Seeking Alpha • Mar 30

Eagle Point Credit: CLO Equity, Treasury Volatility, And The Preferreds

Summary Eagle Point Credit just cut its dividend by 57% following net asset value falling by 18.57% in a single quarter to $5.70 per share. The CEF's Series D Preferreds have sold off in response, with their $1.6875 per share annual coupon currently driving a 9.32% current yield. These benefit from an asset coverage of at least 200% for their preferreds, with the recent dividend cut also a positive for managing the dip in recurring cash flows. Read the full article on Seeking Alpha

Seeking Alpha • Mar 18

ECC, OCCI Or Neither Of Them: A Pairs Trade For 2 CEFs

Summary I'm currently favoring low-duration debt from CLO CEFs, hedging by shorting overvalued CEFs, and recently initiated a pair trade: Long ECC, short OCCI. ECC's high non-leverage expenses and lower asset yield make it less attractive, despite its larger size and historical outperformance compared to OCCI. OCCI, though smaller, boasts a higher asset yield but also higher non-leverage expenses, with no historical alpha generation. Both ECC and OCCI are uninvestable due to high management fees, but their recent deviation presents a mean reversion trading opportunity. Read the full article on Seeking Alpha

Seeking Alpha • Mar 03

I Am Loading Up On This 19% Yield: ECC

Summary 19% yields should set off alarm bells in your head. Either it's a massive disaster inbound or a massive income opportunity. We look into earnings to determine which scenario exists in ECC. You need cash to live; we find sources in the market for it. Read the full article on Seeking Alpha

Seeking Alpha • Feb 22

Eagle Point Credit: Q4 Earnings Indicate Both Strength And Weakness (Rating Downgrade)

Summary ECC offers a high 21.5% dividend yield, fully covered by earnings, but faces capital loss and NAV decline due to high-interest rates. The portfolio is heavily invested in risky CLO equity, with 78.8% exposure, and benefits from floating rate structures, increasing income in high-rate environments. Q4 earnings showed mixed results with net investment income missing estimates and NAV decreasing for four consecutive quarters, reflecting ongoing rate-related challenges. I am downgrading ECC to a hold, reinvesting distributions but not adding new capital until interest rate conditions improve and NAV stabilizes. Read the full article on Seeking Alpha

Seeking Alpha • Jan 29

Eagle Point Credit: Pricing Improves And CLOs Remain Hot (Rating Upgrade)

Summary Eagle Point Credit's valuation has compressed, with the premium to NAV falling from 20% to 5%. ECC's distribution yield remains attractive at over 20%, but the future success hinges on a fast-growing market. The private credit market, particularly CLOs, continues to grow, supporting the Fund's business model and potential for future gains. Selective purchasing at neutral or discounted valuations is recommended for maximizing returns, avoiding dollar cost averaging. Read the full article on Seeking Alpha

Seeking Alpha • Jan 14

Eagle Point Credit: Mixed Signals, But Net Bullish

Summary Eagle Point Credit's extended reinvestment periods and increased equity mix position it well for resilient yields in a falling rates environment. Declining loan accumulation facilities may preview slower portfolio growth, posing a challenge for net investment income and cash flow. ECC trades at a lower than usual premium to NAV, making the buys relatively more appealing. Relative technicals flash bullish signs, indicating potential outperformance vs. the S&P 500. Key risks include continued tightening of CLO debt spreads, which could impact portfolio spreads and yields negatively, and dilution, which erodes per-share cash distributions. Read the full article on Seeking Alpha

Seeking Alpha • Dec 24

ECCU: A 7.75% Baby Bond IPO From Eagle Point Credit Company

Summary ECCU, a new baby bond by Eagle Point Credit, offers a 7.75% annual interest with a maturity date of 06/30/2030 and is currently undervalued. Eagle Point Credit maintains a strong financial position with a low Debt-to-Equity ratio of 0.29 and consistent dividend payments, ensuring interest coverage. ECCU's credit spread is favorable compared to its peers, but OXLCP is a better investment due to higher yield and lower duration risk. I rate ECCU as “Hold” and will monitor for a better entry price. Read the full article on Seeking Alpha

Seeking Alpha • Dec 10

Eagle Point Credit: Strong Sell - Dividends Are, Effectively, Returns Of Capital

Summary Eagle Point Credit has been a poor long-term investment, with significant declines in PPS and NAV over the past decade. Nearly half of the dividends received by investors represent returns of capital, not genuine income, leading to lower actual returns. ECC's high yield is misleading due to the substantial depreciation in stock value and tax implications on dividends. I recommend a strong sell for ECC stock; consider investing in securities with better long-term prospects and reasonable returns. Read the full article on Seeking Alpha

Seeking Alpha • Dec 03

Buy The Dip, Collect 18% Yields - Eagle Point Credit

Summary Dip is delicious, salsa especially, but buying dips in the market is even better. Collecting monthly income with nearly 18.5% annual yields that are fully covered shouldn't be ignored! Your retirement needs cash; get it from the market! Read the full article on Seeking Alpha

Seeking Alpha • Nov 19

ECC: A High Yield Macroeconomic Bet On Low Default Rates

Summary CLO Equity offers high returns but comes with significant risks, especially during economic downturns, as defaults can severely impact the equity tranche. ECC's GAAP Net Investment Income (NII) is insufficient to cover its dividend payouts, leading to NAV erosion and reliance on share issuances. ECC's current dividend yield of 21.19% is unsustainable, with expected long-term returns of 12.80%, assuming stable economic conditions and limited defaults. Macroeconomic indicators suggest a potential recession and rising defaults, making the current environment unfavorable for investing in CLO Equity funds like ECC. Read the full article on Seeking Alpha

Seeking Alpha • Oct 30

8.5% From ECC Perpetual Preferred Stock Is Currently Our Largest Position

Summary Eagle Point Credit Co LLC's ECC-D's 8.5% yield and potential 10% capital appreciation make it our largest holding, supported by relative value analysis and constant market monitoring. Despite ECC's speculative credit rating, market-adjusted asset coverage suggests ECC-D is comparable to investment-grade preferred stocks. ECC-D's current yield is higher than comparable baby bonds, indicating a buying opportunity due to a technical seller. Fair value for ECC-D is at least $22, reflecting a 7.7% yield, aligning with the average yield spread narrowing of similar preferred stocks. Read the full article on Seeking Alpha

Seeking Alpha • Oct 08

Your Retirement Can Be Saved By Income: ECC

Summary How well do you understand the economy and how it is financed? The better you understand the economy, the better you can use it to generate income. I collect income from all around me, combining into a massive stream of life giving cash. Read the full article on Seeking Alpha

Seeking Alpha • Sep 06

Eagle Point Credit: 19% Yield On Common And 8.7% On Preferred Equity

Summary Eagle Point Credit's Series D preferred shares offer an 8.7% yield, with strong dividend and asset coverage, making them a good risk/reward investment. ECC's net investment income of $49.6M in H1 2023 covers perpetual preferred dividends comfortably, with a payout ratio of less than 3%. The company maintains a robust balance sheet with a 352% asset coverage ratio, far exceeding the minimum 200% requirement for preferred stock. I hold a small position in ECC’s Series D preferred shares for portfolio duration and may consider adding more ECC preferred or debt securities. Read the full article on Seeking Alpha

Seeking Alpha • Aug 27

Eagle Point Credit: Common Shares Are Becoming Less Attractive Than Preferreds

Summary Eagle Point Credit offers a unique opportunity to invest away from traditional stocks and bonds, focusing on CLO equity. ECC's Q2 earnings update shows significant developments, including a massive capital raise and declining net asset value. The CLO market is growing rapidly, presenting risks as outlined in a recent report from the Federal Reserve Board. Today, we explore why I decided to sell shares of ECC, now investing only in the preferred shares. Read the full article on Seeking Alpha

Seeking Alpha • Aug 20

Great News For This Fat 18% Yield: ECC

Summary When it comes to investing in debt, the U.S. economy remains my top priority due to its outstanding strength. Eagle Point Credit Co LLC is firing on all cylinders and investors are getting rewarded. Income catalysts can massively boost your income stream in retirement. Read the full article on Seeking Alpha

Seeking Alpha • Jul 09

Eagle Point Credit: Potential Interest Rate Cuts Can Provide Relief

Summary Eagle Point Credit offers an exceptionally high 16.5% dividend yield that issues payments on a monthly basis. ECC provides exposure to Collateralized Loan Obligations through equity and debt investments. Interest rate cuts may serve as a catalyst for positive change in the market. The distribution remains well supported by NII and recurring cash flows. The company offers a dividend reinvestment discount benefit that makes ECC attractive, despite trading at a premium to NAV. Read the full article on Seeking Alpha

Seeking Alpha • Jun 06

A Glorious And Mysterious 17% Yield: Eagle Point Credit

Summary Exploring the uncharted oceans is an experience experts continue to embark on. The markets contain many unexplored corners that investors struggle to reach. I utilize diversified funds to reach dark and mysterious income sources. Read the full article on Seeking Alpha

Seeking Alpha • May 11

Eagle Point Credit: I Don't Mind The 8.5% Preferred Dividend Yield

Summary I plan to build a long position in Eagle Point Credit's Series D preferred shares, which have a maturity date in Q4 2026. Eagle Point Credit focuses on the equity tranches of CLO issues, which are riskier but offer higher rewards. The Series D preferred shares have a current yield of approximately 8.55% and pay an annual distribution of $1.6875 per share. Read the full article on Seeking Alpha

Seeking Alpha • Apr 03

Eagle Point Credit: Earn A High Yield From CLOs

Summary Eagle Point Credit has provided a superior total return compared to Oxford Lane Capital over the last decade. ECC invests in equity tranches of CLOs, generating a higher yield for shareholders due to the riskier nature of these investments. ECC's portfolio is diverse, with exposure to various industries and a large percentage of loans rated below investment grade. However, historical data shows low default rates for this type of investment. The current dividend yield is 16.6% with supplementals declared through June 2024. The price trades at a current premium to NAV of 10%. However, I still believe this to be a good entry. Read the full article on Seeking Alpha

Seeking Alpha • Mar 12

I'm Betting On America With 17% Yields: ECC Year-End Update

Summary America is a bountiful land of income for those seeking wealth from the market. I own the debt of thousands of companies, all of which provide services you enjoy every day. Your retirement is going to be expensive, and this is a prime source of income for you. Read the full article on Seeking Alpha

Seeking Alpha • Feb 01

I'm Betting On America With Another 17% Yielder: ECC

Summary The US economy is often underestimated, to the harm of those who do so. I own U.S. corporate debt through various vehicles to achieve high levels of income. True financial security is having a steady income that vastly outweighs your expenses. Read the full article on Seeking Alpha

Seeking Alpha • Jan 08

Eagle Point Credit: Where This 17.2% Yield Might Fit Into Your Portfolio

Summary Eagle Point Credit Company allows retail investors to access the asset class of collateralized loan obligations (CLOs) traditionally reserved for institutional investors. ECC's expense ratio of 9.5% is high, but it is declining over time, and the 17.2% dividend yield includes the expense ratio. ECC should be used as a small allocation in a portfolio to add meaningful yield, rather than being a core holding. Read the full article on Seeking Alpha

Seeking Alpha • Dec 11

Worried About A Recession? Time To Maximize Your Income: ECC

Summary Worrying about a recession is the latest investment and retirement fad, but eventually we're going to live through multiple if history is our guide. The best plan to survive a recession – Boost your income! We examine an outstanding monthly distribution paying fund that just hit a major milestone. Read the full article on Seeking Alpha

Seeking Alpha • Nov 18

Eagle Point Credit Presents Financial Strength With A Solid Technical Perspective

Summary Eagle Point Income Co showcases solid financial performance in Q3 2023. ECC's stock price demonstrates robust growth, with a positive long-term trajectory and potential for further improvement. The formation of a V-shaped bottom signals long-term bullish trends and indicates potential for higher breakouts. Read the full article on Seeking Alpha

