Carlyle Credit Income Fund

Good day, and welcome to the Carlyle Credit Income Fund's first quarter 2026 earnings call. At this time, all participants are on a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. Joseph Castilla. Please go ahead.

Good morning and welcome to Carlyle Credit Income Fund's first quarter 2026 earnings call. With me on the call today is Nishal Mehta, CCIF's principal executive officer and president, Lauren Bazmajan, CCIF's chair and Carlyle's global head of liquid credit, and Nelson Joseph, CCIF's principal financial officer. Last night, we issued our Q1 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 factors section of our annual report on the form NCSR. 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. During the conference call, we may discuss adjusted net investment income per common share and core net investment income per common share. which are calculated and presented on a basis other than in accordance with GAAP. We use these non-GAAP financial measures internally to analyze and evaluate financial results and performance, and we believe these non-GAAP financial measures are useful to investors gauging the quality of the fund's financial performance, identifying trends in its results, and providing meaningful period-to-period comparisons. The presentation of this non-GAAP measure is not intended to be a substitute for financial results prepared in accordance with GAAP and should not be considered in isolation. With that, I'll turn the call over to Nishal.

Thanks, Joe. Good morning, everyone, and thank you all for joining CCIS quarterly earnings call. The CELO equity class faced challenges in 2025, including continued loan repricings and bearish sentiment, which weighed on returns for both CELO equity market and CCIS. However, credit fundamentals remain strong and default rates continue to decline. To mitigate this market-wide weakness, we continue to focus on optimizing the portfolio, including completing accretive refinancings and resets, and defensively positioning the portfolio with experienced COO managers. I'd like to highlight the fund's activities over the last quarter and key stats on the portfolio as of December 31st. CSIAF's underlying COO investments generated an annualized cash-on-cash yield of 22.67% for the quarter, which resulted in $0.48 of recurring cash flows for the quarter at the fund level. New CLO investments during the quarter totaled $13.1 million, with a weighted average gap yield of 13.6%. We rotated out of two CLO investments for total proceeds of $4.4 million as part of our continued optimization process. Within CSAT's portfolio, We completed three resets in the first quarter of 2026, resulting in 26 refinancings and resets in calendar year 2025, reducing the cost of liabilities by 31 basis points on average. We expect refinancing and reset activity to continue, taking advantage of historically tight CELO liability spreads. We refinanced $52 million of the Series A term preferred shares with a coupon of 8.75%, with lower cost preferred shares with their weight average coupon of 7.33%. The weight average years left in reinvestment increased slightly from 3.3 years to 3.4 years. This provides sealer managers the opportunity to capitalize on periods of volatility through active management. There are also zero sealers in the portfolio that are post-reinvestment period. We believe the portfolio weight average junior over-causation cushion of 4.48% is healthy and offsets potential defaults and losses in the underlying loan portfolios. The average percentage of loans rated CCC by S&P was 4.2%, below the 7.5% CCC limit in CLOs. And the percentage of loans trading below 80 is 3.8%, below the market average. The weight average spread of the underlying loan portfolio was 3.06%, a sixth basis point decline from the prior quarter. This decline is consistent with the broader market and is driven by a record repricing wave in the loan market over the past two years. This has significantly impacted the earnings power of CELO equity, as CELO resets and refinancings have not been able to fully offset the spread compression. Within CSF's portfolio, the excess spread in the early CELOs has declined approximately 32% since December 31st, 2023. resulting in gap yield to further decline to 13.6%. Following discussion with our board of directors, we have revised our monthly dividend to $0.06 per share. When revising the dividend level, our board considered CSF's current and expected gap yields while also focusing on our objective to support net asset value. The revised dividend level of $0.06 per share results in an annualized dividend of 20%, based on the closing share price as of February 23, 2026. The loan spread compression has also resulted in decline in demand for CELA equity, causing a decline in valuations across the market in CSIA. Notwithstanding the decline in loan spreads, CELA equity benefits from historically low funding costs, secured during a period of tight liability spreads, which provides a strong foundation for forward returns. As discussed last quarter, loan spreads have historically followed multi-year cycles. Current levels are similar to those observed in 2018 and was followed by meaningful spread widening in the following two and a half years due to a better supply-demand balance and market volatility. We believe CEO equity today is positioned to benefit from potential spread widening. Loan supply increased in the fourth quarter of 2025, and we expect loan supply to remain elevated in the first half of 2026 based on the current pipeline and discussions we have with our internal capital markets and private equity teams. A sustained increase in volumes would help rebalance market technicals and support wider performing loan spreads. The recent volatility related to concerns on AI disintermediation may further dampen repricing volumes and conversely increase loan spreads. With funding costs locked in at attractive levels, any normalization of loan spreads could meaningfully enhance excess spread, particularly for deals with longer reinvestment runways. As a result, we expect equity outcomes to increasingly reflect advantage, structure, and manager execution, reinforcing the importance of selectivity. With that, I will now hand the call over to Lauren to discuss the current market environment.