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spk03: Ladies and gentlemen thank you for standing by. Our conference will begin in just a couple of minutes. Once again thank you for standing by. Our conference will begin in just a couple of minutes. you Greetings and welcome to the Eagle Point Income Company's third quarter 2021 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. As a reminder, this conference is being recorded. I would now like to turn the call over to Garrett Edson of ICR. Thank you. You may begin.
spk02: Thank you, Daryl, 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 uncertainties, 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 in the statements and projections contained herein, please refer to the company's filings with the Securities and Exchange Commission. Each forward-looking 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 forward-looking 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 2021 financial statements and our third quarter investor presentation with the Securities and Exchange Commission. 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'll refer to in a portion of my remarks. The third quarter was another very strong quarter for EIC. Net investment income for the quarter once again exceeded our common distributions, and our NAV increased during the quarter just as it has for the prior five quarters. The strategy for the company that we laid out over the summer has worked very well. What we planned on doing was introducing long-term leverage to our balance sheet, tweaking the company's portfolio mix by increasing its allocation to CLO equity, and increasing our common distributions. we've achieved all of those objectives and our stock price increased by 9% during the third quarter. Subsequent to quarter end, we issued about 600,000 new shares of common stock through an underwritten overnight offering. While the majority of our common stock remains in institutional hands, we believe that having additional float will help increase the daily trading volume of our stock. Continuing to deliver value to our shareholders Earlier today, we declared a special distribution of 20 cents per common share. And upon finalization of the company's 2021 taxable income, we'll assess the need if we need to make any further distributions in the new year. In October, we completed our first preferred stock offering. This was the Series A term preferred stock, or EICA. It was issued with a very competitive 5% coupon. When combined with the follow-on common stock offering, which was issued at a premium to NAV, we raised $44 million of additional capital over the past two months, which we are rapidly deploying into new CLO junior debt and equity investments. We believe once fully deployed, this capital will help further increase our net investment income. In the broader market, the U.S. economy continues to rebound, though we are keeping a close eye on inflation and supply chain issues. As of quarter end, three-month LIBOR was around 13 basis points, which is nearly as low as it can go. If and when LIBOR moves up, the earnings on our CLO debt portfolio would be expected to increase, holding all else constant, as the CLO debt investments that we hold are all floating rate. In short, we see multiple paths for additional NII to be generated from our portfolio. In terms of corporate defaults, according to S&P, only one loan defaulted in the third quarter. That's remarkable in my opinion. The trailing 12-month default rate at the end of October was down to 20 basis points, which is at or near a historic low. And we believe that we're in the early stages of a next economic expansion, and we anticipate relatively few corporate defaults in the coming quarters. As long-term focused investors, we seek to construct our portfolio to manage through periods of dislocation. In strong markets like we're in today, we focus on positioning our portfolio for the next downturn whenever it may occur. While we don't anticipate that happening anytime soon, what we are doing today is seeking to lengthen the weighted average remaining reinvestment period of our CLO debt and equity portfolios and maintaining a prudent amount of unsecured term leverage in the company's capital structure. We also have a revolver, which is secured but offers us additional flexibility. We would remind you that CLO debt has historically withstood multiple economic downturns, experiencing very low long-term default rates. While past performance is, of course, not a guarantee of future results, we believe the performance of our portfolio through the COVID pandemic has further validated CLO debt as a resilient asset class. I'll now turn the call over to Ken.
spk00: Thanks, Tom. For the third quarter of 2021, the company recorded net investment income, less realized losses of approximately 1.9 million or 31 cents per share. When unrealized gains are included, the company recorded gap net income of approximately 3.6 million or 59 cents per share. The company's third quarter net income was comprised of total investment income of 3 million and unrealized gains on investments of $1.7 million, partially offset by total company expenses of $1 million and net realized losses of $0.1 million. As of October 31st, net of pending investment transactions, the company has approximately $7.4 million of cash and revolver capacity available for investment. As of September 30th, the company's net asset value was approximately $109 million or $17.69 per common share, which is 2% higher than our net asset value as of June 30th. Management's unaudited estimate of the company's NAV as of October 31st was between $17.37 and $17.41 per share of common stock. Our investment portfolio generated a positive return, but NAV fell slightly due to non-recurring costs associated with our EICA preferred stock offering. During the third quarter, we paid three regular monthly common distributions of 9 cents per share. Beginning in October, our monthly common distribution increased by 33% to 12 cents per share. And as Tom mentioned earlier, today we declared a special distribution of 20 cents per common share. I'll now turn the call back over to Tom.
spk01: Great. Thank you, Ken. We're very pleased with our performance throughout the year, our portfolio's current construction, and our recurring cash flow generation. We once again comfortably out-earned our common distributions for the quarter and have been able to go on the offense in the fourth quarter through our recent capital raises and are rapidly deploying that capital into new investments, setting the stage for additional recurring cash flows and anticipated NII growth. The three key attributes as to why we remain excited to be managing a BB-rated CLO debt-focused fund ring true today as when we went public back in 2019. Certainly the potential for a lower credit expense as reflected by the low default rates of BB-rated CLOs over the past two-plus decades, the potential for higher returns compared to similarly rated corporate securities, and the benefits that WBCLO debt offer in markets with rising interest rates. Combined with our new target portfolio construction that provides us with gradually more exposure to CLO equity, we remain confident that EIC is well-positioned to continue generating compelling risk-adjusted returns and value for our shareholders. We thank you for your time and interest in Eagle Point Income Company. Ken and I will now open the call to questions if there are any.
spk03: Thank you, we will now be conducting a question and answer session, if you would like to ask a question, please press star one on your telephone keypad the confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue for participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys one moment, please, while we pull for your questions. As a reminder, that's star one if you'd like to ask a question. There are no questions at this time. I would like to turn the call back over to Tom Majewski for any closing comments.
spk01: Great. Thank you very much, everyone. We appreciate all the call participants and your interest in Eagle Point Income Company. Thank you.
spk03: This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Have a great day.
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