Seeking Alpha • Nov 01

ECC: Avoid The Riskiest Part Of The CLO Structure (Rating Downgrade)

Summary Eagle Point Credit Company has experienced middling total returns in the past year despite its high yield. ECC show classic signs of being amortizing 'return of principal' funds. Total returns of 6-8% cannot fund 18% yields. ECC's subordinated position within the CLO structure and potential for elevated defaults in the leveraged loan space warrant caution for investors. Read the full article on Seeking Alpha

Seeking Alpha • Oct 17

ECC And OXLC: Climbing The CLO Learning Curve

Summary Collateralized loan obligations, or CLOs, are complex and challenging for retail investors, and even many writers and commentators, to understand and explain. Oxford Lane Capital Corporation and Eagle Point Credit were the first two funds to introduce CLOs to the retail investing community. I like the CLO asset class and own a lot of it via closed-end funds. But we need to encourage CLO fund managers to make their reporting more transparent and comprehensible to the average investor. Read the full article on Seeking Alpha

Seeking Alpha • Sep 28

Wake Up And Smell The Cash Flow: ECC Yield 17%

Summary Every dividend you receive is an irrevocable return on investment. A big mistake investors make is frequently forgetting their free cash flow going into their bank accounts. It's time many of us get into a daily ritual of looking at our dividends alongside our morning cup of coffee. Read the full article on Seeking Alpha

Seeking Alpha • Sep 18

Eagle Point Credit: Appealing NAV Price And Solid Performance

Summary Eagle Point Credit is a closed-end fund specializing in Collateralized Loan Obligations with a high dividend yield of 17%. The management sees value in the secondary market, leading to potential dividend growth and market-beating ROI. ECC's portfolio consists of senior secured loans with a B-rated classification, offering higher yield but also higher risk. Read the full article on Seeking Alpha

Seeking Alpha • Aug 15

Eagle Point Credit: Analyzing Q2 2023 Earnings Results

Summary Eagle Point Credit is a high yield stock that offers a steady monthly income of $0.16, leading to an annual yield of 16%. Eagle Point's Q2 results show strong cash flow and easily cover the next 3 months' distributions. ECC is well positioned to generate strong cash flows and may offer another special dividend at the end of the year. Read the full article on Seeking Alpha

Seeking Alpha • Jul 04

Earn 17% Betting On America: Eagle Point Credit

Summary Even through a recession, the U.S. economy should continue to provide for its citizens. Loan default rates are expected to remain exceptionally low. I am buying a portfolio that holds loans from across the entire U.S. economy. Read the full article on Seeking Alpha

Seeking Alpha • Feb 21

Eagle Point Credit Q4 2022 Earnings Preview

Eagle Point Credit (NYSE:ECC) is scheduled to announce Q4 earnings results on Wednesday, February 22nd, before market open. The consensus EPS Estimate is $0.40 and the consensus Revenue Estimate is $31.45M

Seeking Alpha • Feb 01

Eagle Point Credit Company Is Not Suitable For (Most) Retirees Today

Summary 2023 has started with an upbeat tone across financial markets as investors look toward a positive shift in economic indicators. Ultra-high yield investments, such as Eagle Point Credit Company, have seen a sharp rise in NAV premiums as investors pour back into riskier funds. Eagle Point Credit Company primarily owns equity-tranche CLO assets on B-rated senior secured loans - creating immense leverage on an otherwise stable investment. ECC is good at fulfilling its role and is not necessarily a "bad investment" but is only suitable for speculators due to its high risk of permanent catastrophic loss. ECC's track record does not indicate its risk strongly since it has never traded during rising corporate bankruptcies. While the debate continues, I believe this scenario could occur in 2023. The past three years have seen immense volatility in the market and economic trends. The initial shock from pandemic lockdowns led to a significant economic downturn that was relatively short-lived due to enormous government stimulus (deficit spending, global QE, etc.). Of course, the massive increase in the money supply, and decline in economic output, led to significant inflation that peaked last year at record levels. The inflationary boom is arguably the primary factor weighing economic growth today since it is causing strain on real wages (and corporate profit margins). 2022 saw a resurgence in negative market trends as this factor weighed on the economy. The year ended with much higher interest rates, moderately lower stock valuations, and higher corporate bond spreads - all indicating a restrictive investing environment. However, 2023 started with a generally upbeat tone. Yields have not risen in months, and real yields (after inflation) appear to decline. Many stocks rose quickly during the first month of 2023 as earnings and a solid initial GDP report. Both US and global inflation indications are seemingly declining, and China's reopening points to a total end to pandemic-related economic strain. In light of improved expectations, many investors are flocking to higher-risk assets with abnormal yields. Ultra-high yield assets are generally hazardous but can deliver strong returns, mainly as market "fear" falls from elevated levels. One such stock is Eagle Point Credit Company (ECC), a CLO investment company with a staggering 15.6% forward yield. ECC is among the highest-yielding stocks on the market, excluding those with inconsistent dividends, making it a go-to pick for investors looking for high "steady" income streams. However, while interest in ECC is resurging, underlying economic fundamentals threaten its capacity to deliver returns. I believe a resurgence in financial risk perception could quickly cause ECC to lose most of its value - potentially permanently. Eagle Point Credit Company's Business Model Eagle Point's model can be seen as "too complicated," causing some investors to overlook its strategy and instead focus on its high yield and historical performance. While these indicate its future, ECC's structure can obfuscate its true risk profile. The CEF falls into the category of investments I call "Escalator-to-Elevator bets." In "normal" periods, it delivers relatively steady positive returns. In downturns, it suffers catastrophic losses that could wipe out its value entirely. A short-lived downturn, such as that of 2020 (in which most corporations were effectively bailed out), may only bring 20-40% losses that are quickly recouped, but a significant or prolonged downturn could theoretically cause ECC to lose most or all, of its value. In my opinion, this makes ECC's risk-return profile somewhat similar to a "Martingale" betting system, where the risk of eventual rapid catastrophic loss is high but obfuscated by otherwise consistent returns. In reality, Eagle Point's model is not too complicated. The investment company buys collateralized loan obligations on corporate loans, primarily the highest-risk "equity tranche" of CLOs. Most of Eagle Point's CLOs focus on B-rated senior secured corporate loans. Eagle Point's CLO's underlying assets are similar to the Invesco Senior Loan ETF (BKLN), which carries a similar weighted-average credit rating. Senior secured corporate loans are not too risky and pay a 5-7% yield that typically moves with interest rates (giving them no duration risk). If they default, then losses can be offset by secured assets. Generally, B-rated loans carry an average one-year default rate of around 13.8%, so even assets like BKLN tend to lose value over time; of course, their default rate is often much higher during recessionary (or similar) periods and low during regular periods. ECC is effectively a highly levered version of BKLN since it primarily owns the "Equity tranche" of CLOs. Typically, around 65% of a CLO is in the "AAA" tranche, 4-12% in the intermediate "Mezzanine" tranche," and around 8-10% in the "equity tranche." Thus, investing in an equity tranche CLO is akin to purchasing a senior secured loan with 5-10X leverage. As you can see, ECC is closely correlated to BKLN, but ECC is around 5X as volatile on an annual basis: Data by YCharts For investors looking to understand ECC's risk-reward profile simply, I would state it is like BKLN with around 5X leverage, though not 5X the yield due to interest-rate effects (around 2-3X the yield). Of course, for investors looking to understand ECC more deeply, that may be an oversimplification. More technically, the equity tranche of CLOs is paid last and the first to realize losses. Since it carries the most risk, it also has a higher yield. For example, if 5% of companies in a corporate leveraged loan pool default, then a CLO equity would lose around 50% of its income. ECC's income would fall slightly further because it is further subordinated to the company's various preferred equities. If the default rate rises to 10%, ECC is liable to lose all its income. Historically, it is common for B-rated corporate bonds to experience a default rate of over 10% in a recession, wiping out ECC's income. This pattern also significantly impacts ECC's price compared to spreads on B-rated corporate debt. In 2015, a ~4% rise in B-rated spreads caused ECC's price to decline by roughly a third. In 2020, a ~8% rise in B-rated spreads caused ECC's price to drop by around two-thirds. See below: Data by YCharts In 2015 and 2020, many companies that experienced default returned to paying status, causing ECC to recoup most losses and continue to pay a high return. However, neither scenario saw a significant increase in corporate bankruptcies, and in fact, bankruptcies fell considerably in 2020 due to the stimulus impact. If a recession occurs that is met with a rise in bankruptcies, then I believe ECC would likely permanently lose most, if not all, of its current value due to the intrinsic leverage in its business model. ECC Is For Speculators, Not Retirees In my experience, investments like ECC often attract investors looking for high steady income streams; too usually, that means retired people who cannot afford to lose a substantial portion of their equity or cash flow. It is true that Eagle Point has paid a solid dividend through a tumultuous economic period. Still, in 2020, risks within the credit market were obfuscated by substantial government stimulus to corporations and the impact of QE. Looking at ECC's historical risk is a very poor indicator of its risk since it was never traded during a period of sustained high corporate credit spreads, unemployment, or a rise in bankruptcies. A speculator may reasonably suggest that the risk of such a recessionary scenario in 2023 seems to be on the decline now that inflation data is normalizing. Thus, a speculator could argue that ECC is a good investment since its yield is high and its value could rise as risk fades within the corporate credit space. However, that does not change the fact that when corporate credit risks do return (bankruptcies, etc.), ECC is liable to lose most of its current value and income today permanently. Historically, a broad rise in corporate bankruptcies or unemployment is inevitable. In my opinion, people seeking stable income streams with capital preservation should not invest in assets at risk of permanent 50%+ permanent losses. "Equity tranche" CLOs are typically invested in speculative Hedge Funds, BDCs, and specialty credit funds, not banks, insurance, or pensions seeking dependability and capital preservation. This is not to say Eagle Point is a "bad" investment - its managers fulfill its role quite well - just that it is unsuitable for most investors due to its high risk of eventual catastrophic loss. The Bottom Line ECC is a decent option for those with a high-risk tolerance who firmly believe the economy will rebound after a challenging 2022. However, the fund trades at a nearly 15% premium to NAV, so I would not invest in it even if I were bullish on its underlying assets. Further, I am not bullish on ECC's underlying assets and believe the odds of ECC losing most of its value this year are far higher than the market currently appreciates.

