EAGLE POINT CREDIT COMPANY INC. (ECC) Q2 2026 Earnings Report, Transcript and Summary

Good day. You are current holding for the Eagle Point Credit Company call. We will be underway in approximately 2 minutes, and we thank you for your patience. And please continue to stand by. Greetings, and welcome to the Eagle Point Credit Company Second Quarter 26 Financial Results Call. At this time, participants are in a listen-only mode. A Q&A session will follow the formal presentation. If anyone should require operator assistance, please press *. As a reminder, this is now my pleasure to introduce Darren Daugherty with Prosek Partners. Please go ahead, sir.

Thank you, operator, and good morning. Welcome to Eagle Point Credit Company's earnings conference call for the second quarter of 26. Speaking on the call today are Thomas Philip Majewski, Chief Executive Officer and Ken Inorio, 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 project financial information that involves 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 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 second quarter 20 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 Philip Majewski, Chief Executive Officer of Eagle Point Credit Company.

Thanks, Darren, and good morning, everyone. We appreciate your joining the Eagle Point earnings call this morning. I will start by providing some perspectives on the recent quarter. Let me begin with the headline results. Our net asset value for the quarter ended at $4.51 per share, and that is an increase of 8% from $4.17 at March 31. We generated a GAAP return on common equity of 12.7% for the second quarter. And during the quarter, we paid an aggregate of $0.18 per share in cash distributions to our common shareholders. The recovery at NAV was driven by a meaningful rebound in loan prices and CLO equity valuations following the volatility we experienced in the first quarter. Uncertainty surrounding the potential impact of artificial intelligence on software borrowers together with the geopolitical developments, had weighed on leveraged loan prices and CLO equity valuations earlier in the year. As market sentiment improved during the second quarter, valuations recovered meaningfully while underlying credit fundamentals remained resilient throughout the period. This supports our view that much of the first quarter decline reflected market driven pricing pressure rather than a broad deterioration in credit. Software remained an area of focus during the quarter as investors continue to assess the long term impact of AI across different business models. While AI will invariably create both winners and losers over time, many software businesses continue to benefit from recurring contracted revenue sticky customer relationships, and mission critical products. We believe the market reaction earlier in the year was overstated relative to what we expect to be the actual impact on the broader software sector to ultimately be. The volatility earlier this year also improved the reinvestment optionality available within our CLOs. Lower loan prices enabled CLO collateral managers to purchase performing credits at discounted prices while reduced repricing activity in the loan market helped preserve and in some cases, modestly improve loan spreads. These dynamics support par building and spread enhancement within our CLO portfolios which can contribute to stronger CLO equity cash flows and valuations over time. Throughout the quarter, we continue to actively manage our CLO portfolio by completing 8 resets and 7 refinancings of our CLO equity position. This resulted in a weighted average CLO debt cost savings of 22 basis points for those CLOs. Each reset also extended the applicable CLOs reinvestment period to 5 years. These actions help mitigate some of headwinds CLO equity had faced earlier in the year and should support improved earnings and cash flows over time. Our portfolio's weighted average remaining reinvestment period at the end of the quarter stood at 3.4 years. And that is unchanged from March 31 and 15% longer than the market average. This longer reinvestment period provides greater protection against loan price volatility, and positions our CLOs to capitalize on discounted loan prices and relative value trading opportunities when they arise. We also continue to see a meaningful pipeline of potential refinancing and reset opportunities. During the quarter, we deployed $111 million into new investments at a weighted average effective yield of 24.6%. We allocated capital across CLO equity and certain other differentiated credit opportunities where we believe we identified very attractive risk adjusted returns. We also repositioned the portfolio by rotating capital away from a certain group of underperforming CLO collateral managers. While this resulted in realized losses, those losses had largely been reflected as unrealized losses in prior periods, resulting in minimal incremental impact on our NAV during the second quarter. Importantly, the repositioning allowed us to redeploy capital towards our core group of CLO collateral managers and selectively expand our exposure to other attractive credit investments sourced by Eagle Point. Additionally, we reached an important milestone in our new strategic partnership with Muzinich in Europe through the successful pricing of its inaugural European CLO. ECC benefits from the partnership through both its CLO equity investments and the value of the perpetual revenue sharing as additional CLOs are issued by the platform over time. Given Muzinich's established presence in Europe, we believe this platform is well positioned for sustained growth. Similar to our strategic partnership with Muzinich in the United States, which continues to scale. Beyond our core CLO equity investments, continue to selectively allocate capital to infrastructure credit, portfolio debt securities, regulatory capital relief transactions, asset backed securities, and other opportunistic private credit investments. These opportunities are sourced through dedicated teams with specialized expertise and origination capabilities across the broader Eagle Point platform. Allowing us to access differentiated opportunities that complement our core CLO equity strategy. As of June 30, non CLO investments represented 38% of our portfolio which was up from 32% at March 31. And this provides differentiated sources of income and additional diversification for us across multiple types of assets. 1 recent example is our investment in SOI Tickets, a specialty finance transaction which was secured by World Cup tickets that the Eagle Point team originated. Following a 7-month holding period, the investment generated a 1.2x multiple on our invested capital when it was realized back in June. We believe Eagle Point's ability to originate attractive investment opportunities complements ECC's core CLO equity strategy and enhances long term shareholder value. With that, I will turn the call over to Ken to discuss financial results in more detail.

