41)

Oh, hey, Tim, how are you? Thank you for taking the question. Good. How are you? Thanks for taking the question. Joining a little bit late here, so apologize if I'm reiterating anything, but in the press release you mentioned that your common stock issuance via your ATM was issued at a premium to nav. I was just wondering if you could quantify how much accretion to NAV that created.

Thomas Majewski - Chief Executive Officer - (00:50:06)

Yeah, sure. It was a few pennies. We have it in the press release. I would say 2 to 3 cents accretion.

Timothy d' Agostino - Equity Analyst - (00:50:19)

Okay, great. And then just one. Another quick question. In the third quarter, you did 11. Resets and 16 refinances. I was wondering if you could provide an update quarter to date of how many done for the fourth quarter.

Thomas Majewski - Chief Executive Officer - (00:50:35)

I don't think we. We don't publish that number and that sometimes it's episodic. Earlier versus late. We do give the cash flow collected because most of it comes in the first month of the quarter. We haven't published it per se. So if you wanted to figure it out, what I'd probably see, we do list every investment we have. If you look on Bloomberg, you can see which of those have been reset. I recognize that that would take a little bit of time. So we don't publish the stats around that, just because at this midpoint in the. Here we are exactly roughly at the midpoint of the quarter, it may not be indicative of the total volume. So I can assure you we've continued with them and we will continue with them, but we don't share a, a. Mid quarter stat on that.

Timothy d' Agostino - Equity Analyst - (00:51:34)

Okay, great. Thank you so much. Yeah, those are the two quick ones for me.

Thomas Majewski - Chief Executive Officer - (00:51:38)

Thank you very much.

OPERATOR - (00:51:41)

And this now concludes our question and answer session. I would like to turn the floor back over to Thomas Majewski for closing comments.

Thomas Majewski - Chief Executive Officer - (00:51:49)

Great. Thank you very much, everyone for joining the call today. We really appreciate your attention and frankly, the very thoughtful questions from all the analysts. Ken and I are around for the balance of the day. If people have further questions, we're happy to continue the discussion. Thank you very much for your time and interest in Eagle Point Credit Company.

OPERATOR - (00:52:07)

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day.