Eagle Point Credit Q2 2026 Earnings Report

Eagle Point Credit EPS Results

• Actual EPS: $0.17
• Consensus EPS: $0.18
• Beat/Miss: Missed by -$0.01
• One Year Ago EPS: N/A

Eagle Point Credit Revenue Results

• Actual Revenue: $37.90 million
• Expected Revenue: $41.62 million
• Beat/Miss: Missed by -$3.72 million
• YoY Revenue Growth: N/A

Eagle Point Credit Announcement Details

• Quarter: Q2 2026
• Date: 8/13/2026
• Time: Before Market Opens
• Conference Call Date: Thursday, August 13, 2026
• Conference Call Time: 10:00AM ET

Eagle Point Credit (NYSE:ECC) Company is a closed-end, non-diversified management investment company that seeks to generate attractive risk-adjusted returns primarily through investments in collateralized loan obligations (CLOs) and related structured credit instruments. The firm is externally managed by Eagle Point Credit Management, LLC, a specialized credit asset manager focused on the structured credit markets. Eagle Point Credit Company’s shares trade on the New York Stock Exchange under the ticker symbol ECC.

The company’s investment strategy centers on acquiring both equity and debt tranches of actively managed CLOs alongside opportunistic positions in senior secured loans, high-yield bonds and credit derivatives. By focusing on floating-rate assets and employing hedging techniques, Eagle Point Credit Company aims to deliver current income and total return potential in various credit environments. The portfolio is constructed to balance yield generation from CLO equity with risk mitigation provided by debt and derivative exposures.

Since its inception in 2015, Eagle Point Credit Company has grown its asset base by leveraging the deep market relationships and credit-structuring expertise of its manager. The fund’s investments span North America and select European markets, providing diversification across underlying corporate borrowers and collateral pools. Ongoing monitoring and active portfolio management seek to capitalize on market dislocations and credit-cycle opportunities.

Based in Connecticut, the management team supporting Eagle Point Credit Company brings decades of experience in structured credit, leveraged finance and risk management. The firm’s governance and oversight framework are designed to align the interests of shareholders with those of its external manager, reinforcing a disciplined approach to credit selection and portfolio construction.

Eagle Point Credit Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: NAV rebounded 8% to $4.51 per share in the second quarter, generating a 12.7% GAAP return on common equity as loan prices and CLO equity valuations recovered. The company paid $0.18 per share in quarterly distributions and maintained its $0.06 monthly distribution for the remainder of 2026.
• Positive Sentiment: Management completed eight CLO resets and seven refinancings, reducing debt costs by an average of 22 basis points and extending reinvestment periods. It also deployed $111 million into new investments at a 24.6% weighted average effective yield, while loan spread compression appeared to be moderating.
• Positive Sentiment: The portfolio’s credit metrics remained stronger than market averages, with CCC-rated exposure of 3.8% versus 4.6% and a junior over-collateralization cushion of 4.4% versus 3.8%. Look-through default exposure was only 14 basis points, while non-CLO investments rose to 38% of the portfolio, adding diversification.
• Negative Sentiment: Leverage stood at 47% of total assets, above the company’s 27.5%–37.5% target range, and management plans to reduce it over time without setting a firm deadline. July month-end NAV was estimated at $4.33–$4.43 per share, implying a 3% decline from quarter-end, while NII less realized investment losses was negative $0.62 per share due largely to portfolio repositioning.

Presentation

[Operator]

Greetings, and welcome to the Eagle Point Credit Company Second Quarter 2026 Financial Results Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Darren Daugherty with Prosek Partners. Please go ahead, sir.

[Darren Daugherty, Managing Director at Prosek Partners]

Thank you, operator, and good morning. Welcome to Eagle Point Credit Company's earnings conference call for the second quarter of 2026. 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 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 financial information made during this call is based on the information available to us as of the date of this call.

[Darren Daugherty, Managing Director at Prosek Partners]

We disclaim any obligation to update our forward-looking statements unless required by law. Earlier today, we filed our second quarter 2026 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 Eagle Point Credit Company. Tom?