Seeking Alpha • Jan 15

ECC: Chasing A Double-Digit Yield Paid Monthly

Summary Eagle Point Credit offers a more than 15% yield on its commons through its investments in risky but high-return collateralized loan obligations. The Series D preferreds have a 52% yield-to-maturity with a call date that's four years away. With the dividend on the commons covered by net interest income, the CEF is currently on good footing going into what's forecasted to be a recession this year. Eagle Point Credit (ECC) last declared a per-share cash dividend payout of $0.14, around a 15.8% yield that has occasionally been enhanced with special payouts. The last special supplemental dividend was $0.50 per share, the prior special was $0.25 per share and came just a few months before. Hence, ECC means one thing; income. That's its raison d'être since public inception and 2014 IPO. It's hard not to get excited about the possibilities posed by a CEF which has paid out a more than 20% annual yield over the last 12 months. This has been through comfortable monthly installments to render the CEF as a core income holding. Net interest income for the closed-end fund's fiscal 2022 third quarter was $0.47 per share, which means the CEF paid out around 89% of this as regular dividends to common shareholders over 3 months. This is a payout ratio that whilst high isn't flashing red against what's expected to be an intense economic disruption of the corporate debt market this year. Interest rates are set to rise to a 17-year high of between 5% to 5.25% and the US could possibly fall into a recession. CLOs And The Year Ahead What is in ECC's portfolio? A ton of collateralized loan obligations. The CEF primarily invests in the equity and junior debt tranches of CLOs, a relatively unknown investment vehicle that's created from different types of pooled corporate loans. The respective tranches then receive the normal interest and principal payments from the corporate borrowers. The CEF last updated its shareholders with a December portfolio update. As of the end of December, its NAV per share was between $9.03 to $9.13, opening up a double-digit premium with the commons currently trading at $10.60. Eagle Point Credit The equity tranche of CLOs is constituted of unrated and low credit-rated loans and sits at the bottom of the CLO structure. ECC's weighted average loan rating was non-investment grade at B+/B, highlighting a portfolio with a higher chance of default. However, whilst the core investment area is clearly a high risk, the CEF has chased a material level of diversification. The underlying portfolio is diversified across 1,868 loan obligors with the CEF's largest exposure to a single obligor being at 0.93% and with the total exposure to its top 10 loan obligors at just 6.16%. Eagle Point Credit This is further diversified across several industries from technology to telecommunications and health care. Bears could point out that the comparatively higher level of technology exposure going into a recession is a weak point. Further, with the CEF trading at a 16% premium to NAV, there might be scope for weakness in the event of a recession that sees corporate defaults rise. But the bull case is built on income, and the CEF has so far created a portfolio that's diversified across nearly 2,000 companies to mitigate, reduce, and ultimately eliminate the risk posed by singular defaults. Exploring The Series D Preferreds Preferred shares offer a unique investment profile, and Eagle Point's 6.75% Series D Cumulative Preferred Stock (ECC.PD) should also be considered in any conversation about the CEF. The Series D preferreds started trading in November 2021 when 1 million shares were sold at a $25 par value for a total capitalization of $25 million. QuantumOnline The likelihood of the income received by preferred holders being disrupted from now until its November 29, 2026 call date is incredibly low. It would take a near-cataclysmic event on the scale of 2008 to disrupt CLOs to the point of Eagle Point suspending its dividends. This increases the safety of the 8.1% yield paid monthly and could render these preferreds as backstops for portfolios of risk-averse income investors.

Seeking Alpha • Jan 09

Eagle Point Credit goes ex dividend tomorrow

Eagle Point Credit (NYSE:ECC) has declared $0.14/share monthly dividend, in line with previous. Forward yield 15.92% Payable Jan. 31; for shareholders of record Jan. 11; ex-div Jan. 10. See ECC Dividend Scorecard, Yield Chart, & Dividend Growth.

Seeking Alpha • Nov 11

Eagle Point Credit, 'Reading The Tea Leaves' In Its Monthly Report

Summary ECC's monthly portfolio report always has useful insights into its business and performance. One data point I particularly focus on is the average market price of the underlying collateral (i.e., the corporate loans) held by the CLOs whose equity ECC owns. Lately, ECC is reporting that the average loan price is 91.75% of par, a whopping discount of over 8% off the loans' face values. This discount has grown steadily throughout the year, just as the fund's net asset value has dropped. But don't be too quick to draw negative conclusions from this, as rising and "special" distributions tell a very different story. Eagle Point Credit: Reading the Tea Leaves Eagle Point Credit (ECC) is a closed-end fund that owns the equity in collateralized loan obligations (CLOs). CLOs are legal vehicles that essentially resemble "virtual banks." Just like when you buy the equity of a real bank, like Bank of America (BAC) or JP Morgan Chase (JPM), when you own the equity of a CLO you collect the difference between the income from a portfolio of loans, and the cost of the debt (i.e. deposits and other borrowings) used to fund those loans. Sounds easy, right? You lend at 6%, pay perhaps an average of 3% to your depositors and other creditors, as well as for your employee salaries and other costs, and keep the difference. So 6% minus 3%, leaves you a 3% margin, but since your equity is leveraged about 10 to 1, all that margin comes down to the equity, so you make about 10 times 3%, or 30% on your investment. Well, not quite. Credit losses also have to come out of that margin, so if in a bad year, like a recession, you were to lose an average of 3% on credit losses across your portfolio, that 3% times 10, or 30%, would also come out of your equity return, leaving you in our simplified example with zero. Fortunately 3% in losses, given most of your loans are secured and recover most of their principal when they default, would be historically a very high loss rate and therefore seldom happens. But you get the idea how the math works. Collateralized loan obligations ("CLOs") are virtual banks, with the same assets and liabilities, and therefore the same operating dynamics in terms of how they make or lose money as banks, but without the bricks and mortar, tellers and other infrastructure. (For more details and explanations, please check out this Seeking Alpha article, which is a reprint of a chapter on CLOs in my book, The Income Factory.) For many years, CLO investing was the exclusive province of large institutional investors. Over the past decade, two closed-end funds, first Oxford Lane Capital (OXLC), and then a little later ECC, introduced the CLO asset class to retail investors. Since CLOs are more complex than most other financial vehicles, the entire retail market has been on a bit of a learning curve getting up to speed and understanding them. ECC publishes a monthly Portfolio Update (link here) that has some very useful information in it, if you dig into the details. One item about halfway down the report is the "Weighted Average Market Value of Loan Collateral," which for the report dated 10/31/2022 shows a figure of 91.75%. If you look a few lines above that, you see that the number of obligors (i.e. borrowers) represented in the approximately 120 individual CLOs that ECC owns is 1,868. That means the loans issued by those 1,868 borrowers are trading, on average, on the secondary loan market at 91.75% of their par value, or at a discount of 8.25%. Accounting 101 That has major implications for the "market value" of the CLOs in ECC's portfolio. Assume that the equity value (i.e. the "net worth") of a CLO (or a regular bank, or indeed any company or even any person at all) equals its total assets minus its liabilities. That's pretty obvious to anyone, even if they've never taken an accounting course. Our assets may fluctuate in value, up or down, but our liabilities do not. Just because my house drops in value, it doesn't mean I owe any less on my mortgage. Same with a CLO or corporation. If the value of its loan assets decreases, the CLO's debts are still the same, so the drop in value directly comes off the equity. Let's take this basic principle (Assets - Liabilities = Equity) and apply it to ECC over the past year. At the end of 2021, ECC's Monthly Portfolio Update showed the underlying portfolio loans in its CLOs having an average market price of 98.34 cents on the dollar By the end of October this had dropped to 91.75 In other words, the discount on the loan portfolio had gone from 1.66% to its recent 8.25%, a jump of 4 times as much Meanwhile the reported Net Asset Value ("NAV") of a share of ECC went from $13.39 to its recent estimated $9.71; a drop of $3.68, or about 27%. It looks pretty obvious that such a big drop in the value of the loan portfolio would likely be a major contributor to the drop of the reported NAV. But meanwhile, during the past 10 months, as ECC's NAV has dropped from 13.39 to 9.71, the fund has managed to (1) increase its distribution by 17% and (2) pay an additional "special" distribution that is quite a bit larger (178% actually) than its regular distribution. Hardly the actions of a fund that is losing value as its decreasing NAV estimates would seem to indicate. Fortunately, There Is More To The Story Looking at a CLO's value from a pure mark-to-market perspective is simple, but fails to capture how CLOs (or banks) actually work. If a CLO (or a bank) were to go out of business, and had to dump all its assets on the market, then the discounted market price would indeed be the way to value it. In fact, such a "distress sale" would probably result in even bigger discounts. But the market price of a loan is irrelevant to a CLO or bank that is a functioning business, and holds its loans to maturity and collects them at par. The fact that a loan may trade on the market at a discounted price means nothing to the borrower or the lender when the loan matures and the borrower has to pay it back at its original par value. But the story gets even better for CLOs, since at times like this when skittish credit markets have bid down the prices of otherwise healthy loans (and bonds too, but we'll get to that later), CLOs can take the principal repayments they receive (100 cents on the dollar, i.e. at par) on their existing loans and re-invest the cash flow in loans purchased on the secondary market at 92 cents on the dollar. That benefits ECC in two ways: They collect a higher current yield on their new investment than the loan's stated coupon rate, having bought it for 92 cents on the dollar; and In a couple years when the loan matures they'll collect 100 cents on the dollar, giving them a capital gain of the 8 cents discount; further increasing the yield-to-maturity when they spread the 8 cent pickup over the loan's remaining life.

