Eagle Point Credit Q2 Earnings Call Highlights

Key Points

• NAV and profitability rebounded: Eagle Point Credit’s NAV rose 8% to $4.51 per share, while GAAP net income reached $70 million, or $0.53 per share, compared with a loss in the prior quarter. The company paid $0.18 per share in quarterly distributions and maintained its $0.06 monthly distribution through 2026.
• Portfolio activity and credit metrics remained strong: Eagle Point deployed $111 million at a 24.6% weighted-average effective yield, completed 15 CLO resets or refinancings, and reported below-market CCC exposure and default levels. Non-CLO investments increased to 38% of the portfolio, reflecting greater diversification into infrastructure and other private-credit opportunities.
• Leverage remains above target: Debt and preferred equity represented 47% of assets less current liabilities, above the company’s 27.5%-37.5% target range. Management plans to reduce leverage over time, while noting there are no financing maturities before January 2029.

Eagle Point Credit NYSE: ECC reported a rebound in net asset value and profitability in the second quarter of 2026 as loan prices and CLO equity valuations recovered from first-quarter volatility.

Net asset value rose 8% to $4.51 per share at June 30, from $4.17 at March 31. The company generated a 12.7% GAAP return on common equity for the quarter and paid aggregate common-stock cash distributions of $0.18 per share, consisting of three monthly payments of $0.06 per share.

CEO Thomas Majewski said the recovery reflected improved market sentiment after concerns over artificial intelligence's potential effects on software companies, along with geopolitical developments, had pressured leveraged-loan prices and CLO equity values earlier in the year. He said underlying credit fundamentals remained resilient during the period and that the earlier decline appeared to be driven more by market pricing than broad credit deterioration.

Financial results and distributions

Net investment income totaled $0.17 per share during the second quarter. Net investment income less realized investment losses was negative $0.62 per share, compared with positive $0.14 per share in the first quarter and positive $0.16 per share a year earlier.

Including unrealized gains, Eagle Point recorded GAAP net income of $70 million, or $0.53 per share, versus a GAAP net loss of $1.12 per share in the prior quarter and GAAP net income of $0.47 per share in the second quarter of 2025.

Recurring cash flows from investments were $62 million, or $0.47 per share, exceeding common distributions and total expenses by $0.14 per share, CFO and COO Ken Onorio said. The company declared monthly common distributions of $0.06 per share for the remainder of 2026, which Onorio said management believes is aligned with earnings and sustainable over time.

Management's unaudited estimate of NAV at the end of July was between $4.33 and $4.43 per share, with the midpoint representing a 3% decline from the June 30 level. Eagle Point collected $31 million of recurring cash flows during July and expects additional collections during the remainder of the quarter.

CLO activity and portfolio positioning

During the quarter, Eagle Point completed eight resets and seven refinancings of CLO equity positions, producing weighted-average CLO debt-cost savings of 22 basis points for those transactions. Each reset extended the relevant CLO's reinvestment period to five years.

The portfolio's weighted-average remaining reinvestment period was 3.4 years at quarter-end, unchanged from March 31 and 15% longer than the market average, according to Majewski. He said the longer duration provides greater protection from loan-price volatility and allows CLO managers to take advantage of discounted loan prices and relative-value opportunities.

The company deployed $111 million into new investments during the quarter at a weighted-average effective yield of 24.6%. Capital was allocated among CLO equity and other credit opportunities. Eagle Point also rotated out of certain underperforming CLO collateral managers, recording realized losses that Majewski said had largely been reflected in unrealized losses in prior periods.

In discussing the sales, Majewski said the company evaluates managers based on factors including par erosion, credit selection, market-value performance and personnel changes. He said Eagle Point hired a full-time quantitative professional at the beginning of the year to help identify early signals of underperformance and potential improvement among managers.

Eagle Point's look-through CLO portfolio had CCC-rated exposure of 3.8% at quarter-end, compared with a market average of 4.6%. Its weighted-average junior over-collateralization cushion was 4.4%, compared with 3.8% for the market. The company said its look-through default exposure was 14 basis points, below the broader market level.

Loan-market outlook and diversification

The S&P/LSTA Leveraged Loan Index returned 1.9% during the second quarter and a further 80 basis points in July. The trailing 12-month loan default rate ended the quarter at 1%, down from 1.4% at March 31 and below its long-term average of 2.5%.

Majewski said loan spread compression, a headwind for CLO equity during the past 18 months, had largely abated. The weighted-average spread of Eagle Point's CLO loan portfolios was flat during the quarter. He attributed the moderation partly to loan prices remaining below par, which has limited repricing activity, and to lower new CLO issuance. He added that some software borrowers undertaking amendments and extensions have accepted wider loan spreads in exchange for additional maturity time.

Non-CLO investments represented 38% of the portfolio at June 30, up from 32% at March 31. These investments include infrastructure credit, portfolio debt securities, regulatory capital relief transactions, asset-backed securities and other private-credit opportunities. Management said expected yields on both non-CLO investments and CLO equity investments were in the low 20% range.

Majewski cited an investment in SI Tickets, secured by World Cup tickets, that was realized after a seven-month holding period at a 1.2-times multiple of invested capital. He also said infrastructure credit has become a larger portfolio allocation because the firm sees attractive risk-adjusted returns across areas including digital infrastructure, battery-related businesses, electric generation and storage.

Capital structure and leverage

Eagle Point fully redeemed its ECCW and ECCX notes during the quarter, reducing outstanding leverage and extending the duration of its capital structure. The company has no financing maturities before January 2029, while all debt and preferred-stock financing is fixed rate and a significant portion of preferred financing is perpetual, Onorio said.

Debt and preferred equity securities equaled 47% of total assets less current liabilities at June 30, above the company's normal target range of 27.5% to 37.5%. Management said it intends to return leverage to the range over time, potentially through portfolio value appreciation, realizations from investments and repurchases of preferred securities trading at discounts.

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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