[Thomas Majewski, CEO at Eagle Point Credit Company]

Thanks, Darren, and good morning, everyone. We appreciate you joining the Eagle Point earnings call this morning. I'll 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's an increase of 8% from $4.17 at March 31st. We generated a GAAP return on common equity of 12.7% for the second quarter. During the quarter, we paid an aggregate of $0.18 per share in cash distributions to our common shareholders. The recovery in 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 leverage loan prices and CLO equity valuations earlier in the year.

[Thomas Majewski, CEO at Eagle Point Credit Company]

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 continued 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 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.

[Thomas Majewski, CEO at Eagle Point Credit Company]

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 continued to actively manage our CLO portfolio by completing eight resets and seven refinancings of our CLO equity positions. This resulted in a weighted average CLO debt cost savings of 22 basis points for those CLOs. Each reset also extended the applicable CLO's reinvestment period to five years. These actions helped mitigate some of the headwinds CLO equity has faced earlier in the year and should support improved earnings and cash flows over time.

[Thomas Majewski, CEO at Eagle Point Credit Company]

Our portfolio's weighted average remaining reinvestment period at the end of the quarter stood at 3.4 years, and that's unchanged from March 31st 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.

[Thomas Majewski, CEO at Eagle Point Credit Company]

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 arrangement 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.

[Thomas Majewski, CEO at Eagle Point Credit Company]

Beyond our core CLO equity investments, we 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 30th, non-CLO investments represented 38% of our portfolio, which is up from 32% at March 31st, and this provides differentiated sources of income and additional diversification for us across multiple types of assets. One recent example is our investment in SI Tickets, a specialty finance transaction which was secured by World Cup tickets that the Eagle Point team originated. Following a seven-month holding period, the investment generated a 1.2 multiple on our invested capital when it was realized back in June.

[Thomas Majewski, CEO at Eagle Point Credit Company]

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'll turn the call over to Ken to discuss financial results in more detail.

[Ken Onorio, CFO and COO at Eagle Point Credit Company]

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 negative $0.62 per share. This compares to NII less realized losses from investments of $0.14 per share in the first quarter of 2026 and NII less realized losses from investments of $0.16 per share in the second quarter of 2025. 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 2025.

[Ken Onorio, CFO and COO at Eagle Point Credit Company]

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 three 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 reduced our outstanding leverage and further extended the duration of our capital structure. We currently have no financing maturing before January 2029.

[Ken Onorio, CFO and COO at Eagle Point Credit Company]

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%-37.5%, within which we expect to operate under normal market conditions. We intend to return leverage to within our target range over time.

[Ken Onorio, CFO and COO at Eagle Point Credit Company]

Looking at our portfolio activity during the month of July, we collected $31 million in recurring cash flows and 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'll turn it back to Tom.

[Thomas Majewski, CEO at Eagle Point Credit Company]

Thanks, Ken. I'd now like to share some additional thoughts on the loan and CLO markets, as well as share some color on how we're 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/LSTA 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.

[Thomas Majewski, CEO at Eagle Point Credit Company]

The trailing 12-month loan default rate ended the quarter at 1%, which compares to 1.4% as of March 31st, 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 one 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.

[Thomas Majewski, CEO at Eagle Point Credit Company]

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 over-collateralization 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.

[Thomas Majewski, CEO at Eagle Point Credit Company]

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 across our advisors platform see well to create long-term value for our shareholders. We thank you for your time and interest in Eagle Point Credit.

[Operator]

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 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment while we pull for questions. Our first question we will hear from Gaurav Mehta with Alliance Global Partners.

[Gaurav Mehta, Managing Director and Senior Research Analyst at Alliance Global Partners]

Thank you. Good morning. I 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 do you expect the loan spread abatement to be sustainable and maybe improve going forward?