Seeking Alpha • Oct 31

OXLC And ECC: Highlighting CLO Equity CEF Misconceptions

Summary CLO Equity CEFs continue to appeal to investors with their high distribution rates. In this article, we take a look at some misconceptions held by investors about these funds. The key takeaway is that while these funds undoubtedly carry risk, some investors tend to be worried about the wrong things. We also highlight how investors can think about valuations of CLO Equity in gauging attractive entry points. We continue to see value in ECC within the CLO Equity CEF trio of funds. This article was first released to Systematic Income subscribers and free trials on Oct. 24. CLO (collateralized loan obligation) equity closed-end funds ("CEFs") like Oxford Lane Capital Corp (OXLC) and Eagle Point Credit Company Inc. (ECC) continue to appeal to income investors due to their high distribution rates. In this article, we highlight some of the misconceptions that surround these funds. The key takeaway is that while these funds undoubtedly carry risk, some investors tend to be worried about the wrong things. We also highlight how investors can think about valuations of the CLO Equity asset class in gauging attractive entry points. Within the trio of CLO Equity CEFs, we see value in ECC, trading at a flat discount and a 16.4% current yield. Key CLO Equity CEF Misconceptions In this section, we highlight some of the key misconceptions we have come across in the commentariat relating to these funds as well as to the CLO Equity asset class more broadly. Ultimately, income investors are best served when they get a fuller picture of the risk/reward on offer. CLOs will do X because of Y This is a bit of a pet peeve but a lot of commentary across both CLO Equity and CLO Debt securities speaks blithely about "CLOs" as in CLOs will do X or Y in this or that market environment. It doesn't make any sense to speak about CLO performance or behavior in general terms. That's because CLO Debt and CLO Equity have extremely different risk / return profiles. Higher-rated CLO Debt securities are: 1) static securities; 2) are short a call option; and 3) are some of the highest-quality securities available in the fixed-income space outside of Treasuries with an incredible track record (i.e., no defaults on CLOs originally rated AAA ever and only 1 for AA-rated CLOs). On the other hand, CLO Equity are: 1) better described as dynamic investment strategies than securities; 2) long the refi and reset options; and 3) have highly variable performance due to greater dependence on CLO vintage and manager alpha. 5Y CLO Equity total returns are negative now or compare poorly to some other funds, e.g., SJNK, SPY It may sound counterintuitive but an asset class that happens to have a low return over a given period does not actually tell you a whole lot. There are tons of examples of major asset classes going through periods of low or negative returns. The chart below shows the rolling 5Y return of the High Yield corporate bond market. Just in the last three years, we have seen the 5Y return move close to zero on two different occasions. There were two other instances where the 5Y return moved into negative territory this century. Does this make HY corporate bonds uninvestable? No. Are there many more 5Y periods where the HY market had fantastic performance? Yes. Systematic Income HY bonds are not alone here. There are also multiple decade-long periods where U.S. stocks delivered no returns. Does this make U.S. stocks uninvestable as an asset class? No. Credentwealth This will come as little surprise to most income investors, but asset prices can fall and sometimes they can fall a lot. 2022 is one of those times. Therefore, it's not shocking to find that CLO Equity has delivered a low 5Y total return - the same is true for most other asset classes. Having a low 5Y return in 2022 tells us nothing about whether a given asset class is worth allocating to or not. In fact, previous low return periods have marked fantastic entry points. The other reason why the 5Y period total return is misleading is that CLO Equity CEF valuations have fallen significantly. In other words, a big reason for the low 5Y total return of CLO Equity CEFs like OXLC and ECC has to do with the deflation in the funds' premium rather than any collapse in NAV returns. The following chart shows that the valuation of ECC fell from north of 20% to about zero. As many investors know, buying any fund at a 20+% premium is asking for trouble. Systematic Income If we focus on total NAV returns, they look much better - the 5Y total NAV return for OXLC and ECC is 10% and 5.9% CAGR, respectively - that's better than the vast majority of credit CEFs, even the vaunted PIMCO credit CEFs. Systematic Income CEF Tool In short, using the 5Y total return window is a misleading way to analyze securities given today's credit valuations and it is particularly poor at getting a sense of CEFs, whose returns are influenced as much by moves in discounts as by their total NAV performance. So whenever investors are offered a price chart of OXLC and ECC like this to "prove" that they are "bad" funds, they should instead reply with the total NAV return chart of the funds. Google And that chart looks like the following. For investors trying to understand the actual value-generation capacity of CLO Equity CEFs this chart is much more useful. Systematic Income Holding CLO Equity going into a recession is dumb This view is very intuitive. After all - CLO Equity is a leveraged play on bank loans. And loans, as well as other credit assets, tend to struggle during recessions. The chart below shows that loan defaults tend to spike during recessions as they did during the GFC, the near Energy shock recession. and the COVID recession. S&P However, this is another example of where a little knowledge is a dangerous thing. The point is that CLO Equity is not just a leveraged play on loans. As we suggested above, it is more akin to a dynamic allocation strategy. Specifically, CLO Equity benefits from a number of embedded options such as the reinvestment option and the call option which allow CLO Equity to generate additional returns in a weak market environment. Specifically, in a period of elevated default rates, CLO Equity benefits from reinvested principal prepayments and amortization payments into loans trading at depressed prices. Since the majority of these loans tend to redeem at par, this accrues directly to the CLO Equity tranches. The chart below shows that CLO Equity delivered stellar results through the GFC specifically because of this dynamic. Nuveen Total NAV returns over the COVID shock were very strong as well - they are highlighted in the table below from our CEF Tool. Systematic Income CEF Tool It's important to understand why results over the GFC and the COVID shock were so strong and why they did not align with the simple intuition that holding leveraged exposure to bank loans in the form of CLO Equity over a recession is dumb. What's important to understand is that there is a self-correction element to both CLO Equity and CLO Debt. The self-correction elements of CLO Debt securities are baked into the CLO structure in the form of various performance tests, summarized below. Guggenheim CLO Equity, on the other hand, benefits from a number of options which become highly valuable during periods of high volatility. The chief among these, and the one most relevant in the current market environment, is the reinvestment option which allows CLO managers to reinvest principal and amortization payments on loans in the portfolio into loans trading below par. A loan acquired at $90 which redeems at par sees the entire $10 go right to the bottom line of CLO Equity. This is why a distressed loan environment can be highly advantageous for CLO Equity since skilled managers can acquire loans at a steep discount and enjoy the full accretion back up to par. Granted, some loans will suffer defaults and the loan prepayment rate typically slows in a difficult market environment, but the history is very clear - CLO Equity has performed exceptionally well during periods of distress because of this important feature. Neglecting the power of the reinvestment option also causes many investors to wrongly conclude that it is "obvious" that holding CLO Equity in a tough market environment is a dumb thing to do. Other options enjoyed by CLO Equity include the refi option, also called the "call" option as well as the reset option. The refi option allows managers to refinance the transaction after the non-call period, allowing them to lower the cost of leverage and restructure the CLO with debt at lower levels. This is particularly powerful in an environment of strong risk appetite such as the one we saw in 2021. A reset allows managers to extend the term of the CLO deal. These options combine to deliver a much stronger performance potential for CLO Equity than the usual view that some investors have that they are just dumb leveraged portfolios of loans. Ever falling NAVs show CLO Equity overdistribute That OXLC and ECC NAVs have fallen over time is a fact. Systematic Income What may surprise investors is that these funds are far from alone in this behavior. All fixed-income funds have seen lower NAVs over time - a selection of sectors is shown in the chart below. This behavior doesn't make Municipal bonds or High Yield bonds or Preferreds a Ponzi scheme like some investors attest. There are multiple drags on fixed-income performance, ranging from the coupon convention of Municipal bonds which causes them to be issued at prices above par but redeemed at par to typical credit losses on higher-yielding assets such as loans or corporate bonds. Systematic Income Separately, the complaint that CLO Equity funds see a deterioration in the NAV misunderstands the nature of the CLO Equity asset class. Specifically, CLO Equity has an annuity flavor to it - it distributes a lot of its principal through its periodic cashflows. This may seem odd for a credit security - many investors believe that a credit security should pay you a coupon and then the principal later on. However, this is simply not the way CLO Equity works. The chart below shows two sample cashflow profiles from a study of CLO Equity returns. Both CLO tranches had very strong double-digit returns over their life. However, one looked like an annuity and the other paid out a "principal" equivalent to around 70% of "par." If you hold these kinds of securities in a fund and distribute all of the income, the NAV of the fund will reduce over time. That's just a reflection of the asset class. Other fixed-income asset classes have a similar annuity profile - mortgages are probably the most familiar to investors that have this flavor. Maxwell Consulting The NAV is just a random number based of Level 3 assets. Calculating it is complicated! It goes up, it goes down so don't look at it. We have some sympathy for the fact that CLO Equity is much less transparent than that of a typical credit fund. However, the idea that the NAVs of CLO Equity funds is some sort of complex random number and should be entirely ignored is also unfounded. The right answer for how investors should think about CLO Equity NAVs is somewhere between it being a Ponzi scheme that's going to zero tomorrow and so random that it should be ignored. The trajectory of CLO Equity fund NAVs is going to be downward. At the same time, it does give investors a decent guide for what kind of total returns they should expect. These total returns are very likely to be shy of the current distribution rates these funds boast. The specific drags these funds face are their partial annuity profile, high distribution rates, and occasional deleveraging in periods of high volatility and others. These drags are also found in many other credit CEF sectors. Getting A Sense of CLO Equity Valuations Apart from its dynamic profile and, perhaps, less intuitive nature, one thing that makes CLO Equity a tricky asset class for income investors is the fact that getting a sense of valuations is hard. Specifically, investors would like to know at any given time - how attractive is CLO Equity right now? For instance, to gauge the attractiveness of corporate bonds we have historic credit spreads and yields. Loans are a bit more complicated because of the refinancing option, so there is something called discount margin which assumes a given refinancing period – usually 3 years. For CLO equity there is no single analogue. There is something called net interest margin which is basically the residual yield that goes to CLO equity once CLO Debt tranches are paid their contractual coupons. A historic chart of CLO Equity NIM from Blackstone is shown below. Blackstone However, NIM is impossible to observe in real time (at least by retail investors) and, arguably, more relevant for new CLOs. It also doesn’t fully take into account the value of the reinvestment option. In other words, when equity NIM looks low such as right now (it’s around 1.6% versus the typical 1.8-2% range historically) it could be depressed by the fact that the value of the reinvestment option is fairly high since loans are trading at around $95. We can also look at CLO Equity fund NAVs as shown below in a normalized way (i.e., starting from $100) for OXLC and ECC. Sharp drops in the NAV have historically offered an attractive entry point. This makes sense however there are limits to this as well. That’s because historically CLO Equity NAVs have moved lower over time – for example, ECC started at $20 in 2014 and is around $10 now – the 2021 peak was $14. Systematic Income We can also look at the drop from the recent peak which is around 30%, and this gives a better sense of potential, although it’s not a metric that works over more than 1-2 years so it’s not able to give us a good historic profile. We can also look at the average loan price – since, after all, CLO Equity is a leveraged portfolio of loans (with some other bits) and the value of the reinvestment option derives from the average loan price. Historically, loans tend to trade in the high 90s on average, outside of periods of distress as the following chart shows. S&P Current levels of around $95 are around $2-3 below the average level of the previous decade, indicating a decent entry point. TCW

Seeking Alpha • Oct 17

ECC: The 2 Big Hurdles To Good Returns

Summary We had a bearish view on ECC when we covered it last. The fund has succumbed to the credit stress, and total returns including distributions are now negative over the last 5 years. When enough bad news is priced in, the fund can indeed deliver positive returns. But two hurdles stand in the way. Our article on Eagle Point Credit Company Inc. (ECC) was received with all the enthusiasm of a wet blanket, and investors found innovative ways to not acknowledge reality in the comment stream. You might disagree with the thesis, but you won't ever blame us for a lack of clarity on where we stand. What ECC and CLO indices do in that time frame is to be decided, but we would not be expecting total returns anywhere in the ballpark of that 14.4% yield. This total return for ECC also is likely to face the massive headwind of premium compression. If we trade at or below NAV in a recession, it would be hard to avoid negative double-digit returns. We rate the shares a sell. Source: The Story Of 1% Adjusted Total Annual Returns For 5 Years Despite the premature celebrations on ECC declaring a special distribution, the fund did indeed go in the direction we expected. Returns Since Last Article Today, we will go over where the CLO market stands and update our outlook for ECC. Credit Stress The US High Yield CCC or below Option Adjusted Spread index is a good proxy for generalized junk level stress. This initially moved lower, right after our article was released and has now pole vaulted to 12.74%. Data by YCharts Our reflection on this tells us that this is well suited for the current conditions and is pricing current problems quite well. This is very different than the comatose conditions in late June 2021. Back then we were pricing for no defaults till 2030 and bidding premiums on ((PTY)) all the way to 30%. We expect this pricing is also well reflected in the ECC holdings, with only 6.8% of the holdings being priced above the 97.5 mark. ECC Sept 2022 Update In January of this year, we were at 92.2% for the same benchmark. ECC Jan 2022 Update The fund is well set up here if we don't hit a recession as we will see a very good recovery in prices. Of course, our base outlook still continues to be for a recession, so we don't think you are getting a spectacular deal here with ECC. Recent Performance Over the last 1 year, NAV has dropped 27.20%, and that has been in line with other CLO funds like XAI Octagon FR & Alt Income Term Trust (XFLT), Eagle Point Income Company (EIC) and OFS Credit Company (OCCI). Data by YCharts We threw in SPDR Bloomberg High Yield Bond ETF (JNK) and SPDR Bloomberg Short Term High Yield ETF (SJNK) to show how hard CLO funds have been hit. ECC's NAV drop would have been worse, had it not been for issuance of about 10.5 million shares above NAV. ECC NAV History Since ECC's premium is modest, this funding adds just a little bit to NAV per share. The bigger thing it does do is prevent forced selling of CLO assets to pay the very large distributions. This is not a minor benefit for a leveraged company. Net assets were $491.4 million, but total assets were $752.3 million. ECC Sept 2022 Update If you envision a climate where $120 million of equity could not be raised, total assets would have to move $200 million lower. That would be some very high pressure selling. Even ECC's secondary securities, like Eagle Point Capital 6.6875% Notes (ECCX), Eagle Point Credit Company Inc - 6.75% NT REDEEM 31/03/2031 (ECCW) and Eagle Point Credit Company Inc - 5.375% NT REDEEM 31/01/2029 (ECCV) have strong coverage requirements and could trigger selling. For now, the equity window remains open for all these CLO funds and that prevents a downward spiral. Total Returns Over the last 5 years, ECC has delivered price returns of Negative 50.80% and total returns including distributions of Negative 2.10%. This compares to price returns of Negative 14.89% for SJNK and Negative 21.36% for JNK. Total returns for SJNK were at Positive 10.67% and JNK at Positive 2.13%. Data by YCharts The leveraged loan index from S&P delivered a positive 13.87% in total returns over the last 5 years. None of this information should be shocking to anyone following the math and the longer-term performance of CLOs and junk. It might come as a surprise to people suggesting that CLOs can comfortably deliver double-digit total returns in all environments. Just like with XFLT, though, the current price drop is welcome and improves the probability of better returns for ECC.