Thank you, Tom, and thanks, everyone, for joining us today. During the second quarter, the company generated net investment income or NII of $0.17 per share. NII less realized losses from investments was -$0.62 per share. This compares to NII less realized losses from investments of $0.14 per share in the first quarter of 26 and NII less realized losses from investments of $0.16 per share in the second quarter of 25. Including unrealized gains, the company recorded GAAP net income of 70 million or $0.53 per share. This compares to a GAAP net loss of $1.12 per share in the previous quarter and GAAP net income of $0.47 per share in the second quarter of 25. Recurring cash flows from the company's investments totaled 62 million or $0.47 per share. During the quarter. exceeding the company's common distributions and total expenses by $0.14 per share. We paid 3 monthly common stock distributions of $0.06 per share during the quarter and declared monthly common stock distributions of $0.06 per share for the remainder of 2026. We believe the current distribution level is appropriately aligned with the company's earnings and will support maintaining a sustainable distribution over time. Turning to our capital structure, we completed the full redemption of our ECCW and ECCX notes. These redemptions reduce our outstanding leverage and further extended the duration of our capital structure. We currently have no financing maturing before January 2029. All of our debt and preferred stock financing is fixed rate and a significant portion of our preferred stock financing is perpetual with no set maturity date. We believe this long duration capital structure provides important stability and flexibility to support our investment strategy. We are unaware of any other publicly traded entity that invests primarily in CLO equity with perpetual financing and consider this to be a material competitive advantage for the company. As of June month-end, the company had debt and preferred equity securities equal to 47% of total assets less current liabilities. Above our target range of 27.5% to 37.5% within which we expect to operate under normal market conditions. We intend to return leverage to within our target range over time. Looking at our portfolio activity during the month of July, we collected $31 million in recurring cash flows in expect additional collections during the remainder of the quarter. Management's unaudited estimate of NAV as of July month-end was between $4.33 and $4.43 per share, the midpoint being a 3% decrease from quarter end. With that, I will turn it back to Tom.