[Thomas Majewski, CEO at Eagle Point Credit Company]

Hey, good morning. A very good question. The lag in loan spread compression flowing through CLOs always takes a little while. Even in the first quarter, there were some repricings that then kind of manifested themselves. The repricing was agreed, let's say, in the first quarter before things got choppy, and then it rolled through the portfolio in the second quarter. The spread on the underlying loan portfolio is roughly flat quarter-over-quarter. Frankly, we are seeing some loans actually move up in spread. In the software sector in particular, one of the trends we're seeing is amendments and extensions, and as part of that, in certain instances, the loan spreads are actually getting reset wider in exchange for some degree of additional maturity time. What drives loan spread compression is strong demand for loans not met by sufficient supply of new loans.

[Thomas Majewski, CEO at Eagle Point Credit Company]

From there, loans get bid up to par, a par and a half, and 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-Q2 of new issue CLOs down by a non-trivial amount as well. I don't remember the exact number, but I'm going to 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. Via bull market takes over tomorrow. Oddly, the spread compression is caused by bullish demand for loans, not the opposite.

[Thomas Majewski, CEO at Eagle Point Credit Company]

But where we sit today, with a little bit of rate uncertainty, certainly some geopolitical uncertainty, and a more challenged new issue CLO arbitrage. Not that existing CLOs are necessarily unattractive, but not as many new ones are getting created. All of those auger well for certainly muted spread compression and gasp at 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're in a better situation now.

[Gaurav Mehta, Managing Director and Senior Research Analyst at Alliance Global Partners]

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

[Thomas Majewski, CEO at Eagle Point Credit Company]

Two questions there. What is the yield of non-CLO investments going in the ground? I do not know if I have. Do you have a?

[Ken Onorio, CFO and COO at Eagle Point Credit Company]

Roughly low 20s.

[Thomas Majewski, CEO at Eagle Point Credit Company]

Okay.

[Ken Onorio, CFO and COO at Eagle Point Credit Company]

For non-CLO and also low 20s for CLO equity.

[Thomas Majewski, CEO at Eagle Point Credit Company]

Conveniently both in the very low 20s 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 20s IRRs, but getting secondaries in the market. When we look at the non-CLO bucket, as we think about ECC and its objectives, our number one objective is to deliver attractive, ideally double-digit returns for investors using credit investments with some complexity and where we can accept some illiquidity. 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. I think one report even suggested double digits decline in the first half of 2026.

[Thomas Majewski, CEO at Eagle Point Credit Company]

While we're trying our best to navigate, it's obviously been a very difficult market for CLO equity, largely due to the demand for loans exceeding the supply and significant amount of spread compression. As we've looked to add other investments into ECC, we started highlighting it at the beginning of the year, and indeed, we're in the high 30s right now. We don't 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're going to handle this and how we're 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 SI Tickets investment. In addition to that specific World Cup facility, we also have a regular term loan to the company.

[Thomas Majewski, CEO at Eagle Point Credit Company]

We have some equity in the company. We have some other very attractive investments, some of which have gone full cycle, beyond that SI 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're doing something special just to add into ECC. One of the advantages of having Eagle Point Credit as the advisor to ECC is the broader access to a much bigger investment suite than just CLO equity. The short answer is, I don't have a specific number to give you. The rationale is maximizing returns. The theory, the strategy is working. Importantly, it's things we're doing across the complex. We're not putting any investments in here of these originated investments that are specific just to this vehicle.

[Gaurav Mehta, Managing Director and Senior Research Analyst at Alliance Global Partners]

All right. Thanks for those details. That's all I had.

[Thomas Majewski, CEO at Eagle Point Credit Company]

Thank you very much.

[Operator]

Next, I'll move to Timothy D'Agostino with B. Riley Securities.

[Timothy D'Agostino, Research Analyst at B. Riley Securities]

Yeah, hi. Thanks for taking the question. Good morning. Regarding gross capital deployed into new investments, in the releases mentioned about $111 million in 2Q 2026, and then for 3Q 2026 to date, it's up to about $125 million. I was just wondering, are you seeing more favorable market conditions or just generally more capital to deploy?

[Thomas Majewski, CEO at Eagle Point Credit Company]

A combination of both, frankly. I guess some of it is we try and keep the company relatively fully invested. There is always some cash, it's invariable with a portfolio of this size and complexity, some 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 positions. I'm going to 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 went into other CLOs, and then a bunch have gone into other investments.