Seeking Alpha • Oct 11

2008 Vs. 2022: The CLO Industry - Eagle Point Credit CEO Tom Majewski

Summary Eagle Point Credit is a closed-ended, collateralized loan obligation (CLO) fund. CEO Tom Majewski compares the 2008 downturn to today’s market environment. A look inside Eagle Point's portfolio. Downside risks. The impact of rising interest rates on Eagle Point and the greater CLO industry. 4:45 - The 2008 GFC and how it compares to 2022’s economic environment 10:48 - A look inside Eagle Point (ECC)’s portfolio 14:26 - Potential returns and downside risks 16:26 - The impact of rising interest rates 22:01 - NASDAQ: OXLC vs. NYSE: ECC Date of Interview: September 20th Transcript Jesse Redmond: Welcome to Seeking Alpha, I'm your host, Jesse Redmond. Today, I'm joined by Tom Majewski, CEO of Eagle Pointe Credit Company. Tom, welcome to the show. Tom Majewski: Jesse, Thanks so much for having me today. JR: So let's start out with a bit of an overview. How would you describe your business to someone that's not familiar with the company? TM: Sure. Eagle Point Credit Company or Ticker, ECC invests principally in the equity tranches of U.S. dominated collateralized loan obligations or CLO's. At a high level, a CLO is a pool of secured corporate loans, principally to a large American companies, that is has the long term capital structure within each CLO, such that each CLO sort of behaves like a mini bank in that we lend money at a high rate like banks often do, and we borrow money from creditors to close at a lower rate. That's kind of banking 101. Different than what nearly any bank has ever figured out how to do, CLOs borrow on a long term basis. We typically have 12-year financing in each of our CLOs. But we lend money to these companies, typically on a 5 to 7 year basis, such that, whereas many banks worry about an asset-liability mismatch where deposits can leave very quickly, as that's happened to any number of banks over the years, CLOs benefit from having financing, that's longer and their assets so that we can weather substantially any storm that comes our way. The underlying asset class of CLOs are something called senior secured loans or par loans or bank loans. They're called a lot of different things. At the end of the day, are CLOs own small pieces of big loans to big American companies. As our principal investment strategy, this is American Airlines, Dell Computers, Hilton Hotels, Samsonite luggage companies you know of and do business with every day and smaller companies as well. What was very interesting in our opinion, is that for the 30 years (ending December 2021), the Credit Suisse Leveraged Loan Index, which is sort of the S&P 500 of loans, has had positive total returns for 28 of the last 30 years. And one of those two negative returns was down half a percent. So you take an asset class that's delivered positive total returns in substantially any market cycle. The only negative year was 2008 frankly, in the last 30. And then we apply long term, very stable financing without any mark-to-market triggers. And it provides a very nice, attractive high current income for the holders of CLO equity, which includes ECC, which allows us to pay a high current monthly distribution and also provide us ample cash to continue investing in new CLOs as market opportunities present themselves. So each CLO we think of really as a mini bank doing what banks do every day, lending at a high rate, borrowing at a low rate, but without the burden of an asset-liability mismatch and without the burden of many other things that go wrong at banks. We don't have derivatives. There's no derivatives business, there's no branches, there's no London Whales. All the things that typically get banks in trouble is not something that CLOs are involved in. So it's, we view it in many cases as a better bank and Eagle Point Credit Management. The advisor of ECC, is one of the largest investors of CLO equity in the world, but we believe the largest actually, and that gives us some very meaningful size and scale advantages when you invest in the CLO equity market being part of a much broader advisor portfolio. JR: And Tom, I'm old enough to have been around here in 2008. I was working in the financial industry then and when I started doing some research on Eagle Point, one of the first things that triggered it in my head was 2008 and CLOs. Can you just kind of briefly highlight what happened back then? And do you see any similarities in today's environment to that riskier period in 2008? TM: Sure. Yeah. Well, actually, if we look at history, certainly we hope history repeats itself. If looking back to data compiled by Citibank, 96% of all CLOs issued leading up to the financial crisis, well over 500 cash flow CLOs, of them, 96% had a positive return to the equity class and the median return was about 15% IRR. So whereas the common perception, if you thought you might have invested in a C (blank) O just before the financial crisis, one might assume things ended quite poorly. The reality is, if you had the staying power and saw the investments through to their full cycle, you had a return in many cases better than the kind of the contemplated base case pre-crisis and why that is, every loan that doesn't default pays off at par. It's a binary. Every credit has a binary outcome. One of two things.... you get your money back or you don't. In 2009, between 2008 and 2009, the 12-month default rate peaked at about 11%. But what that means is all the other loans paid off on par and at the same time, loan prices fell significantly during that time, 60, 70, $0.80 on the dollar and loans, those that don't default, keep paying. They make prepayments. They make amortization of payments, payments when they're due. And that money, that par money coming back can be reinvested, typically, for the first five years of a CLO's life, into either new loans or in choppier markets, you invest them in loans. In the secondary market, there's about $1.6 trillion of US syndicated loans outstanding, so that all the investment banks are big desks that have traded billions, hundreds of millions of dollars every single day ,and in a time of distress, if you're getting hard dollars back from prepayments and amortization payments, you call up JPMorgan and say what loans they have today. They might have loans for sale at $0.60 on the dollar. You're using your par dollars to buy those. Bringing the clock a little more forward to April of 2020. Certainly it was a very difficult time in the financial markets, there was much uncertainty in all the world. No one knew exactly what would happen. The price of loans fell to about $0.80 on the dollar in that same month. About 2% of all loans repaid at par in the syndicated loan market. And all of a sudden, you have 2% of your money coming back in at 100 when you can go reinvested at 80, and that everyone matured substantially. Everyone made mistakes going into COVID. Very few people called the trajectory of the COVID cycle credit cycle market events perfectly. But one good way to make up for a few problems as a lender is the ability to buy some other things cheap using par dollars. So that same playbook, it was tremendous in 2009 it was, I'll say, very good in 2020. If anything, I wish the price of loans stayed lower longer. It would have provided for even more attractive reinvestment opportunities within our CLO's. But where we look today from an economic cycle, if we think back to 2008 which was the second part of your question, Justin, when we think about that and we look at it, historically, there have been very few soft landings. But we look at where companies are today. And what I'll say is that the tough times of 2020 certainly changed the way many treasurers and CFOs run their companies. Today, there's a little more liquidity. Many companies favor longer maturities on their debt. And in 2019, we might have even called some of these lazy balance sheets at companies and you run it a little tighter, a little leaner, pay a special dividend to the shareholders, all the things private equity investors like to see happen. The reality is everyone got surprised in some way, shape or form during COVID, and that's helped companies run with a little more liquidity. So while defaults, which have been nearly 0% for the last year or two, are creeping up hard to go below zero, we don't see a scenario where loan defaults increase to such a material amount as to cause a big problem in the market. But even if they did, what we would expect is the price of loans in the secondary market would fall significantly. This is not a prediction on our part, but in a scenario where 10% or 15% of all corporate American loans defaulted in the secondary market, we expect that to be trading at 60, 70, $0.80 on the dollar. in such an extreme situation. Defaults will certainly pick up. It's hard to see them not. And we're seeing it happen as we speak. But we see a scenario more akin to a two, three or 4% default cycle. Loans are pricing that already today many loans trade between 1990 $0.05 on the dollar. Some of the higher quality loans $.96 $.97. But there's enough discount in the system in the loan market to be able to buffer losses that you might have from a few defaults that are going to sneak into a CLO portfolio. JR: And when you're building the portfolio, Tom, are there any particular themes or things that you're looking for in these positions? TM: Absolutely. We have a view that is very different than many in the market in that one of the things I mentioned is within CLOs is the ability to reinvest repayments and paydowns and even make some trading within each loan within the loan portfolio, sell loan A and buy loan B. Typically in a CLO today you're able to do that for the first five years of the life of a CLO. And thereafter, for the next seven years when payments come in, you simply repay your debt repayment. triple-A, which has the lowest cost and then the Double-A until the equity gets the principal left over. Along the way., this is very important, the equity gets all of the net interest margin, assuming the CLO is in compliance with all its tests so that we can we lend at a high rate, we borrow at a low rate that difference or net investment income or net investment margin or phrases banks use, get dividends out to CLO equity every single quarter. That's the kind of operating profits of interest. But where we look, even if defaults were to increase , the ability to reinvest cheaper we think is very likely to continue. One of the ways I think of CLO equity as a winning trade, as long as you're in the reinvestment period, as long as price volatility is greater than actual credit expense, you're probably going to do okay. In that the defaults are going to go up and down. That's, you know, every few years it happens. The world will, I don't think will ever solve that problem. But when defaults are going up, nearly certainly the price of loans is falling, every loan that doesn't default pays off at par. Now, if you're in that five year reinvestment period, you can take those par dollars and go buy things that are on sale in a distressed secondary market. That's great. After the reinvestment period, then you're just repaying your debt. You're never forced to sell anything. But as money comes in, the principal comes in, you repay your creditors, which if you're in a time of distress, the last thing in the world you would want to do is repay your creditors at par. So one thing we do as an investor, which I think while many other investors or some other investors at least focus on this, I think we put a very, very high emphasis on having as much remaining reinvestment period as possible in the CLOs we hold. And one of the things, if you listen to our earnings calls or read our press releases with each earnings release, we'll talk very regularly about our weighted average remaining reinvestment period. That's quite a mouthful of a phrase. The WARRP with 2 "R"s we sometimes call it. But I tell our team here that WARRP can never be too high. There's never a scenario where we have too much remaining reinvestment period in that the number one defense when a credit cycle occurs and no one can accurately predict when they're going to occur. Everyone always says always someone predicting one will occur. And once in a while even a wrong clock is right. Twice a day. We find that if you have the ability to reinvest your principal amounts that you receive back into those deeply, deeply discounted distressed credits or good credit spent on a distressed market, you're going to come out as good as you expected, if not better. So I think we focus on that more than many other investors, and I think our performance has proven us. That's certainly proven us accurate with the Fed approach. JR: And for the long term investor, what's a good expectation in terms of potential returns and also in terms of downside risk to about something like a maximum drawdown? TM: Sure. So if you look at kind of once we are fully we went public in October of 2014. By the time we got our balance sheet in place and issued some preferred stock and things like that, kind of the end of 2015. If you look at the return of our stock kind of from 2016 onward, once we had all the cash deployed from the IPO, you know, it was it was, you know, we got the money deployed as quickly as possible. But you don't want to do anything hasty as well. We've had very strong returns depending on the days you measure it. In many cases, it's a double-digit total return since inception. So we sense that kind of January 2016 date, so that's good. Double digit returns are always good. Then the share price has whipped around more than it should. What I'll tell you is, if you look when our share price is down, quite often you'll see insiders buying at. I remember in 2020 and you know, there were so many insiders who wanted to buy. We obviously had to get the NAV out and publish everything before we knew it, we had to wait a couple of days even after that. But more than a few people said, could you get the NAV out a little more quickly because we're ready to buy. So the drawdown, you know, the market will be what the market will be in terms of how if people want to sell the stock, which they certainly did in 2020, on average, since our IPO in 2014, our stock has been at about a 10% premium to NAV, which is very unusual for a closed end fund. We run it more like a company than a closed fund. But whereas many of these many closed end funds traded discounts over the last eight years, on average, we've traded at a handsome premium to NAV. JR: It's an interesting time where today's Tuesday, September 20th, when we're recording tomorrow, we're going to have the Fed announcements expected, something like a three quarters of a point, maybe a full point. How does something like that impact your portfolio? TM: So directly, with very limited impact. Indirectly, maybe bigger. Essentially, everything in a CLO is match funded. All of our assets are nearly all of our assets pay off of three month LIBOR. So the good news is the next time the interest rates reset for companies in October, if short term rates go up, the LIBOR or SOFR, and the longer transitioning over the reset rate in October will be higher than it was when they last reset in July. So assuming the Fed does as many people expect, that'll be great news. CLO debt pays floating rate as well, also off of three month LIBOR, three months SOFR. So what we get on the one side, we give on the other such that the equity is largely indifferent when holding all else equal to where interest rates are. But we're not in a situation where we're using long term rates on one side and short term rates on the other. It's all typically a three month resetting paper in the case of ECC. All of our financing, however, is fixed rate. So those ECC- C's I talked about, the ECC-B's which we issued, those have fairly low and fixed rate coupons. So you're able to buy them at a discount today as an investor in the markets are able to get some convexity in your purchase price, but those have five and 6% fixed rate coupons. So ECC kind of benefits, to the extent rates are going up, our assets and our CLO's are going up in terms of their coupon, but our financing is fixed rate. Now, the consequential or indirect thing, if the Fed is raising rates, they're trying to pull in the reins on the economy. That's not a secret by any stretch. At some point, they've raised rates so much, it hurts consumer behavior and it hurts companies ability to service their debt. That's where, you know, rising rates is good until a point and then it becomes less good. In my opinion, we're not to the point where these near-term rate increases that are contemplated bring companies into a default situation by any stretch. There may be one or two outliers. Of course, we lend to well over a thousand companies through our CLO's. So when you have large numbers there will always g be one or two. But by and large, companies have sufficient coverage. The ratio of EBITDA kind of their cash profits to debt service is very comfortable for the vast majority of borrowers in the leveraged loan market. So if we wake up tomorrow and rates are seven or 8%, which is certainly not our prediction, I might have a different story, but as we're inching our way to 3%, 4%, that's all in the acceptable band, frankly. That also impacts consumer behavior. Anyone who is thinking about buying a house, if you bought it in March, you're quite happy. If you're looking to buy a house today, your mortgage payments doubled. That's bad as well. Depends on your perspective, I guess. But for buyers of houses and sellers of houses, if you're a buyer, your payments going up. If you're a seller, the price your neighbor got six months ago is no longer available to you. That certainly slows consumer behavior, and that indirectly also was a bad thing for many companies in that we like consumers to spend a lot of money. So the Fed is getting done what they achieved, what they're seeking to achieve. We could debate the pace. I think they're doing a good job broadly, but we're in a situation where we are going to see some degree of slowdown of economic activity from rates. Our broad view is that the increase in rates at the pace we're going is not such that's going to cause a meaningful default cycle. One other interesting way, just to kind of a little slightly different twist in addition to ECC, we also have a sister company, Eagle Point Income Company, which trades under ticker EIC on the New York Stock Exchange, and that's also externally managed by Eagle Point income management, that portfolio, the vast majority of it, is actually straight up floating rate CLO debt, the same stuff that our CLOs issue. We don't buy their different securities, but the same concept of having LIBOR based three month floaters and as a benefit of having our earnings go up. ... Let's see, this year we've had the dividend started, distributions started at $0.12 a month, went to 12 and a half cents as of August declaration went up to $0.14 a month and our earnings in general keep going up as LIBOR and SOFR goes up.