Thanks, Ken. I would now like to share some additional thoughts on the loan and CLO markets as well as share some color on how we are positioning the portfolio. During the second quarter, new CLO issuance totaled $33 billion. Reset activity for the quarter totaled $55 billion and refinancing activity totaled $39 billion This activity created opportunities for CLO equity investors like ourselves to reduce liability costs and through resets extend the reinvestment periods when market conditions proved attractive. The S&P UBS Leveraged Loan Index rose 1.9% in the second quarter and returned an additional 80 basis points in July. Average corporate revenue and EBITDA growth remained positive during the quarter, supporting overall credit fundamentals across the broadly syndicated loan market, despite continued dispersion in certain sectors and among certain issuers. The trailing 12-month loan default rate ended the quarter at 1%, which compares to 1.4% as of March 31, and remains well below its long term average of 2.5%. ECC's look through default exposure remains low at 14 basis points. Significantly below the broader market average. We believe this reflects both the quality of our underlying loan holdings and our active portfolio management and disciplined investment approach. Loan prices recovered during the second quarter, although the improvement remained uneven across individual credits and was more pronounced outside software. Importantly, the proportion of loans trading above par did not return to levels typically associated with broad based market repricing. We believe 1 of the most significant headwinds facing CLO equity over the last 18 months loan spread compression has largely abated for now. Indeed, the weighted average spread of our CLO's loan portfolios was flat during the quarter. The June look through portfolio had a weighted average loan collateral market price of 95.99, providing opportunities for par building as performing discount loans repay or refinance at par. Turning to portfolio positioning, Our CLO portfolio metrics continue to compare favorably to the broader market. As of quarter end, CCC rated exposures in our portfolio were 3.8%, which is better than the market average of 4.6%. Our weighted average junior overcollateralization cushion stood at 4.4%, also better than the market average, which was 3.8%. These metrics reflect our disciplined investment approach and focus on higher quality CLO collateral managers and help position the portfolio to navigate periods of adverse market conditions. As I mentioned earlier, we have continued to selectively allocate capital beyond our core CLO equity investments to differentiated opportunities sourced and originated across the broader Eagle Point platform. We believe this diversification together with our core CLO equity strategy, positions the portfolio well to generate attractive risk-adjusted returns. Looking ahead, we remain constructive on the long term outlook for CLO equity and the broader opportunity set across the Eagle Point platform. We remain focused on completing resets and refinancings where market conditions permit. Deploying capital into attractive investments and continuing to expand our strategic partnerships and other private credit investment opportunities. We believe our disciplined portfolio management, active capital allocation, and access to differentiated opportunities are across our advisor's platform, position us well to create long term value for our shareholders. We thank you for your time and interest in Eagle Point Credit. Thank you.

We will now be conducting a Q&A session. If you would like to ask a question, please press 1 on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press 2 to remove yourself from the queue. For participants using speaker equipment, you it may be necessary to pick up the handset before pressing the star keys. 1 moment while we pull for questions. And our first question, we will hear from Gaurav Mehta with Alliance Global Partners.

Thank you. Good morning. Wanted to go back to your comments around loan spread compression abating in the quarter. Can you maybe provide some color on what is driving that? And, given that, do you expect the loan spread abatement to be sustainable and maybe improve going forward?

Hey. Good morning. A very good question. The lag in loan spread compression flowing through CLOs always takes a little while. So even in the first quarter, there were some repricings that then kinda manifested themselves The pricing-- repricing was agreed, let's say, in the first quarter before things got choppy, then it rolled through the portfolio in the second quarter. The spread on the underlying loan portfolio is roughly flat quarter over quarter. And, frankly, we are seeing some loans actually move up in spread. In the software sector in particular, 1 of the trends we are seeing is amendments and extensions. And as part of that, in certain instances, the loans spreads are actually getting reset wider in exchange for, you know, some degree of additional maturity time. So what drives loan spread compression is strong demand for loans not met by sufficient supply of new loans And from there, loans get bid up to par, par and a half, and you know, smart CFOs say, hey. Let's reprice our debt tighter. With most loans trading at discounts to par, that certainly has slowed. In addition, the CLO machine has certainly slowed down, and quarter over quarter issuance volume from Q1 to Q2 of new issue CLOs down by a nontrivial amount as well. Do not remember the exact number, but I am gonna say, judgmentally, around 20-25%. Showing that the new issue CLO arbitrage remains challenged. Which is something that does reduce the demand for loans and therefore keeping the prices lower. You can never declare a victory on these things, You know, be a bull market takes over tomorrow. Oddly, the spread compression is caused by bullish demand for loans, not the opposite. But where we sit today, a little bit of rate uncertainty, certainly some geopolitical uncertainty, and a more challenged and new issue CLO arbitrage. Not that existing CLOs are necessarily unattractive, but not as many new ones are getting created All of those augur well for certainly muted spread compression and you know, I guess, but the potential even for spreads to widen a little bit, which we are seeing on some loans. But it is, in a short way to put it, supply and demand driven. And hopefully, we are in a better situation now.

