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spk02: Thank you for your patience. We will begin in about a minute or two. Again, thank you for your patience. We will begin in about one or two minutes. Thank you. Good evening. Welcome to the Eagle Point Income Company Third Quarter 2020 Financial Results 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. Please note this conference is being recorded. I will now turn the conference over to your host, Gary Edson of ICR.
spk00: You may begin. Thank you, Shamali, and good morning. 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 certainties that may cause the company's actual results to differ materially from those projected in such forward-looking statements and 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 Finance, Securities, and Exchange Commissions. Each forelooking statement and 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 forelooking statements unless required by law. A replay of this call can be accessed for 30 days via the company's website, www.EaglePointIncome.com. Earlier today, we filed our third quarter 2020 financial statements and third quarter investor presentation with the Securities and Exchange Commission. The financial statements and 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, Chairman and Chief Executive Officer of Eagle Point Income Company.
spk01: Great. Thank you, Garrett, and welcome everyone to Eagle Point Income Company's third quarter earnings call. We appreciate your interest in Eagle Point Income Company, or EIC. If you haven't done so already, we invite you to download our investor presentation from our website at eaglepointincome.com, which I will refer to in a portion of my remarks. On the call, I'll provide some high-level commentary on the third quarter and recent activity. Ken will walk us through the financials, and then we'll open the call to your questions. What a difference a few months have made. Certainly back in March, we were facing some of the greatest crises we'd experienced in the form of a pandemic crisis. Uncertainties were abound. Some suggested markets were dangerously close to experiencing a large spike in corporate defaults. However, the worst-case scenarios for credit that some predicted back in March certainly have not materialized. The Credit Suisse Leverage Loan Index is now positive for the year, and many bank research desks are reducing their near-term default projections. While COVID cases are on the rise again, the mortality rate appears to have declined. Thanks in part to generous policies from Washington and around the world, the economies have stabilized and are again growing in many cases. We aren't out of the woods by any stretch, but it certainly feels that the most dire outlooks may have been overblown. As long-term investors, we have constructed our portfolio to be able to manage through periods of dislocation and believe that we are well positioned to grow the portfolio and generate attractive returns for our investors. During the third quarter, all but one of our investments in our portfolio paid as scheduled. our NAV increased by 5% net of distributions paid. That positive momentum continued in October with all of our portfolio positions that were scheduled to make payments doing so. And the one position that deferred its payment in July paid as scheduled in October and also paid interest on the deferred balance. So that security is fully trued up in our portfolio. Despite the drop in LIBOR earlier this year, the total amount of distributions that we received on our investment portfolio in October exceeded the total amount for all of the third quarter. This was principally due to the benefit of LIBOR floors on many loans, which flows through to our CLO equity holdings and offset a reduction in collections from lower LIBOR rates on the CLO debt tranches that we hold. We recorded net investment income of $0.28 per share during the third quarter, once again well in excess of our distribution rate for the quarter. Last week, the company declared distributions for the first three months of 2021, maintaining our current distribution level of $0.08 per month. While we remain optimistic about our longer-term outlook, our NAV recovery, and the broader COOBB market, we're mindful that market has still lagged other risk assets. And compared to the stock market and high-yield bonds, which remain at or near record highs, our market remains below where it started the year. As of October 31st, the J.P. Morgan CLO BB Index discount margin stood at 938 basis points, still meaningfully wide of the 722 basis points where the index stood at the beginning of the year. We believe this still cheap nature may offer a path to further upside in our portfolio and our NAV. We are long-term focused, and as we are seeing that defaults are not rising as quickly as feared, we would remind you that CLO BBs have managed on multiple occasions to withstand the worst of economic cycles, experiencing extremely low long-term default rates. While past performance is, of course, not a guarantee of future results, we certainly believe that the past few months have once again validated CLO BBs as an attractive and resilient asset class. I'll now turn the call over to Ken and ask Ken to walk us through the financials for the quarter.
spk03: Thanks, Tom. For the third quarter of 2020, the company recorded net investment income of approximately 1.7 million, or 28 cents per share, with no meaningful gains or losses. When unrealized portfolio appreciation is included for the third quarter, the company recorded GAAP net income of approximately 6.9 million, or $1.13 per share. Please note our short-term cash flow generation is largely unaffected by unrealized changes in the fair value that we record in any given quarter. The company's third quarter net income was comprised of total investment income of $2.5 million and unrealized mark-to-market gains on investments of $5.2 million, partially offset by expenses of $0.8 million. As of October 31st, net of pending investment transactions the company has approximately $19.3 million of cash and revolver capacity available for investment. As of September 30th, the company's net asset value was approximately $91 million, or $14.84 per share, which is $0.70 per share higher than our net asset value at June 30th. Management's unaudited estimate of the company's NAV as of October 31st was between $14.66 and $14.70 per share. During the quarter, we paid three regular monthly distributions of $0.08 per share and declared monthly distributions for the fourth quarter in the same amount. Additionally, this past Friday, we declared monthly distributions for the first three months of 2021 also at $0.08 per share. As one of the requirements to maintain its ability to be taxed as a regulated investment company, the company is required to pay distributions to holders of its stock in an amount equal to substantially all of its taxable income within one year of its tax year end. On October 30th, the company paid its second of two special distributions of 19 cents per share related to the 2019 tax year. I will now turn the call back over to Tom.
spk01: Great. Thank you, Ken. We're certainly very pleased with our portfolio's continued cash flow generation and the appreciation during the third quarter. We comfortably out-earned our distributions for the quarter, and that momentum has continued into October. 100% of our CLO debt and equity holdings, which were scheduled to make payments in October, did so. We have plenty of liquidity to capitalize where we see opportunities. We thank you for your time and interest in Eagle Point Income Company. Ken and I will open the call to questions if there are any.
spk02: At this time, we'll be conducting your question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. And again, as a reminder, if you have any questions, you may press star 1 on your telephone keypad. And it seems there are no questions at the moment.
spk01: Therefore, we will turn to Matt before any closing remarks. Great. Thank you very much. We appreciate everyone dialing in this morning to hear about Eagle Point Income Company's third quarter, and we appreciate your continued interest and support of the company. Thank you.
spk02: This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.
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