Carlyle Credit Income Fund

good day and thank you for standing by welcome to the carlisle credit income fund third quarter 2024 financial results and investor conference call at this time all participants are in a listen-only mode please be advised that today's conference is being recorded after the speaker's presentation there will be a question and answer session to ask a question please press star 1 1 on your telephone and wait for your name to be announced to withdraw your question please press star 1 1 again I would now like to hand the conference over to your speaker today, Jane Tsai.

Good morning and welcome to Carlyle Credit Income Fund's third quarter 2024 earnings call. With me on the call today is Lauren Beth Majan, CCIF's Chief Executive Officer, Nishal Mehta, CCIF's Portfolio Manager, and Nelson Joseph, CCIF's Chief Financial Officer. Last night, we issued our Q3 financial statements and a corresponding press release and earnings presentation discussing our results, which are available on the investor relations section of our website. Following our remarks today, we will hold a question and answer session for analysts and institutional investors. This call is being webcast and a replay will be available on our website. Any forward-looking statements made today do not guarantee future performance and any undue reliance should not be placed on them. These statements are based on current management expectations and involve inherent risks and uncertainties, including those identified in the risk factor section of our semiannual report on the form and CSR. These risks and uncertainties could cause actual results to differ materially from those indicated. Carlyle Credit Income Fund assumes no obligation to update any forward-looking statements at any time. With that, I'll turn the call over to Lauren.

Thanks, Jane. Good morning, everyone, and thank you all for joining CCIF's quarterly earnings call. I would like to start by reviewing the fund's activities over the last quarter. We maintained our dividend at 10.5 cents per share, which is now declared through November 2024, equating to a 14.8% annualized dividend based on the share price as of August 20, 2024. The monthly dividend is supported by 81 cents of recurring cash flows. New CLO investments during the quarter totaled $12.2 million, with a weighted average gap yield of 19.5%. The aggregate portfolio weighted average gap yield was 20.3% as of June 30th. I would like to highlight what Carlyle has accomplished since July 14th, 2023, the date that we took over as the investment advisor of CCIF. We rotated the portfolio into a diverse pool of CLO equity positions, generating a gap yield of 20.3%, with no CLOs that have an over-collateralization cushion of less than 3%. We met the fund's leverage targets by issuing flexible and long-term preferred stock without any financial covenants or mark-to-market provisions. We increased the dividend from 8% to 16.5%, based on the fund's net asset value as of July 31, 2024. Pivoting to the current market environment, I'd like to discuss what we've observed in both the loan and CLO equity markets over the quarter. Continued tightening in CLO liability spreads has supported the arbitrage for CLO equity, resulting in higher new issue volumes. CLO market activity accelerated this past quarter with $53 billion of issuance. which is the most active quarter on record. CLO issuance through June totals $101 billion, an increase of 80% year over year. We believe the continued tightening of CLO liabilities has fueled heightened CLO refinancing and reset activity. Year-to-date through June, CLO refinancing and reset volumes of $39 billion and $73 billion have materially outpaced 2023's $5 billion and $20 billion. As a reminder, refinancings reduce the financing cost of the CLO, while resets extend the reinvestment period to a fresh five years typically. Within CCIF's portfolio, we have completed six resets year-to-date through June, extending the reinvestment period of these CLOs. Despite the increase in CLO reset activity, 32% of the CLO market is still out of their reinvestment period. though CCIF's portfolio only has two CLO positions outside of their reinvestment period, both of which were opportunistic purchases. While the implications of elevated interest rates may pressure borrowers' ability to service existing debt, Carlisle's U.S. loan portfolio of over 600 borrowers has remained resilient in the first quarter and is a valuable proxy for assessing the overall health of borrowers in the broadly syndicated loan markets. While the average sales growth in the loan portfolio decreased versus the prior quarter, EBITDA growth of 9.5% is the second highest quarter that we have experienced since the Russian invasion of Ukraine in 2022. We believe this trend indicates that management teams are focused on cost containment and cash preservation as they operate in a higher rate environment. The LSTA index default rate, excluding distressed exchanges, declined to 90 basis points at the end of July, compared to 1.1% at the end of March. While we believe restructuring risk remains, as approximately 4.4% of the loan market trades below 80, the loan default rate, inclusive of distressed exchanges, also moderated, from 3.5% at the end of March to 3.3% by the end of July. We anticipate loan defaults will remain manageable for CLO managers, including and excluding distressed exchange activity. Retail loan inflows and robust CLO new issuance activity of the LSTA index closed at a two-year high of 96.99 in mid-May, before declining to 96.59 by the end of June. Performing issuers capitalized on market conditions, and year-to-date through June, loan repricing activity totals $383 billion, which accounts for about 30% of borrowers in the loan market. So through these repricings, borrowers have reduced spread on the underlying loans by an average of 54 basis points year-to-date. While a decrease in underlying asset spreads negatively impacts CLO arbitrage, including a 15 basis point year-to-date decline in the weighted average spread of CCIF loan portfolio, these impacts were partially offset by continued tightening in liability spreads. Furthermore, we remain encouraged by CLO equity's attractive cash-on-cash distributions. Median CLO equity payments in July totaled 4.1%, a slight decline from April payments, but still higher than the 10-year average of 3.8%. I'll now hand the call over to Nishal Mehta, our portfolio manager, to discuss our deployment and the current portfolio.