Thanks for those details. And as a follow-up, I wanted to ask you on your non CLO investment that you guys made in the quarter. what is the yield on the non CLO investment as compared to the CLO investment that you guys are making? I think in the prepared remarks, you also mentioned you guys are at 38% for non-CLO compared to 32% in March. Is there a target number for that exposure?

The yield of non CLO investments going in the ground? Do not know if I have-- do have a-- Roughly low twenties. For non CLO and also low twenties for CLO equity. Those-- yeah. Conveniently, both in the very low twenties expected yield on both cases. The bulk of the CLO purchases were either secondary or reset injections if memory serves. Not creating new CLOs at low twenties IRRs, but getting secondary in the market. When we look at when we look at the non CLO bucket, you know, we as we think about you know, ECC and its objectives, you know, our number 1 objective is to deliver attractive ideally, double digit returns for investors using credit investments with some complexity and where we can accept some illiquidity. You know, for a very long time, CLO equity was where we believe that best opportunity to be. More recently, and this is market wide, we certainly would have seen dealer research that suggested the CLO market was down double digits in 2025. And I think 1 report even suggested double digits decline in the first half of 26. So while we are trying our best to navigate, we are you know, it is been a it is it is obviously been a very difficult market for CLO equity. Largely due to the demand for loans exceeding the supply and know, significant amount of spread compression. So as we have looked to add other investments into ECC where we started highlighting it at the beginning of the year, and, indeed, we are in the high 30s right now. We do not have a set target for where to get to with that. Could it go up or down from here? It really could go either way. As we think about how we are gonna handle this and how we are going to manage the company. The first and foremost is getting good investments in here that will deliver very, very strong returns. We shared the SOI Tickets investment. that is in addition to that specific World Cup facility, we also have a regular term loan to the company. We have some equity in the company. We have some other very attractive investments, some of which have gone full cycle beyond that SOI Tickets World Cup special facility. That are generating very, very attractive returns. Importantly, these are investments that we hold across the Eagle Point Complex. This is not like we are doing something special. Just to add into ECC. And 1 of the advantages of having Eagle Point Credit as the adviser to ECC is the broader access to a much bigger investment suite than just CLO equity. So the short answer is I do not have a specific number to give you. The rationale is maximizing returns. The theory the strategy is working. And, importantly, it is things we are doing across the complex. Nothing we are not putting any investments in here of these originated investments that are specific just to this vehicle. Alright. Thanks for those details. that is all I had. Thank you very much.

And next, we will move to Timothy D'Agostino with B. Riley Securities.

Yes. Thanks for taking the question. Good morning. Regarding gross capital deployed into new investments, in the release, it was mentioned about $111 million in 2Q 26. And then for 03/2026 to date, it is up to about a hundred and 25 million.

So I was just wondering, are you seeing more favorable market conditions? Or just generally more capital to deploy? Combination of both, frankly. I guess some of it is you know, we try and keep the company relatively fully invested. The yeah. We there is always some cash you know, it is invariable with the portfolio of this size and complexity. Cash floating around in the system. What drives the deployment is a goal to ideally be close to fully invested at all times, the statement of any more going in is sometimes driven also by the sale proceeds. Mindful, we did rotate out of some CLO equity position. I am gonna say We sold over $100 million of CLO equity on a market value basis during the quarter. So that also frees up a bunch of capital to reinvest some of it into see other CLOs. And then a bunch went to a bunch have gone into other investments. As I look across the complex, of the $71 million invested during it looks like about $44 million went into CLOs and related investments. And about $27 million into other investments. About 10 million into infrastructure credit, about $10 million into specialty finance, similar to things like SOI tickets.

