Eagle Point Credit Company Common Share of Beneficial Interest

Greetings and welcome to Eagle Point Credit Company's third quarter 2020 financial results conference 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 during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Garrett Edson of ICR. Thank you. You may begin.

Thank you, Rob, and good morning. By now, everyone should have access to our earnings announcement and investor presentation, which was released prior to this call and which may also be found on our website at eaglepointcreditcompany.com. Before we begin our formal remarks, we need to remind everyone that the matters discussed on this call include forward-looking statements or projected financial information that involve risks and uncertainties that may cause the company's actual results to differ materially from those projected in such forward-looking statements or projected financial information. 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 Securities and Exchange Commission. Each forward-looking statement or projection of financial information made during this call is based on information available to us as of the date of this call. We disclaim any obligation to update our forward-looking statements unless required by law. A replay of this call can be accessed for 30 days via the company's website, EaglePointCreditCompany.com. Earlier today, we filed our third quarter 2020 financial statements and our third quarter investor presentation with Securities and Exchange Commission. The financial statements in our third quarter investor presentation are also available within the investor relations section of the company's website. The financial statements can be found by following the financial statements and reports link, and the investor presentation can be found by following the presentations and events link. I would now like to introduce Tom Majewski, Chief Executive Officer of Eagle Point Credit Company.

Thank you, Garrett, and welcome, everyone, to Eagle Point Credit Company's third quarter earnings call. If you haven't done so already, we invite you to download our investor presentation from our website, which provides additional information about the company, including information about our portfolio and the underlying corporate loan obligors. For today's call, I'll provide some high-level commentary on the third quarter and more recent events. Then I'll turn the call over to Ken, who will walk us through the third quarter financials. I'll then return to talk about the macro environment, our strategy, and provide updates on some recent activity. We'll also open the call to your questions. During the third quarter, the U.S. economy continued its gradual recovery as many shutdown orders were relaxed and governments globally provided liquidity to the market. Worst-case scenarios for corporate credit that some predicted back in March have not materialized. Today, many research desks are actually reducing their near-term default projections. With that said, we're very mindful that we're not out of the woods just yet with respect to COVID as cases have been rising. Given our strong balance sheet and ample liquidity, we've been able to find attractive CLO opportunities both in the secondary and primary markets. During the third quarter, we deployed a little over $27 million of net capital into new investments. We also converted three of our existing loan accumulation facilities into new CLOs. During the third quarter, the company received recurring cash flows from our portfolio of $16.7 million, or about 53 cents per weighted average common share. Our net investment income was 29 cents per common share in the third quarter, well above our common distribution level. We did realize some losses selling a few investments, and that brought our NII net of realized losses to 23 cents per common share. net of distributions paid to common stockholders, our NAV increased by 13% during the quarter. While we're certainly pleased with the upward NAV movement, we're mindful that it still has lagged other risk assets, as CLO equity often does. Our NAV remains below where it started the year, and we believe there may be potential for continued upsides in our NAV. Looking to October, we see some even better news. we received recurring cash flows from our portfolio of $25.5 million during the month of October. This is an increase of 50% over the prior quarter. Cash flows were pressured in the third quarter due to an adverse LIBOR mismatch when many CLO rates were set back in April of this year. That has corrected itself, and now CLOs are benefiting from a positive LIBOR basis driven by 1% floors, which are becoming increasingly common on many loans today. We expect this positive basis to continue as long as LIBOR remains low, and that will benefit CLO equity. In addition, several investments in our portfolio that deferred payments in July resumed making distributions in October as they came on sides with their OC tests. Beyond the positive trends in our cash flows and earnings, We continue to maintain a very solid balance sheet. We have no financing maturities due before October of 2026. We have no secured financing whatsoever, no repo-style financing, and no unfunded revolver commitments. So while we are optimistic that the economy will continue to rebound, we remain very well positioned, we believe, to weather setbacks should they occur. We have ample dry powder, a little over $12 million as of October 31st. allowing us to continue to be on the offense when we see opportunities. We also declared common distributions of $0.08 per share per month for the first three months of 2021, keeping with the rate that we've been paying over the past few quarters. Earlier, I talked about positioning the company's balance sheet. I also want to highlight the value of the right side of our CLO equity portfolio's balance sheet. We continue to believe our portfolio could withstand a prolonged recession should it occur, and we believe it could thrive in it. This is not because we're blind to defaults, but because the value that can be created by reinvesting within our CLO structures. A key metric to evaluate our reinvestment optionality is how much reinvestment period we have left in our portfolio. At quarter end, our CLO equities portfolio's weighted average remaining reinvestment period stood at 2.6 years. This allows our CLOs to continue to be on the offense in volatile markets. This measure was 2.7 years at the end of June and 2.9 years at the beginning of 2020. So despite the passage of nine months, through our proactive management of our portfolio, our portfolio's remaining reinvestment period decayed by less than half. After Ken's remarks, I'll take you through the current state of the corporate loan and CLO markets and share our outlook for the remainder of 2020. I'll now turn the call over to Ken.