Operator: Good day, and thank you for standing by. Welcome to the Carlyle Credit Income Fund Second Quarter 2026 Financial Results and Investor Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Joseph Castilla. Please go ahead.
Joseph Castilla: Good morning, and welcome to Carlyle Credit Income Fund's Second Quarter 2026 Earnings Call. With me on the call today is Nishil Mehta, CCIF's Principal Executive Officer and President; Lauren Basmadjian, CCIF's Chair and Carlyle's Global Head of Liquid Credit; and Nelson Joseph, CCIF's Principal Financial Officer. Last night, we issued our Q2 financial statements and a corresponding press release and earnings presentation discussing our results, which are available on the Investor Relations section of our website. Following our remarks today, we will hold a question-and-answer session for analysts and institutional investors. This call is being webcast, and a replay will be available on our website. Any forward-looking statements made today do not guarantee future performance, and any undue reliance should not be placed on them. These statements are based on current management expectations and involve inherent risks and uncertainties, including those identified in the Risk Factors section of our annual report on the Form N-CSR. These risks and uncertainties could cause actual results to differ materially from those indicated. Carlyle Credit Income Fund assumes no obligation to update any forward-looking statements at any time. During the conference call, we may discuss adjusted net investment income per common share and core net investment income per common share, which are calculated and presented on a basis other than in accordance with GAAP. We use these non-GAAP financial measures internally to analyze and evaluate financial results and performance, and we believe these non-GAAP financial measures are useful to investors gauging the quality of the fund's financial performance, identifying trends in its results and providing meaningful period-to-period comparisons. The presentation of this non-GAAP measure is not intended to be a substitute for financial results prepared in accordance with GAAP and should not be considered in isolation. With that, I'll turn the call over to Nishil.
Nishil Mehta: Thanks, Joe. Good morning, everyone, and thank you all for joining CCIF's quarterly earnings call. CLO equity market continued to face pressure during the quarter due to a combination of a repricing wave in January, which led to further declines in the average spreads, weakness in certain software-related loans due to concerns regarding AI disintermediation and volatility from the conflict in the Middle East. These factors weighed on loan prices, CLO equity valuations and CLO equity cash flows across the market and within CCIF's portfolio. However, underlying credit fundamentals remained broadly stable during the quarter and the volatility created better balance in the market with very limited repricings in February and March. To navigate this market environment, we continue to focus on optimizing the portfolio, including selectively completing refinancings and resets and defensively positions CCIF with experienced CLO managers and transactions with longer reinvestment periods. I'd like to highlight the fund's activities over the last quarter and key stats on the portfolio as of March 31. We maintained our monthly dividend of $0.06 per share or 21.5% annualized based on the share price as of May 12, which is now declared through August 2026. CCIF's underlying CLO investments generated an annualized cash-on-cash yield of 20.11% for the quarter, which resulted in $0.44 of recurring cash flows and $0.29 of core net investment income for the quarter at the fund level. Core net investment income provided dividend coverage of 161% and a revised monthly dividend of $0.06 per share. New CLO investments during the quarter totaled $1.5 million with a weighted average GAAP yield of 11.5%. Total sales proceeds during the quarter totaled $21.7 million as we used the proceeds to redeem $20 million of the 7.5% Series C convertible preferred shares in cash to reduce leverage. Within CCIF's portfolio, we completed 4 resets in Q2 2026, in addition to the 26 refinancings and resets completed in calendar year 2025. Refinancings and resets reduce the cost of liabilities and extend the reinvestment period across CLOs and bolster equity cash flows. We expect to continue to refinance and reset the portfolio to enhance returns. The weighted average years left in the investment period decreased slightly from approximately 3.4 years to 3.3 years. This provides CLO managers the opportunity to capitalize on periods of volatility through active management. There are also 0 CLOs in the portfolio that were post reinvestment period as of March 31. We believe the portfolio weighted average junior overcollateralization cushion of 4.18% is healthy and offsets potential defaults and losses in the underlying loan portfolios. And the average percentage of loans rated CCC by S&P was 4.1%, below the 7.5% CCC limit in CLOs. The weighted average spread of the underlying loan portfolio was 2.96%, a 10 basis point decline from the prior quarter. The continued decline in weighted average spread reflects the cumulative impact of elevated repricing activity over the last several quarters, particularly the very high level of repricing activity experienced in January. Lower loan spreads continue to pressure the earnings for our CLO equity as resets and refinancings have not fully offset the spread compression. Importantly, underlying credit fundamentals across CCIF's portfolio remained broadly stable, and we believe recent CLO equity performance has been driven more by valuation and technical factors than broad-based credit deterioration. We remain confident in the resilience of our portfolio, which is diversified across high-quality managers and structured to navigate evolving market conditions. While liability costs have increased and equity distributions have moderated, we believe resilient credit fundamentals and continued demand for floating rate assets will support CLO performance over time. We saw a stabilization of NAVs in April as loan prices partly retraced the declines from earlier this year, and we saw very limited loan repricing. Now I will switch gears to discuss our outlook. CLO equity continues to benefit from historically attractive liability costs. Any normalization in loan spreads or increase in loan spreads could improve excess spread generation over time, particularly for deals with longer reinvestment. With approximately 17% of the loan market maturing by the end of 2028, we expect heightened refinancing activity, which could also lead to spread widening, benefiting CLO equity. Looking ahead, we believe CLO equity performance will continue to depend on manager selection, reinvestment discipline and active credit management. We continue to position CCIF conservatively while selectively deploying capital into opportunities where we believe valuations appropriately compensate investors for underlying risk. We also continue to leverage Carlyle's in-house credit research platform to conduct a detailed bottom-up analysis across underlying loan portfolios, including software-related exposures and evolving AI-related risk. CCIF's portfolio remains highly diversified across approximately 1,850 underlying loans with exposure to any single issuer representing less than 1% of the portfolio. In addition, the portfolio is predominantly comprised of first lien senior secured loans, representing over 97% of exposure, which we believe provides meaningful downside protection and structural resilience. With that, I will now hand the call over to Lauren to discuss the current market environment.