Okay. Great. And then just on the infrastructure credit, understanding diversifying the portfolio a little bit, but just over the past 3 quarters, it seems like infrastructure credit has been the 1 sleeve that has picked up meaningfully. Looks like at year end, it was $31 million, and at 02/2026, was about $112 million. So just trying to understand what you are seeing within that sleeve, particularly, understanding that you are looking for better risk adjusted returns, but just more just more focused on infrastructure credit. Is there any other color or commentary to provide on that sleeve? Thank you.

Yeah. What we are seeing, you know, frankly, you can some of the line items in the portfolio, really some of the best risk-attractive returns. The some of the best risk attractive risk returns that we are seeing across our investment opportunities that we are looking at here at Eagle Point. We are not making, you know, project finance loans you know, at 7% or something like that. These are typically a little more interesting loans, but where there is a unique opportunity or where our capital can be transformative, We have a I think, a at least 5-person dedicated team and maybe someone else hired who is joining shortly. For, you know, originating these investments. And they go in a number of funds across the complex here at Eagle Point Credit. So a number of them, I think, have been some of the, frankly, the best investments we have made in the last year.

Okay. And if I could just sneak in another 1 on the infrastructure credit. Could you maybe talk to, like, what type of infrastructure? Just trying to understand, you know, is it mostly digital infrastructure? Or is it maybe, like, traditional I am just trying to understand, you know, in context what type of this infrastructure. Thank you.

Sure. it is a it is a it is a broad market basket frankly. Not any 1 particular sector, there is some digital infrastructure. there is 1 or 2 investments in that space. there is I believe we have got I do not know if it closed last quarter. It may be-- I think it is in the second quarter. Did Celgard-- yeah. Close in here? Yeah. Close in here. Yeah. So that is a company that makes battery separators, which is something that is required for EV batteries and all batteries, and, you know, they have multiyear ticker pay contracts. With large off take large offtakers. There, we are also able to make both a senior secured credit investment as well as get some equity kickers as part of that loan Across the firm, I do not know. I without replying as to which are in ECC at any given time, we have been involved in, you know, a recycling facility. I know we just bought something in a hydroelectric facility, which would have been in the third quarter. I do not know if it will if ECC was able to participate in it. But a broad basket, electric generation, battery storage facilities, So we are we are we are sector agnostic. it is not as if we are looking for just 1 particular type of infrastructure, and our team is a very deep team The leader of that team is well over 35 years experience, in infrastructure and project finance. And joined us, had previously been at a very, very, very big firm, but might now be the largest asset manager in the world. But with a really, really deep bench of experience. And we have been very happy with those investments. But we are not trying to say we are not trying to say wind is where we want to be or solar is where we want to be. Looking across a broad basket. Okay. Great. Thank you so much for taking the questions this morning. Excellent.

And as a reminder, it is star 1 if you would like to ask a question. We will next hear from Erik Zwick with Lucid Capital Markets.

Thanks. Good morning, everyone. Tom, you mentioned in your comments earlier that you rotated capital away from some underperforming managers. Curious if you could just provide a little bit more color or detail into, what particular metrics, you know, where they were kind of not meeting, you know, getting up to muster, kind of underperforming from perspective.

