Eagle Point Credit Company Common Share of Beneficial Interest

Ladies and gentlemen, thank you for patiently holding. The conference is expected to start in the next few minutes. Please continue to hold. Ladies and gentlemen, thank you for patiently holding. The conference is expected to start in the next few minutes. Please continue to hold. © transcript Emily Beynon Thank you. Thank you. Thank you. Greetings and welcome to Eagle Point Credit Company Inc. Fourth Quarter 2022 Financial Results Call. At this time, all participants are in a listen-only mode. A brief 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. It is now my pleasure to introduce your host, Garrett Edson of ICR. Thank you. You may begin.

Thank you, 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. Further information on factors that could impact the company and statements and projections contained herein. Please refer to the company's filings with the 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 form NCSR, our full year 2022 audited financial statements, and our fourth quarter investor presentation with the Securities and Exchange Commission. Financial statements in our fourth 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 presentation 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 fourth 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 and our portfolio. The company's portfolio had a good end to the year despite the continued challenging macroeconomic environment. We were pleased with our overall performance for the year as we generated strong cash flows that enabled us to increase our common distributions during the year and as well as declare 75 cents per common share in special distributions during 2022. Our portfolio of CLO equity continues to demonstrate resilience compared to many other risk assets. We believe our diverse CLO equity portfolio, with three years as a weighted average remaining reinvestment period, remains well positioned to thrive in the current market environment. For the fourth quarter, Our net income totaled 40 cents per common share before non-recurring expenses. This is just a hair below our regular common stock distributions for the quarter. We actively managed our portfolio, deploying $27.8 million of net new capital in portfolio investments during the quarter. We had recurring cash flows on our portfolio in the fourth quarter of $32.9 million, or 65 cents per common share. As we noted on our previous call, the reduced October amount is largely attributable to our CLO equity portfolio and the rapid changes in the benchmark interest rates resulting in a disparity between one-month and three-month rates and a difference between LIBOR and SOFR. Currently, many loan obligors are paying off of a one-month reference rate, be it LIBOR or SOFR, while CLO liabilities typically have a three-month reference rate at present most of which still LIBOR-based. Cash flows in the first quarter of 2023 have rebounded nicely, and we expect cash flows to trend further upward in April, driven by a tighter spread between one-month and three-month reference rates, and more and more paper both on the asset and liability side converting to SOFR. We previously declared a 50-cent special common distribution, which was paid in January of 2023. NAV per share ended the fourth quarter at $9.07. NAV was lower than it would have otherwise been in part due to the special distributions paid. Since the end of the quarter, we estimate our NAV at January month end increased to between $9.62 and $9.72 per common share. This is up roughly 7% for where it stood on December 31st. We also continue to raise capital prudently through our at-the-market program, and issued about 6.7 million common shares at a premium to NAV. That helped NAV increase by 12 cents per common share simply from the stock issuance. These sales generated net proceeds of about $71 million during the fourth quarter. All of our financing is fixed rate and unsecured. You've heard us say that many calls in the past, and I expect we'll continue to. It gives us a real measure of protection in a rising environment. Nothing is secured, and we have no financing maturities until April of 2028. So we have a very long-term, stable runway for the company's financing. Earlier today, we declared regular monthly common distributions for the second quarter of 14 cents per common share. We were also pleased to announce an additional variable supplemental distribution of 2 cents per common share per month for the second quarter. This is related to 2022 taxable spillover income, reflecting again our 2022 strong performance. Management currently expects to continue monthly variable supplemental distributions for the balance of the year, although the exact timing and amounts of distributions may vary. We're pleased to get more cash into the hands of our shareholders. CLO equity is a highly cash-generative asset, and that's one of the reasons why we believe people invest with us. If you invested in our IPO back in 2014, you've now received over 90% of our IPO price back in the form of cash distributions, and we're looking to crossing the 100% threshold very soon. As of December 31st, the weighted average effective yield of our CLO equity portfolio was 16.23%. This is down just modestly from 16.29% at the end of the third quarter. Our portfolio's weighted average effective yield was aided by a few borrowers defaulting and essentially no loan repricings. In fact, as borrowers tackled 2023 and 2024 maturities, some are even refinancing at wider spreads, which is great news for CLOs. As I mentioned, during the quarter, we deployed $27.8 million of net capital into CLO and other investments. Notably, during the quarter, we deployed a bit of capital into SRT, or significant risk transfer investments. These are bank balance sheet securitizations where banks seek to obtain capital relief on diversified pools of core lending assets. They're sometimes called balance sheet CLOs, and we believe they do present an attractive investment opportunity. We continue to find attractive opportunities also in the secondary and primary CLO markets, but we remain disciplined and maintain significant dry powder. So far in the first quarter, we've deployed an additional $43.1 million of net capital into CLO equity and other investments. As of year end, our CLO equity portfolio's weighted average remaining reinvestment period stood at three years. And this is down just modestly from 3.2 years as of the end of the third quarter. And it's actually in line with where the portfolio stood at the beginning of 2022. So despite the passage of 12 months through our proactive portfolio management, the weighted average remaining reinvestment period on our CLO equity portfolio remains substantially unchanged, which we believe continues to drive the portfolio's outperformance relative to the broader CLO equity market. We remain focused on finding opportunities to invest in CLO equity with generally longer reinvestment periods to enable us to further navigate through the current market volatility. I would also like to take a moment to highlight Eagle Point Income Company, which trades under the ticker symbol EIC. EIC invests principally in CLO junior debt. For the fourth quarter, EIC generated net investment income of 52 cents per common share prior to non-recurring expenses, and this was comfortably above its regular common distributions. Since the first quarter of 21, EIC has doubled its monthly common distribution. And with the rising interest rate environment, EIC remains very well positioned to increase NII over time, given the performance of CLO junior debt, which pays a floating rate coupon, and that's directly correlated to rising interest rates. We invite you to join EIC's investor call at 11.30 a.m. today, and also to visit the company's website at eaglepointincome.com. Overall, we remain very active in managing our portfolio and mindful of the broader economy. After Ken's remarks, I'll take you through our view of the current corporate loan and CLO markets and share a bit more of our outlook for 2023. I'll turn the call over to Ken now.