Lauren Basmadjian: Thank you, Nishil. I'd now like to provide an update on the recent developments across both the loan and CLO markets. CLO liability spreads widened modestly across the capital stack with AAA spreads widening by about 5 basis points quarter-over-quarter and BB spreads widening by about 150 basis points. New issue CLO volume totaled approximately $47 billion during the quarter compared to $44 billion in the prior year. CLO resets and refinancings totaled $28 billion and $23 billion, respectively, down from $57 billion and $37 billion in the first quarter of 2026 as wider liability spreads and increased market volatility reduced refinancing and reset activity during the quarter. The share of U.S. CLOs out of the reinvestment period has declined to roughly 11%, down from about 40% in 2023, reflecting a market with expanded reinvestment capacity. Turning to the loan market. Leveraged loans experienced modest weakness in the first quarter of 2026 as market volatility increased during this period. The LSTA U.S. Leveraged Loan Index declined 60 basis points during the quarter as loan prices declined 2.1%. Similar to prior quarters, issuance activity was largely driven by opportunistic refinancing and a significant number of repricing in January. However, the market also saw an increase in LBO and M&A activity during the quarter, most notably the Electronic Arts' LBO contributing to about $51 billion of quarterly LBO and M&A volume in the broadly syndicated loan market, the highest quarterly total in more than 4 years. Credit fundamentals within the U.S. portfolio of over 550 borrowers remained resilient in the fourth quarter of 2025. Free cash flow generation continues to be a key focus with over 75% of borrowers producing positive free cash flow, supported by the benefit of prior rate cuts and lower spreads on corporate loans. Revenue and EBITDA growth remained positive at 5% and 6% year-over-year, which is similar to what we saw in the third quarter. Interest coverage remained healthy at 3.8x with only a small portion of the portfolio below 1x interest coverage. Overall, borrower performance and the credit quality remained broadly stable. While Chapter 11 activity remains moderate relative to historical averages, liability management exercises continue across the market. The broadly syndicated loan default rate, inclusive of liability management exercises, has declined from a recent cycle peak of 4.4% at the end of 2024 to approximately 3% in March and further to 2.8% in April, retreating closer to historical averages. With about 17% of the loan market maturing before the end of 2028, we think the next year will be busy with refinancing transactions. But unlike the last 2-plus years, some of these transactions should be spread additive. We have not yet seen software companies look to extend their maturities, but we anticipate activity among some of the larger companies with 2028 maturities, which should show the market where the true cost of capital is for performing software. As capital for data centers remain in high demand, we are beginning to see companies access the leveraged loan market for financing, creating a new source of collateral. Overall, given the current geopolitical, AI and inflationary risks, we think 2026 will continue to be a year of dispersion with the haves and have-nots experiencing very different outcomes. I will now turn the call to Nelson, our CFO, to discuss the financial results.
Nelson Joseph: Thank you, Lauren. Today, I will begin with a review of our second quarter earnings. Total investment income for the second quarter was $5.5 million or $0.26 per share. Total expenses for the quarter were $3.6 million. Total net investment income for the second quarter was $1.9 million or $0.09 per share. Adjusted net investment income for the second quarter was $2.4 million or $0.11 per share. Adjusted NII adjusts for the $0.02 per share impact from the amortization of the OID and issuance costs for the fund's preferred shares and credit facility. Core net investment income for the second quarter was $0.29 per share, providing dividend coverage of 161% on a revised monthly dividend of $0.06 per share. We believe core net investment income is a more accurate representation of CCIF's distribution requirement. Net asset value as of March 31 was $3.34 per share. Our net asset value and valuations are based on the bid side mark we received from a third party of 100% of the CLO portfolio. We continue to hold one legacy real estate asset in the portfolio. The fair market value of the loan is $2.2 million. With that, I'll turn it back to Nishil.