Buying bad credits and or just burning par through selling things, I want to say indiscriminately, but selling things You know? Destroying value within the portfolio broadly. And it is typically measured on either a par burn basis, a decline in the par of the portfolio, which means, you know, they bought something at a 100 and sold it at 80 and did not have a replacement asset to buy at 80. And or the market value of the portfolio declining very, very quickly. Quicker than average with some, you know, credit misses. And what we have seen over time and although in my experience, it is been a little more pronounced this time Like, when we look through COVID, some collateral managers, you know, actually really outperformed and some missed. Different reasons why, and we always try and learn from them. And while we are generally very long term in our relationships with collateral managers, If we see underperformance, you know, for persistent underperformance or a change in personnel or things like that. We are happy to-- you know, we are not happy. We-- we it makes sense to exit, and we are very willing to exit when we need to on particular names. So it is the totality. I, you know, in the-- to be critical of ourselves, I wish we found those sooner. But we have actually hired at the beginning of the year a full time quant who is dedicated on our CLO equity investing team. And yeah, we are we are continuing to I would say, look for early signals to be able to both exit names sooner and then similarly to get into names quicker that seem to have rebounded. We always have a watch list a positive watch list of names we are thinking about adding as well. And when we pull the trigger on that and the diligence we do, looking for both qualitative measures but also quantitative measures to help with both of those. But at the end of the day, it is been, you know, it is been a tough market for CLO equity. If you say, say, the market was down 15% last year using Nomura's numbers, Some pieces of CLO were down 30% total return, and others were flattish, you know, give or take. So it is it is obviously exiting those that are down, 1 of the things we have talked about you know, are we just selling at the low and the worst is behind us? In our opinion, the in our opinion, the trends have a funny habit of continuing. And, you know, you could say, well, we have already taken the pain. Let's hold on to it. What we are what we are thinking what we what we generally see in the CLO market is that decay continues, unfortunately. Thanks.

I appreciate the detail there, and I think you kinda hit on what was gonna be my follow-up just in terms of how you view underperformance from, you know, 1 CLO and how that affects your you know, kind of ongoing relationship with the manager, but you touched on that. So thank you for the complete answer. Just another topic. Ken, I think, mentioned, current leverage running above the target range and plans to return to that range over time. Wondering if you could maybe just frame that a little bit more in terms of is there, you know, kind of a time frame expectation for getting there, and what is the path or strategy for achieving that target range.

it is a combination, you know, of things available to us. While we cannot extrapolate this, you know, nav was up 12%, I think, in the-- I think we just did that the next few quarters. That would resolve the problem. that is obviously not a prediction. prediction and not likely to be the definitive outcome. Against that the you know, it is conceivable to see some more just increase in the value of the portfolio.

We have a couple other investments in the portfolio that, you know, we believe have a possibility. No, nothing's ever assured or guaranteed. To crystallize some attractive MOECs multiple on invested capital. So some of the investments we make, you know, have a nice stated coupon This is away from CLOs. But if it is paid off early, we might be, you know, if guaranteed, an even higher return above the rate at which we are accruing. So we think we will have a couple of those coming in. And then we do, if needed, have the ability to and we have very slowly I mean, it is it is very I do not even think we highlighted it. Somewhere in the financials, we bought back a little of the ECCC preferreds, which are due in 2031, if memory serves. We have been able to buy those back at a discount because they are trading at a discount. So that helps get a little forgiveness of indebtedness.

So really a combination of all those. it is not 1 silver bullet that is going to happen. We do not have a we have not set an internal deadline, get it done by this date. But we wanna be steering the ship back to get it in the, you know, in the middle of that lane, frankly. And, Eric, just a point of clarification, the GAAP return was up 13%, and the NAV was up 8%. Oh, I apologize. Yeah. My number is mixed. Thank you, Ken. Yes. So, yes, so NAV was up 8, but and we cannot extrapolate that either. But, you know, a couple of positive quarters of NAV can go a pretty long way. But it is a combination of each of those factors that are going to get us back onside. We all know the direction and we know the levers to pull. We are pulling on different ones of them at different paces.

Yep. No. That all makes sense. I realize that NAV for a little while was working against you and but it could you know, hopefully, you know, go back in your favor, and that could drive a lot of it. But, no. I appreciate the commentary on what levers are in your control as well. So thank you. that is all I have today.

Thank you, Eric. There are no further questions at this time. I would like to turn the floor back to Thomas Philip Majewski for closing remarks.

Great. Thank you very much, everyone. We appreciate you joining the call today and for your questions. Ken and I will be in the office throughout the day today. And if anyone has follow-up questions, please feel free to reach us. I also share the Eagle Point Income Company call as scheduled for 11:30 this morning. We invite you to join for that as well. Thank you very much.

Thank you. This does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.