[Thomas Majewski, CEO at Eagle Point Credit Company]

As I look across the complex, of the $71 million invested during Q2, 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 SI Tickets..

[Timothy D'Agostino, Research Analyst at B. Riley Securities]

Okay, great. On the infrastructure credit, understanding diversifying the portfolio a little bit, over the past three quarters, it seems like infrastructure credit has been the one sleeve that has picked up meaningfully. It looks like at year-end, it was about $31 million, and at 2Q26, it was about $112 million. 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 focus on infrastructure credit. Is there any other color or commentary to provide on that sleeve? Thank you.

[Thomas Majewski, CEO at Eagle Point Credit Company]

Yeah. What we are seeing, frankly, and you can see some of the line items in the portfolio, really some of the best risk-adjusted returns. Some of the best risk-adjusted returns that we are seeing across our investment opportunities that we are looking here at Eagle Point. We are not making project finance loans 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, I think, at least a five-person dedicated team, and maybe someone else hired who is joining shortly, for originating these investments. Then they go in a number of funds across the complex here at Eagle Point Credit. A number of them I think have been some of the, frankly, the best investments we have made in the last year.

[Timothy D'Agostino, Research Analyst at B. Riley Securities]

Okay. If I could just sneak in another one on the infrastructure credit.

[Thomas Majewski, CEO at Eagle Point Credit Company]

Yeah.

[Timothy D'Agostino, Research Analyst at B. Riley Securities]

Could you maybe talk to what type of infrastructure? Just trying to understand, is it mostly digital infrastructure or is it maybe traditional? Just trying to understand, in context, what the type of infrastructure? Thank you.

[Thomas Majewski, CEO at Eagle Point Credit Company]

Sure. It's a broad market basket, frankly. Not any one particular sector. There's some digital infrastructure. There's one or two investments in that space. There's, I believe we've got I don't know if it closed last quarter. I think it's in the second quarter. Did Microporous—

[Timothy D'Agostino, Research Analyst at B. Riley Securities]

Yeah.

[Thomas Majewski, CEO at Eagle Point Credit Company]

close in here yet? It closed in here, yes. So, that's a company that makes battery separators, which is something that's required for EV batteries and all batteries, and they have multi-year take-or-pay contracts with large off takers. 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 don't know, without opining as to which are in ECC at any given time, we've been involved in a recycling facility. I know we just bought something in a hydroelectric facility, which would've been in the third quarter. I don't know if ECC was able to participate in it. But a broad basket, electric generation, battery storage facilities. We're sector agnostic. It's not as if we're looking for just one particular type of infrastructure, and our team is a very deep team.

[Thomas Majewski, CEO at Eagle Point Credit Company]

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 big firm, but might now be the largest asset manager in the world. But with a really deep bench of experience, and we've been very happy with those investments. We're not trying to say wind is where we want to be, or solar is where we want to be. Looking across a broad basket.

[Timothy D'Agostino, Research Analyst at B. Riley Securities]

Okay, great. Thank you so much for taking the questions this morning.

[Thomas Majewski, CEO at Eagle Point Credit Company]

Excellent.

[Operator]

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

[Erik Zwick, Managing Director at Lucid Capital Markets]

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

[Thomas Majewski, CEO at Eagle Point Credit Company]

Buying bad credits and/or just burning par through selling things, I don't want to say indiscriminately, but selling things. Destroying value within the portfolio broadly. It is typically measured on either a par burn basis, a decline in the par of the portfolio. Which means they bought something at 100 and sold it at 80, and didn't have a replacement asset to buy at 80. And/or the market value of the portfolio declining very quickly. Quicker than average with some credit misses. What we've seen over time, although in my experience, it's been a little more pronounced this time. When we look through COVID, some collateral managers actually really outperformed and some missed. Different reasons why, and we always try and learn from them.