Nishil Mehta: Thanks, Nelson. We remain confident in the fundamentals of CCIF's portfolio, which remains defensively positioned in the current market environment. We remain focused on experienced managers and transactions that demonstrate durable par build, strong underlying collateral quality and disciplined credit underwriting, including ongoing evaluation of evolving AI-related risk across certain sectors. We are deploying capital selectively, prioritizing opportunities that offer attractive relative value across both new issue and seasoned transactions. We continue to leverage the depth of the Carlyle Liquid Credit platform and our collaborative One Carlyle platform to source and invest in high-quality CLO portfolios through a disciplined bottom-up 15-step investment process.
Operator: [Operator Instructions] And our first question will be coming from the line of Gaurav Mehta of AGP Alliance Global Partners.
Gaurav Mehta: I wanted to ask on the trends you guys are seeing in April. I think you talked about stabilization of NAV and improvement in loan prices. Just want to get some more color on what you guys are seeing in loan repricing? And any comments on spreads and yields?
Nishil Mehta: Yes. Sorry, go ahead.
Lauren Basmadjian: Yes, sorry. I'll talk about the loan repricing. We have seen a period where they stopped, including up until April. But I will say that, in May, they have started again.
Nishil Mehta: And I would add to that, that we have seen the loan market kind of stabilize over the past couple of months. And as a result, we've seen some stabilization in NAV as well.
Gaurav Mehta: Second question on resets and refi. Can you maybe provide some color on how much opportunity do you have for resets and refis in your portfolio for this year?
Nishil Mehta: Yes. So look, it's something that we continue to focus on because the best way to offset loan repricings is completing the accretive refinancings and resets. We completed 4 in the first quarter. And now that CLO debt spreads have tightened in line with kind of overall fixed income market tightening, we expect to continue to be very active in refinancing and resetting the portfolio.
Operator: [Operator Instructions] Our next question will be coming from the line of Erik Zwick of Lucid Capital Markets.
Erik Zwick: I wanted to start with a question on software, and I guess it may be a multipart question. So if I look at your Slide 12 on the right-hand side, I guess the first question is most of your software exposure in that high-tech category and then -- or is there spillover into other some maybe kind of tangential businesses that utilize software heavily as well? And then kind of the second question is, if you decided you wanted to reduce software exposure in the portfolio, how easy is that to accomplish? Can you have discussions with the CLO issuers or the CLO primarily just reflective of overall leveraged loan issuance? Just kind of curious how -- if you want to reduce that or change in any sector, how easy is that to accomplish?
Nishil Mehta: Sure. So maybe on the second part, I'll touch upon that. So software right now is around 12% to 13% of the overall loan market, BSL market. And right now, I think for CCIF, it's around 12%. So the way that we can adjust our software exposure, there's 2 ways. One, look, we're always looking to optimize our portfolios. So if we see a portfolio where it's not necessarily the amount of software exposure, it's utilizing our in-house credit experts and analysts to do kind of a line-by-line review of each of the loans, really looking at the quality of the software names within each CLO. So we can always rotate out of the position if we don't like the risk profile and credit profile of those underlying software names. And then two, we do have discussions with our managers on kind of software exposure, their views on software, kind of what their strategies are on software. So we won't necessarily dictate to them in terms of changing their strategy because ultimately, they have ultimate discretion, but we can always rotate out of positions and CLO managers accordingly. And I think the third is, I think what you're naturally going to see is software exposure decline over time. And that's going to be a market-wide phenomenon. One, you're probably going to see less activity in the software space, less capital markets activity just given that everything going on. And then two, as new CLOs are created, we're already seeing that software exposure, and newer CLOs are typically closer to half of what the current exposure is. So maybe mid- to high single digits.
Erik Zwick: That's very helpful and insightful. And second one for me, just what was the driver of realized losses in the most recent quarter?
Nishil Mehta: Yes. So the one thing that we did is, I think, just prudent management of the capital structure. So given the decline in NAV, our leverage was higher than kind of what our target range is. And so we proactively sold some of our positions and use the proceeds to redeem our Series C, which is around $20 million.
Operator: And I am showing no further questions. I would now like to turn it back to management for closing remarks.
Joseph Castilla: Thank you all for joining. We look forward to speaking to everyone next quarter, if not sooner. Please feel free to reach out if you have any questions, and thank you again for your support.
Operator: And this concludes today's program. Thank you for participating. You may now disconnect.