Eagle Point Credit Q1 Earnings Call Highlights

Key Points

• Net asset value dropped sharply in Q1 2026, falling to $4.17 per share from $5.70 at year-end, as leveraged loan and CLO equity market weakness drove valuation pressure. Management said the portfolio fundamentals were still relatively stable and that NAV rebounded in April.
• The company reduced its monthly distribution to $0.06 per share for the third quarter, saying the payout better matches its near-term earnings power and is intended to be sustainable. Executives said net investment income has been roughly in line with the current distribution level.
• Eagle Point Credit shifted capital into selective opportunities, deploying $100 million in new investments at a weighted average yield of 18.9% and increasing exposure to infrastructure credit and other non-CLO assets. The firm also completed CLO resets and refinancings that lowered debt costs and extended reinvestment periods.

Eagle Point Credit NYSE: ECC reported a sharp first-quarter decline in net asset value as pressure in the leveraged loan and CLO equity markets weighed on valuations, though management said portfolio fundamentals remained relatively stable and pointed to a rebound in April.

On the company’s first-quarter 2026 earnings call, Chief Executive Officer Thomas Majewski said CLO equity faced “challenging market conditions” during the quarter. He cited lower loan prices, particularly in the software sector, and a cautious tone in credit markets tied to the ongoing war in Ukraine as factors that affected Eagle Point Credit’s quarterly results.

Majewski said the software sector was a particular focus for investors as they evaluated the potential impact of artificial intelligence on certain business models and revenue streams. He emphasized that Eagle Point Credit’s exposure is primarily through broadly syndicated loans rather than middle-market lending. The company’s software exposure stood at about 10.8% at quarter-end, according to Majewski.

NAV Falls in First Quarter, Rebounds in April

Eagle Point Credit’s net asset value ended the first quarter at $4.17 per share, down 26.8% from $5.70 per share at year-end. The company generated a GAAP return on equity of negative 20.2% for the quarter and paid $0.42 per share in cash distributions to common shareholders.

Chief Financial Officer and Chief Operating Officer Ken Onorio said the company recorded net investment income less realized losses from investments of $19 million, or $0.14 per share, for the first quarter. That compared with negative $0.26 per share in the fourth quarter of 2025 and net investment income and realized gains of $0.33 per share in the first quarter of 2025.

Including unrealized losses, Eagle Point Credit posted a GAAP net loss of $148 million, or $1.12 per share. That compared with GAAP net losses of $0.84 per share in both the prior quarter and the year-earlier period.

Management said the portfolio recovered in April. Onorio said the company’s unaudited estimated NAV as of April 30 was between $4.49 and $4.59 per share, with the midpoint representing a 9% increase from quarter-end. In response to an analyst question, Onorio attributed the April improvement to a broad rebound in credit fundamentals, market sentiment and the software-as-a-service space, describing it as a normalization after the first-quarter downdraft in valuations.

Distribution Reduced to $0.06 Monthly for Third Quarter

Majewski said Eagle Point Credit declared three monthly distributions of $0.06 per share for the third quarter of 2026, consistent with the company’s second-quarter distribution level. He said the current distribution level is aligned with the company’s near-term earnings profile and reflects a focus on maintaining a sustainable distribution over time.

During the question-and-answer portion of the call, analyst Christopher Nolan of Ladenburg Thalmann asked whether the annualized distribution rate appeared high relative to first-quarter NAV. Majewski said the company’s net investment income has been roughly in line with the current distribution level and “even a smidge above.” He said management considered historic earnings and forward estimates when setting the distribution.

Portfolio Activity and Credit Market Conditions

Eagle Point Credit deployed $100 million into new investments during the quarter at a weighted average effective yield of 18.9%. Majewski said the company took advantage of relative value opportunities created by an uncertain macroeconomic environment.

The company also completed four resets and three refinancings of CLO equity positions during the quarter, resulting in weighted average CLO debt cost savings of 43 basis points for those CLOs. Majewski said the reset positions extended their reinvestment periods to five years. The portfolio’s weighted average remaining reinvestment period ended the quarter at 3.4 years, compared with a market average of 2.8 years and the company’s year-end level of 3.3 years.

Majewski said first-quarter loan price declines created short-term valuation pressure but also gave CLO collateral managers the opportunity to reinvest into discounted loans. He said management believes the market often undervalues the reinvestment option embedded in CLOs during periods of dislocation.

In response to a question from Nolan, Majewski said lower loan prices affected loans already in CLO portfolios as well as opportunities in the secondary market. He noted that loans continue to prepay and repay, typically at double-digit annual percentages, allowing CLO managers to reinvest proceeds into discounted loans when prices are below par.

Shift Toward Complementary Credit Investments

While CLO equity remains central to Eagle Point Credit’s strategy, Majewski said the company has selectively increased exposure to complementary asset classes, including infrastructure credit, regulatory capital relief, portfolio debt securities and other structured and specialty credit investments.

As of March 31, CLO equity represented 67% of the portfolio, other credit asset classes represented 31%, and the balance was held in cash. In response to analyst Gaurav Mehta of Alliance Global Partners, management said roughly 75% of first-quarter purchases were in non-CLO investments, with the remaining 25% in CLO investments.

Majewski highlighted a directly originated infrastructure investment made in the fourth quarter of 2025 and realized four months later, saying the transaction produced an attractive return and demonstrated the company’s ability to originate and monetize differentiated credit opportunities outside CLO equity.

Leverage, Redemptions and Market Outlook

Onorio said all of the company’s financing remains fixed rate and long duration, with no maturities before January 2029. He also noted that a significant portion of Eagle Point Credit’s preferred stock financing is perpetual.

After quarter-end, the company completed the full redemption of its ECCW and ECCX notes. Onorio said that, pro forma for April performance and the redemption of those notes, leverage was 47% based on the midpoint of management’s unaudited April NAV estimate. He said the company intends over time to bring leverage back to its target range of 27.5% to 37.5% under normal market conditions.

Majewski said the broader CLO market remained active despite volatility, with $47 billion of new CLO issuance in the first quarter, $32 billion of reset activity and $24 billion of refinancing activity. He said the S&P/LSTA Leveraged Loan Index fell 50 basis points in the first quarter but rebounded 1.2% in April, turning positive for the year.

Credit metrics in the company’s portfolio remained favorable relative to the market, according to Majewski. Triple-C rated exposure stood at 4.1%, below a market average of 4.9%, while the weighted average junior over-collateralization ratio was 4.4%, compared with a market average of 4.0%. Eagle Point Credit’s look-through default rate was 32 basis points, below the broader market’s trailing 12-month default rate of 1.4%.

Majewski said management believes the current environment is more attractive than first-quarter headlines suggest, citing lower loan prices, reduced loan repricing activity and continued market dispersion. He said April’s NAV recovery supports management’s view that the first-quarter decline was driven largely by short-term mark-to-market pressure rather than deterioration in the portfolio’s long-term earning power.

About Eagle Point Credit NYSE: ECC

Eagle Point Credit 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.

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