[Thomas Majewski, CEO at Eagle Point Credit Company]

While we're generally very long-term in our relationships with collateral managers, if we see underperformance, for persistent underperformance, or a change in personnel, or things like that, we're happy to—we're not happy. It makes sense to exit, and we're very willing to exit when we need to on particular names. So it's the totality. To be critical of ourselves, I wish we found those sooner. We actually hired at the beginning of the year a full-time quant who's dedicated on our CLO equity investing team. We're continuing to, shall we 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 watchlist, a positive watchlist of names we're thinking about adding as well.

[Thomas Majewski, CEO at Eagle Point Credit Company]

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. At the end of the day, it has been a tough market for CLO equity. If you say the market was down 15% last year using Nomura's numbers, some pieces of CLO were down 30% total return, and others were flat-ish, give or take. It is obviously exiting those that are down. One of the things we have talked about, are we just selling at the low and the worst is behind us? In our opinion, the trends have a funny habit of continuing. You could say: Well, we have already taken the pain. Let us hold on to it. What we generally see in the CLO market is that the decay continues, unfortunately.

[Erik Zwick, Managing Director at Lucid Capital Markets]

Thanks. I appreciate the detail there. I think you kind of hit on what was going to be my follow-up, just in terms of how you view underperformance from one CLO and how that affects your ongoing relationship with the manager. 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 a timeframe expectation for getting there, and what is the path or strategy for re-achieving that target range?

[Thomas Majewski, CEO at Eagle Point Credit Company]

It is a combination of things available to us. While we cannot extrapolate this, NAV was up 12%, I think, in the-

[Ken Onorio, CFO and COO at Eagle Point Credit Company]

13%.

[Thomas Majewski, CEO at Eagle Point Credit Company]

13%. We just did that the next few quarters, that would resolve the problem. That is obviously not a prediction and not likely to be the definitive outcome. Against that, 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 we believe have the possibility, nothing is ever assured or guaranteed, to crystallize some attractive MOICs, multiple on invested capital. Some of the investments we make have a nice stated coupon. This is away from CLOs. If it is paid off early, we might be guaranteed an even higher return above the rate at which we are accruing. We think we will have a couple of those coming in. We do, if needed, have the ability to. We have very slowly, I do not even think we highlighted it.

[Thomas Majewski, CEO at Eagle Point Credit Company]

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. It is really a combination of all those. It is not one silver bullet that is going to happen. We have not set an internal deadline, get it done by this date, but we want to be steering the ship back in to get it in the middle of that lane, frankly.

[Ken Onorio, CFO and COO at Eagle Point Credit Company]

Erik, just a point of clarification.

[Thomas Majewski, CEO at Eagle Point Credit Company]

Oh.

[Ken Onorio, CFO and COO at Eagle Point Credit Company]

The GAAP return was up 13%, and the NAV was up 8%.

[Thomas Majewski, CEO at Eagle Point Credit Company]

Oh, I apologize. Yeah. I had my numbers mixed. Thank you, Ken.

[Ken Onorio, CFO and COO at Eagle Point Credit Company]

Yeah.

[Thomas Majewski, CEO at Eagle Point Credit Company]

Yes. NAV was up 8%, and we can't extrapolate that either. A couple of positive quarters of NAV can go a pretty long way. It's a combination of each of those factors that are going to get us back on sides. We all know the direction, and we know the levers to pull. We're pulling on different ones of them at different paces.

[Erik Zwick, Managing Director at Lucid Capital Markets]

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

[Ken Onorio, CFO and COO at Eagle Point Credit Company]

Thank you, Erik.

[Operator]

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

[Thomas Majewski, CEO at Eagle Point Credit Company]

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 will also share the Eagle Point Income Company call is scheduled for 11:30 A.M. this morning. We invite you to join for that as well. Thank you very much.

[Operator]

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

Participants

Executives

• Thomas Majewski, CEO
• Ken Onorio, CFO and COO

Analysts

• Darren Daugherty, Managing Director at Prosek Partners
• Gaurav Mehta, Managing Director and Senior Research Analyst at Alliance Global Partners
• Timothy D'Agostino, Research Analyst at B. Riley Securities
• Erik Zwick, Managing Director at Lucid Capital Markets