Seeking Alpha • Oct 02

Eagle Point Credit: 16% Yield, 6% Discount, Monthly Payer

Summary Eagle Point Credit Company Inc. yields 15.85%. It's selling at a 15.13% discount to NAV. Eagle Point Credit pays $.14 monthly. Have you ever invested in CLO-related investment vehicles? CLOs, Collateralized Loan Obligations, are securitizations of a portfolio of Senior Secured Loans. Funds like Eagle Point Credit Company Inc. (ECC) invest in CLOs. The CLO market is the largest source of capital for the U.S. senior secured loan market As of 6/30/22, the CLO market had volume of ~$107B, and was on pace to set a new record. CLO site Profile: Eagle Point is a closed-end fund, a CEF, launched and managed by Eagle Point Credit Management LLC. It is focused on CLO securities and related investments (as well as other income-oriented investments), and each member of the senior investment team is a CLO industry specialist who has been directly involved in the CLO market for the majority of his career. ECC held 122 CLO equity securities, with 1862 underlying obligors, as of 6/30/22, with ~94% exposure to floating rate Senior Secured loans. (ECC site) Its annual expenses look much higher than other CEFs we've covered, running at 6.51% for management and other expenses. There's also 3.21% in interest expense: Hidden Dividend Stocks Plus The weighted average loan spread is 3.6%, with a B+/B rating, and an average maturity of 4.8 years. ECC's investments are mostly transacted in U.S. currency, 98.46%. ECC site Earnings: ECC earned Net investment income, NII, and realized capital gains of $0.43/common share, vs. $.30 in Q1 '22. It received cash distributions of $1.12/share, and paid out $.14/share in common distributions. NAV per common share was $10.08 as of 6/30/22, vs.$12.64 as of 3/31/22. ECC site In Q1-2 2022, ECC's total Investment Income rose 50%, while NII rose 75.6%. Net Realized Gains, which are lumpy on a quarterly basis, were minimal, while Net Unrealized Gains swung from positive $57M to -$153M. NAV/Share fell -22.3%, to $10.08, vs. $12.97/share in Q2 '21, due to higher non-cash markdowns, and the share count swelling by 26.6%. Interest Expense continued to climb, rising 18.8% in Q1-2 '22, after rising ~38% in 2021, as management ramped up the portfolio's size to drive growth. Hidden Dividend Stocks Plus Dividends: ECC pays $.14/share monthly, yielding nearly 16%, not including special distributions. Management declared a special distribution to common stockholders of $0.25/share to be paid on October 31, 2022, to stockholders of record as of October 11, 2022. Hidden Dividend Stocks Plus Pricing: Since NAV/Share is calculated at the end of each trading day, you have to look at the most recent closing values to determine the current NAV discount or premium. Buying CEFs like ECC at a deeper discount than their historical average discounts/premiums can be a useful strategy, due to mean reversion. At its 9/29/22 $10.60 closing price, ECC was trading at a -6.36% discount to its NAV/Share of $11.32, which is much cheaper than its 1-year 6.29% average premium, its 8.80% 3-year average premium, and its 11.87% 5-year average premium. However, the average Price/Book for the debt CEF industry is just .85X, a 15% discount to book, so ECC is getting a premium vs. its industry. While ECC's inception NAV/Share was $19.93, its 9/29/22 NAV/Share was $11.32. However, ECC has paid out a cumulative $16.54 in distributions since its 2014 inception. Hidden Dividend Stocks Plus Holdings: ECC's portfolio consists of ~86% in CLO Equity positions, ~7% in CLO Debt, ~5% in Loan Facilities, plus cash: ECC site ECC's holdings look well-diversified, with Tech, Health Care, and Publishing forming ~27% of ECC's top industry holdings, and 7 other industries comprising ~29%: ECC site All of ECC's top 10 positions are less than 1%. Univision dropped from the top 10 in Q2 '22, replaced by McAfee. ECC site The portfolio also is well-laddered out into the future, with just ~8% maturing before 2025, when it starts maturing at a ~16% rate over 2025 through 2027: ECC site Debt: ECC has 3 unsecured Notes maturing in 2028, 2029, and 2031, plus a Preferred series maturing in 2031, and a perpetual preferred series D, with a 2026 call date.

Seeking Alpha • Aug 27

ECC And OXLC: Watch High Yield Spreads For Signal To Buy

Summary Eagle Point Credit Company and Oxford Lane Capital are both CEFs focused on CLO Equity investments. Both funds have ~15% current distribution yields. ECC has announced a $0.25 special dividend. I am staying away from both ECC and OXLC as I believe we are in the early innings of a credit cycle. I recently wrote an article reviewing Oxford Lane Capital (OXLC). Although my conclusion was to be cautious on Oxford Lane, the article did prompt a lot of comments discussing the merits of OXLC's high cash distribution and whether CLO Equity investments were really that risky. This prompted me to look into the space in more detail. In this article, I will take a look at Eagle Point Credit Company (ECC), another Closed End Fund ("CEF") focused on CLO Equity investments. I will compare between ECC and OXCL. Finally, I will provide additional thoughts on CLO Equity investments in general. My thoughts on Eagle Point mirrors my conclusions on Oxford Lane. While I think the current distribution yield is attractive, I am staying away from both ECC and OXLC as I believe we are in the early stages of a credit deterioration cycle. Also, an equivalent income stream can be created with low cost vanilla funds that may offer better return and risk characteristics than high yielding CEFs with NAV declines. I would consider CLO Equity funds like OXLC and ECC as a credit recovery play if high yield spreads were to widen to 8% and the Federal Reserve has stopped tightening financial conditions. ECC Fund Overview As mentioned above, Eagle Point Credit Company is a CEF that primarily invests in the equity tranches of Collateralized Loan Obligations ("CLO"). ECC currently has an equity market cap of $515 million, a slight premium to the July 31'st NAV estimate of $485 million. Strategy Eagle Point's strategy is to invest in a portfolio of CLO Equity tranches. A CLO is a collection of bank loans that have been packaged, securitized, and tranched (Figure 1). The securitization and tranching allows AAA-rated securities to be created from underlying loans that may not be AAA themselves. This gives risk-averse investors like banks and insurers a broader universe of highly rated securities to invest in, while risk-seeking investors can choose to invest in the riskier equity tranches. Investors who wish to learn more about CLOs are encouraged to do their research online, for example, here. Figure 1 - CLO structure (corporatefinanceinstitute.com) From a database of CLO 1.0 returns (CLOs issued from 2002 to 2011), ECC management notes that only 4% of CLOs have had negative equity returns (Figure 2). As the senior loans within the CLOs are floating rate, they also provide some degree of protection against inflation. Figure 2 - CLO rationale (ECC investor presentation) Strong historical returns and insatiable investor demand for the highly rated CLO tranches have created a massive market for CLOs. From less than $300 billion before the Great Financial Crisis ("GFC"), the U.S. CLO market is now almost $1 trillion in size (Figure 3). Figure 3 - CLO Equity Overview (ECC investor presentation) ECC Portfolio Holdings CLOs are managed by external CLO managers, so it's hard for investors of Eagle Point to gauge the actual underlying exposures. From the most recent quarterly presentation, we know that Eagle Point has investments in over 120 different CLO Equity tranches with total value of $566 million, and 22 CLO Debt tranches with total value of $48 million (Figure 4). Figure 4 - ECC CLO portfolio (ECC investor presentation) Additional portfolio metrics are shown in Figure 5 below. The Eagle Point portfolio is 86% invested in CLO Equity tranches, with over 1,800 unique underlying obligors and the largest individual obligor at 0.83% of the portfolio. Figure 5 - ECC Portfolio statistics (ECC investor presentation) Figure 6 shows ECC's top ten individual obligors and sector breakdown. Figure 6 - ECC top 10 obligors and sectors (ECC investor presentation) ECC Returns Figure 7 is excerpted from ECC's 2021 annual report. It shows ECC has generated 5-Yr annualized 11.1% returns, and 8.9% annualized returns since inception. Both numbers are better than the S&P BDC Index that ECC chooses to be compared to. Figure 7 - ECC Historical returns (ECC 2021 annual report) Similar to my comment on OXLC's annual returns, ECC's returns on a year-to-year basis can be quite lumpy. The fund did exceptionally well in 2016, 2020, and 2021, but poorly in 2015 and 2018. From Morningstar's lens, we see ECC flips often between top quartile and bottom quartile in terms of returns versus the peer group (Figure 8). Figure 8 - ECC vs. peers (morningstar.com) ECC Distribution & Yield ECC is currently paying a $0.14 / month distribution, which works out to a 14.5% current yield. ECC also recently announced a special distribution of $0.25 to be paid on October 31, 2022 with an ex-dividend date of October 7th (Figure 9). Figure 9 - ECC 2022 distributions (Eagle Point website) Historically, ECC has paid $15.76 in distributions to year-end 2021. Note, the monthly distribution was cut severely in 2020 from $0.20 to $0.08 as a result of the COVID-19 pandemic. It was later increased to $0.10 and $0.12 in 2021, along with a $0.50 special distribution at 2021 year-end. The monthly distribution was increased again to $0.14 earlier this year. Figure 10 - ECC historical distributions (Seeking Alpha) However, investors are cautioned about ECC's distributions, as a lot of the distribution in recent years have been from 'Return-of-Capital' ("ROC"). Figure 11 shows summary financials from ECC's 2021 annual report. It shows that ROC was $1.06, $1.00, $0.89 per share in 2020, 2019, and 2018 respectively. Figure 11 - ECC Summary Financials (ECC 2021 annual report) ECC Fees Eagle Point is a high cost fund. For Fiscal 2021, total expenses was 8.75% of net assets (Figure 12). ECC charges a base management fee of 1.75% of total equity base (common + preferred equity), and a performance fee of 20% above a 2.0% Net Investment Income ("NII") quarterly hurdle (8% annualized). Figure 12 - ECC 2021 total fees (ECC 2021 annual report) Like OXLC, ECC's common shareholders are responsible for all expenses of the fund, including interest on borrowed funds and preferred dividends. Unlike OXLC, ECC does not disclose the indirect costs of CLO expenses. However, given how similar the fee structure is between the two funds, I suspect the total indirect costs would be similar to OXLC. For reference, total fee expense for OXLC in Fiscal 2022 was 10.42%, and 30.69% including indirect CLO expenses. Eagle Point Comparison To Oxford Lane Using Portfolio Visualizer to compare between Eagle Point and Oxford Lane, we can see the two funds have very similar return profiles (this is to be expected, as both funds primarily invest in CLO Equity tranches). Figure 12 shows the simulation output. Note, this simulation does not take into account the Dividend Reinvestment Plan ("DRIP") discounts. Both funds offer a 5% discount for DRIP and the advertised annual returns of both funds take the discount into account. From Figure 12, we see OXLC has a higher returns CAGR of 7.2% vs. 6.6% in the time period analyzed (Nov 2014 to July 2022), but has higher volatility (34.0% St. Dev. vs. 26.4%). OXLC has a max drawdown of 60.6%, while ECC has a max drawdown of 59.3%. Figure 12 - Portfolio Visualizer comparison between OXLC and ECC (Portfolio Visualizer) In terms of current distribution yield, the two are also very similar. OXLC has a current yield of 15.0% ($0.075 / month annualized), while ECC has 14.5% current yield. However, including the announced special distribution, ECC is yielding 16.9%. In terms of fees, ECC seems to be slightly more shareholder friendly, as its total expenses for the last fiscal year was 8.75% compared to OXLC's 10.42%. Importantly, ECC charges base management fee on total equity (common + preferreds), while OXLC charges base management fee on gross assets, which includes leverage from debt. ECC also has a higher NII hurdle rate for performance fees, at 2.0% per quarter vs. 1.75% for OXLC. Revisiting Concerns About ECC and OXLC In my prior article on OXLC, I was primarily concerned about the constant declines in OXLC's NAV and perpetual issuance of shares. When distributions are cut due to economic concerns, like they were in 2020, long term investors are left with a capital haircut and decreased distributions. The subsequent credit recovery is further diluted as a lot of shares were issued in the meantime to maintain AUM. ECC shares the same issue, though to a lesser degree than OXLC has it has been in operation for fewer years. ECC IPO'd in October 2014 at $20 / share NAV, and the most recent July NAV per share $10.84 / share. Although Day 1 investors have received a cumulative $16.68 in distributions to July 2022, they would have lost $9.16 in NAV value. Some commentators on my OXLC article have suggested that the proper way to utilize high yielding CEFs like OXLC and ECC is to take all distributions and re-invest them at the DRIP discount window, and only withdraw amounts where necessary. By reinvesting all the distributions and only withdrawing a smaller amount per month, investors can achieve investment returns closer to the advertised annualized returns. This is indeed an interesting concept I had not thought about, so kudos to those investors applying this ingenious DRIP investment methodology. However, my next question is, it appears in applying the DRIP method, investors are trying to maximize total returns. If that is the case, wouldn't investors be better served investing in a low-cost asset that increases in NAV, like the Vanguard S&P 500 ETF (VOO), and withdraw the monthly amount required? For example, in Figure 13, I have set up a comparison analysis between OXLC, ECC, and VOO, with initial invested capital of $100,000 in November 2014. Each month, $500 is withdrawn, so it provides a 6% initial capital yield (not adjusted for inflation). Figure 13 - OXLC, ECC, vs. VOO comparison (Author created using Portfolio Visualizer) The end result is that the OXLC portfolio has an ending balance of $102K, the ECC portfolio has an ending balance of $103k, and VOO has an ending balance of $161K (Figure 14). i.e., you still end up ahead investing in conventional low cost assets like VOO. Granted, this portfolio visualizer analysis does not take into account the DRIP discount, but I am not sure if a 5% DRIP discount can make up for a 6% difference in the CAGR returns. Also, risk metrics such as Standard Deviation of returns and max drawdowns are much lower with the VOO portfolio and Sharpe ratios are much higher. Figure 14 - OXLC vs. ECC vs. VOO returns (Author created using Portfolio Visualizer) CLOs Probably Won't Cause Next Financial Crisis After reading more research on historical leveraged loan performance and CLO default rates, I agree with most commentators that CLOs are not the ticking time bombs some analysts believe them to be. This is because, unlike CDOs that caused the great financial crisis in 2008, the underlying raw building blocks in CLOs are leveraged loans across diverse businesses in the economy. Most CLOs have strict loan diversification rules (no sector can be greater than 15% of the CLO; no obligor greater than 2%, etc.), are overcollateralized, and have automatic guardrails that force the structure to delever once some credit events are triggered. According to Wharton finance professor Michael Roberts: If lenders were to recover $0.40 on the dollar for loans in default, then 60% of the loans in CLO portfolios would have to default before the AAA-rated tranches would even begin to lose money. To put that number in context, the cumulative default rate for risky debt during the worst three years of the Great Depression (1931-1933) was 31%. But CLO Equity Tranches Can Still Lose Money However, that does not mean junior holders of CLOs, like CLO Equity tranches, will not suffer losses. The CLO structure contains overcollateralization ("OC"), Interest Coverage ("IC") and Interest Diversion tests to protect the senior tranche holders. In the OC test, if the underlying loan collateral is less than the CLO debt tranches, then the CLO is paid down from the most senior tranche downward until the test goes back into compliance. Similarly, interest is paid to the most senior tranches first. In effect, these tests protect the senior CLO debt holders from losses. CLO Equity, by definition, is there to protect the senior tranches from default. In ECC's portfolio, shown in Figure 15, we see there are holdings where the 'Junior OC Cushion' is negative and thus the CLO Equity tranche receives no cash distribution (Harborview VII for example). So even if the AAA tranche of Harborview VII does not default, the Equity tranche could be wiped out.

Seeking Alpha • Aug 16

Eagle Point Credit NII of $0.43 beats by $0.06

Eagle Point Credit press release (NYSE:ECC): Q2 NII of $0.43 beats by $0.06. NAV per common share of $10.08 as of June 30, 2022, compared to $12.64 as of March 31, 2022. “While the reduction in CLO security prices during the quarter impacted our NAV, we have found multiple opportunities to invest in secondary CLO securities at significant discounts,” added Mr. Majewski. “We believe the recent sell-off was more technical in nature and the prices of many securities have risen so far in the third quarter. With a strong balance sheet – 100% fixed-rate financing, no debt maturities prior to 2028 and approximately $50.8 million in available cash for investment as of July 31 – we remain well positioned to generate attractive risk-adjusted returns over the long term.”

Seeking Alpha • Jul 25

ECC: The Story Of 1% Total Annual Returns For 5 Years

CLOs are a recession-resistant asset class. One needs to have a modicum of restraint in forecasting returns over here though. ECC has shown rather poor total returns in the last 5 years and the outrageous premium to NAV sets up a poor outcome today. What is a good return? This can be subjective as investors have different expectations. What is good for one, might be poor for the other. That said, one can use objective benchmarks to get comparisons. We are about to do just that for one popular fund, Eagle Point Credit (ECC) and we will let the readers decide how good the returns have been. We will also tell you why forward 12-month returns are likely to be in the same range as the past. The Fund ECC's primary investment objective is to generate high current income and it has a secondary objective to generate capital appreciation. Right off the bat, we can tell you that you can forget about the secondary objective as the NAV is half what it was when the fund started. As for the primary objective, the fund seeks to achieve this by investing in equity and junior debt tranches of CLOs that are collateralized by a portfolio consisting primarily of below investment grade U.S. senior secured loans. ECC June 30, 2022 Update We have seen this shopping exercise previously, with Oxford Lane Capital (OXLC) and seen that the returns there have hardly been stellar. What about ECC? The Allure & The Returns Let's face it. ECC's appeal has come from that distribution yield that has stayed in the high double-digits for most of the last 5 years. That number below is a bit off, as it includes the special distribution, but current yield is 14.4%. Data by YCharts If you take a small leap of faith here and assume that the average was 14.4%, you would expect to double your money over the last 5 years (rule of 72). Actual total annual returns, as defined by the company, have come in at 3.11%. ECC June 30, 2022 Update This assumes reinvestment of distributions. ECC June 30, 2022 Update Now that return is not bad by itself. 3.11% exceeded the return on CS Leveraged Loan Index and on the ICE BofA US High Yield Index. Both those indices don't have management fees, so you would expect an actively (or even passively) managed fund to lag. The outperformance here is good. The contrast though, is gut wrenching from expected returns. 12-17% yield resulting in 3% annual total returns means that a lot of the return is literally your capital coming back to you. Bear in mind, we have pretty much given you what the company is telling you your total returns are. So those are the facts, and they are not in dispute. Returns Under Other Circumstances The DRIP plan is nice and helps investors enhance their returns. This is how it works. If we declare a dividend or distribution payable either in cash or in Common Shares, we will issue Common Shares to participants at a value equal to 95% of the market price per Common Share at the close of regular trading on the payment date for such distribution. The number of additional Common Shares to be credited to each participant’s account will be determined by dividing the dollar amount of the distribution or dividend by 95% of the market price. However, we reserve the right to purchase shares in the open market in connection with our implementation of the DRIP Plan. If we declare a distribution to Common Stockholders, the DRIP Plan Agent may be instructed not to credit accounts with newly issued shares and instead to buy shares in the open market if the price at which newly issued Common Shares are to be credited does not exceed 110% of the last determined NAV of the shares; or we have advised the DRIP Plan Agent that since such NAV was last determined, we have become aware of events that indicate the possibility of a material change in per share NAV as a result of which the NAV of the shares on the payment date might be higher than the price at which the DRIP Plan Agent would credit newly issued shares to stockholders. Source ECC DRIP Description The point here is that the DRIP plan is built into the returns shown above. What if you did not reinvest the distributions? This is hardly unusual as the bulk of the investors invest here to meet their monthly expenses. For that, we used Buy Upside for the calculations. We will note here that period is slightly different and runs from July 24, 2017 to July 22, 2022. The company's 5-year period shown above is from July 1, 2017 to June 30, 2022. Nonetheless, we can glean some great information here. Buy Upside 1) The starting price was $20.48. The ending price was $11.65. 2) Total returns with distributions taken in cash was 6.3% ($1,000 becomes $1,063). 3) Total Returns were about 1.02% compounded. 4) The returns were NOT driven by changes in premium. In June and July 2017, The NAV was around $17.60. ECC NAV 2017 The Fund traded at a 17% premium to NAV. This is almost identical to today. CEF Connect 5) Your yield on original cost would have dropped from over 12%, to about 8.2% today.

Seeking Alpha • Jun 03

Eagle Point Credit: 13% Yield, Monthly Payer, Strong Q1 2022, Low Premium To NAV

ECC yields 13.25%, and goes ex-dividend next on 6/9/22. Management already announced Q3 monthly distributions of $.14/month. ECC is trading at a 1.52% premium, lower than its 1-, 3- and 5-year premiums.

Seeking Alpha • May 24

Eagle Point Credit Company: Examining The Fund Amidst Market Turmoil

ECC is a closed-end fund that invests in the junior debt and equity tranches of CLOs. Eagle Point reports earnings on May 24th, an important quarter amongst broad market disruption. The fund recently reaffirmed the monthly distribution through September, temporarily solidifying a dividend yield of 13.5%.

Seeking Alpha • Oct 07

Eagle Point Credit Company: The Top Of The Risk Pyramid

ECC is a closed end fund that invests in equity tranches of CLOs to generate high current yield and total return. The fund has a current yield of >10% which could further increase should the United States economy continue to recover at a record pace. The fund invests in high-risk debt instruments, but management has successfully generated attractive long-term returns. ECC still stands to benefit from a continued economic recovery but remains exposed to near-term risk factors.

Seeking Alpha • Jun 21

Eagle Point raises additional $3.4M as underwriters buy shares in preferred stock offering

Eagle Point Credit (ECC) raised an additional ~$3.4M in net proceeds after the underwriters of its previously announced Series C Term preferred stock offering fully exercised their option to buy 140K shares.The company previously closed its offering of 1.06M shares of its 6.50% Series C Term preferred stock due 2031 at $25 per share.Preferred Stock is rated ‘BBB’ by Egan-Jones Ratings company. Source: Press Release

Punteggio fiocco di neve
Valutazione	1/6
Crescita futura	3/6
Prestazioni passate	0/6
Salute finanziaria	3/6
Dividendi	2/6

Prezzi storici delle azioni
Prezzo attuale dell'azione	US$4.28
Massimo di 52 settimane	US$8.05
Minimo di 52 settimane	US$3.46
Beta	0.35
Variazione di 1 mese	8.91%
Variazione a 3 mesi	-16.89%
Variazione di 1 anno	-46.43%
Variazione a 3 anni	-61.96%
Variazione a 5 anni	-66.30%
Variazione dall'IPO	-77.59%

	ECC	US Capital Markets	US Mercato
7D	4.9%	0.7%	2.1%
1Y	-46.4%	14.0%	30.6%

ECC volatility
ECC Average Weekly Movement	6.5%
Capital Markets Industry Average Movement	3.6%
Market Average Movement	7.2%
10% most volatile stocks in US Market	16.1%
10% least volatile stocks in US Market	3.2%

ECC statistiche fondamentali
Capitalizzazione di mercato	US$557.92m
Utili (TTM)	-US$134.44m
Ricavi(TTM)	US$203.98m

ECC Conto economico (TTM)
Ricavi	US$203.98m
Costo del fatturato	US$0
Profitto lordo	US$203.98m
Altre spese	US$338.42m
Utili	-US$134.44m

Utile per azione (EPS)	-1.02
Margine lordo	100.00%
Margine di profitto netto	-65.90%
Rapporto debito/patrimonio netto	39.5%

Eagle Point Credit date dei dividendi
Data di stacco del dividendo	May 11 2026
Data di pagamento dei dividendi	May 29 2026
Giorni fino al dividendo Ex	0 days
Giorni prima della data di pagamento dei dividendi	18 days

Dati	Ultimo aggiornamento (ora UTC)
Analisi dell'azienda	2026/05/07 17:27
Prezzo dell'azione a fine giornata	2026/05/07 00:00
Utili	2025/12/31
Utili annuali	2025/12/31

Pacchetto	Dati	Tempistica	Esempio Fonte USA ^*
Dati finanziari della società	10 anni	Conto economico Rendiconto finanziario Bilancio	Modulo SEC 10-K Modulo SEC 10-Q
Stime di consenso degli analisti	+3 anni	Previsioni finanziarie Obiettivi di prezzo degli analisti	Rapporti di ricerca degli analisti Blue Matrix
Prezzi di mercato	30 anni	Prezzi delle azioni Dividendi, scissioni e azioni	Dati di mercato ICE Modulo SEC S-1
Proprietà	10 anni	Top azionisti Insider trading	Modulo 4 SEC Modulo 13D SEC
Gestione	10 anni	Team di leadership Consiglio di amministrazione	Modulo SEC 10-K Modulo SEC DEF 14A
Sviluppi principali	10 anni	Annunci aziendali	Modulo 8-K SEC

Analista	Istituzione
Gaurav Mehta	Alliance Global Partners
Timothy D'Agostino	B. Riley Securities, Inc.
Stephen Laws	Deutsche Bank

Eagle Point Credit (ECC) Panoramica del titolo

Analyst Price Targets

Resets And Refinancings Will Support Stronger Cash Flows And Dividend Sustainability

New CLO Equity Rotation And Loan Supply Trends Will Drive Stronger Future Cash Flows

Top Analyst Narratives

Resets And Refinancings Will Support Stronger Cash Flows And Dividend Sustainability

New CLO Equity Rotation And Loan Supply Trends Will Drive Stronger Future Cash Flows

Concorrenti di Eagle Point Credit Company Inc.

Storia dei prezzi e prestazioni

Notizie e aggiornamenti recenti

Eagle Point Credit Company Inc. to Report Q1, 2026 Results on May 19, 2026

Eagle Point Credit Company Inc., Annual General Meeting, May 12, 2026

Eagle Point Credit: CLO Equity, Treasury Volatility, And The Preferreds

Eagle Point Credit Company Inc. announces Monthly dividend, payable on May 29, 2026

Eagle Point Credit Company Inc. (NYSE:ECC) announces an Equity Buyback for $100 million worth of its shares.

Eagle Point Credit Company Inc. to Report Q4, 2025 Results on Feb 17, 2026

Recent updates

Eagle Point Credit Company Inc. to Report Q1, 2026 Results on May 19, 2026

Eagle Point Credit Company Inc., Annual General Meeting, May 12, 2026

Eagle Point Credit: CLO Equity, Treasury Volatility, And The Preferreds

Eagle Point Credit Company Inc. announces Monthly dividend, payable on May 29, 2026

Eagle Point Credit Company Inc. (NYSE:ECC) announces an Equity Buyback for $100 million worth of its shares.

Eagle Point Credit Company Inc. to Report Q4, 2025 Results on Feb 17, 2026

Eagle Point Credit Company Inc. Declares Monthly Regular Distributions for the First Quarter of 2026, Payable on January 30, 2026, February 27, 2026 and March 31, 2026 Respectively

Eagle Point Credit Company Inc. to Report Q3, 2025 Results on Nov 13, 2025

Eagle Point Credit Company Inc. Declares F Distributions on Common Shares for the Fourth Quarter of 2025, Payable on October 31, 2025, November 29, 2025 and December 30, 2025

Eagle Point Credit Company Inc. to Report Q2, 2025 Results on Aug 12, 2025

Eagle Point Credit Company Inc. Declares Monthly Regular Distributions for the Third Quarter of 2025, Payable on July 31, 2025, August 29, 2025 and September 30, 2025 Respectively

Eagle Point Credit Company Inc. to Report Q1, 2025 Results on May 28, 2025

Eagle Point Credit Company Inc., Annual General Meeting, May 23, 2025

ECC, OCCI Or Neither Of Them: A Pairs Trade For 2 CEFs

I Am Loading Up On This 19% Yield: ECC

Eagle Point Credit: Q4 Earnings Indicate Both Strength And Weakness (Rating Downgrade)

Eagle Point Credit Company Inc. Declares Monthly Regular Distributions for the Second Quarter of 2025, Payable on April 30, 2025, May 30, 2025 and June 30, 2025

Eagle Point Credit Company Inc. to Report Q4, 2024 Results on Feb 20, 2025

Eagle Point Credit: Pricing Improves And CLOs Remain Hot (Rating Upgrade)

Eagle Point Credit: Mixed Signals, But Net Bullish

ECCU: A 7.75% Baby Bond IPO From Eagle Point Credit Company

Eagle Point Credit: Strong Sell - Dividends Are, Effectively, Returns Of Capital

Buy The Dip, Collect 18% Yields - Eagle Point Credit

ECC: A High Yield Macroeconomic Bet On Low Default Rates

Eagle Point Credit Company Inc. Declares Three Separate Monthly Regular Distributions, Payable on Each of January 31, 2025, February 28, 2025 and March 31, 2025

Eagle Point Credit Company Inc. to Report Q3, 2024 Results on Nov 14, 2024

8.5% From ECC Perpetual Preferred Stock Is Currently Our Largest Position

Eagle Point Credit Company Inc. Provides Unaudited Earnings Guidance for the Quarter Ended September 30, 2024

Your Retirement Can Be Saved By Income: ECC

Eagle Point Credit: 19% Yield On Common And 8.7% On Preferred Equity

Eagle Point Credit: Common Shares Are Becoming Less Attractive Than Preferreds

Great News For This Fat 18% Yield: ECC

Eagle Point Credit Company Inc. Declares Common Stock Supplemental Distributions, Payable on August 30, 2024 and September 30, 2024 Respectively

Eagle Point Credit Company Inc. to Report Q2, 2024 Results on Aug 06, 2024

Eagle Point Credit: Potential Interest Rate Cuts Can Provide Relief

A Glorious And Mysterious 17% Yield: Eagle Point Credit

Eagle Point Credit Company Inc. Declares Monthly Distributions, Payable on July 31, 2024, August 30, 2024 and September 30, 2024 Respectively

Eagle Point Credit: I Don't Mind The 8.5% Preferred Dividend Yield

Eagle Point Credit Company Inc. to Report Q1, 2024 Results on May 21, 2024

Eagle Point Credit Company Inc., Annual General Meeting, May 15, 2024

Eagle Point Credit: Earn A High Yield From CLOs

I'm Betting On America With 17% Yields: ECC Year-End Update

Eagle Point Credit Company Inc. Declares Monthly Distributions, Payable on April 30, 2024, May 31, 2024 and June 28, 2024 Respectively

Eagle Point Credit Company Inc. to Report Q4, 2023 Results on Feb 22, 2024

I'm Betting On America With Another 17% Yielder: ECC

Eagle Point Credit: Where This 17.2% Yield Might Fit Into Your Portfolio

Worried About A Recession? Time To Maximize Your Income: ECC

Eagle Point Credit Presents Financial Strength With A Solid Technical Perspective

Eagle Point Credit Company Inc. Declares Monthly Distributions, Payable on November 30, 2023, December 29, 2023, January 31, 2024, February 29, 2024, March 28, 2024 Respectively

Eagle Point Credit Company Inc. to Report Q3, 2023 Results on Nov 14, 2023

ECC: Avoid The Riskiest Part Of The CLO Structure (Rating Downgrade)

ECC And OXLC: Climbing The CLO Learning Curve

Wake Up And Smell The Cash Flow: ECC Yield 17%

Eagle Point Credit: Appealing NAV Price And Solid Performance

Eagle Point Credit Company Inc. Declares Monthly Distributions, Payable on August 31, 2023, September 29, 2023, October 31, 2023, November 30, 2023, December 29, 2023 Respectively

Eagle Point Credit: Analyzing Q2 2023 Earnings Results

Eagle Point Credit Company Inc. to Report Q2, 2023 Results on Aug 15, 2023

Earn 17% Betting On America: Eagle Point Credit

Eagle Point Credit Company Inc. to Report Q1, 2023 Results on May 23, 2023

Eagle Point Credit Q4 2022 Earnings Preview

Eagle Point Credit Company Inc. to Report Q4, 2022 Results on Feb 22, 2023

Eagle Point Credit Company Is Not Suitable For (Most) Retirees Today

ECC: Chasing A Double-Digit Yield Paid Monthly