Operator: Greetings, and welcome to the Eagle Point Credit Company Fourth Quarter 2025 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. [Operator Instructions] It's now my pleasure to turn the call over to your host, Darren Daugherty with Prosek Partners. Please go ahead, Darren.
Darren Daugherty: Thank you, Kevin, and good morning. Welcome to Eagle Point Credit Company's earnings conference call for the fourth quarter and full year 2025. Speaking on the call today are Thomas Majewski, Chief Executive Officer; and Ken Onorio, Chief Financial Officer and Chief Operating Officer. Before we begin, I would like to remind everyone that the matters discussed on this call include forward-looking statements or projected financial information that involve risks and uncertainties that may cause the company's actual results to differ materially from such projections. For further information on factors that could impact the company and the statements and projections contained herein, please refer to the company's filings with the SEC. In addition, because we are holding this call prior to filing our annual report, the financial results discussed today are preliminary and unaudited and remains subject to completion of our year-end audit procedures. Actual results included in our annual report may differ from the information discussed on this call and those differences could be material. Each forward-looking statement or projection of financial information made during this call is based on the information available to us as of the date of this call. We disclaim any obligation to update our forward-looking statements unless required by law. A replay of this call will also be made available later today. I will now turn the call over to Thomas Majewski, Chief Executive Officer of Eagle Point Credit Company. Tom?
Thomas Majewski: Thanks, Darren, and good morning to everyone. We appreciate you joining the call today. We decided to hold our call earlier than usual this quarter to provide shareholders with a timely update on our fourth quarter results and recent activity at the company. Our annual report will be filed later this month. During 2025, CLO equity faced difficult market conditions and the company was not immune to these market-wide conditions. While defaults remain below long-term averages, both spread compression in the loan market and a general negative sentiment towards credit, which we believe is overdone, weighed on both our financial performance and the total return for our shareholders last year. Our disciplined focus on portfolio management and long-term value creation through CLO resets and refinancings, helped mitigate some of the headwinds that CLO equity faced. In addition, throughout the year, we leveraged our advisers' broader origination capabilities and opportunistically increased the company's exposure to credit assets beyond CLO equity. The strong demand for loans was fueled in part by captive CLO equity funds which are often return insensitive buyers of new CLOs. We believe these funds also led to loan spreads compressing faster than CLO liabilities tightened as their CLO issuances created more CLO debt supply than the market might have otherwise had appetite for. This significantly reduced the CLO equity arbitrage during the year. These factors, among others, drove what Nomura Research estimated to be a median CLO equity return of negative 15% for 2025. With that as a backdrop, the company generated a GAAP return on common equity of negative 14.6% during 2025. And this is modestly better than Nomura's market-wide assessment. As of December 31, the company's NAV was $5.70 per share, which is down from $7 per share on September 30. The fourth quarter of 2025 saw a net investment income, or NII, less realized losses of negative $0.26 per share, which was comprised of net investment income of $0.23 per share and offset by realized losses of $0.49 per share. This compares to NII less realized losses of $0.16 per share in the third quarter. For the fourth quarter of 2025 recurring cash flows from our portfolio increased to $80 million or $0.61 per share, and that's up from $77 million or $0.59 per share in the prior quarter. We paid total cash distributions of $1.68 per common share during 2025. As majority CLO equity investors our ability to direct resets and refinancings helped offset some of the loan compression. In the fourth quarter alone, the company completed 10 resets and 3 refinancings of its CLOs. Over the course of 2025, we participated in 34 resets and 27 refinancings, making us one of the more active CLO equity investors in the market last year. This robust activity led to 42 basis points of CLO debt cost savings on average across our portfolio. The weighted average remaining reinvestment period or WARP of our portfolio stayed roughly flat, moving from 3.4 years at the beginning of 2025 to 3.3 years at the end of 2025 despite the passage of the year. This is due both to our reset activity and our new investments that we made during the year. During the fourth quarter, we invested $184 million in gross capital at a weighted average effective yield of 15.4%. We continue to selectively add exposure to asset classes such as regulatory capital relief, portfolio debt securities and other opportunistic private credit investments which complements our core CLO equity portfolio. During the quarter of the $184 million that we deployed, new investments in other credit assets totaled $147 million. At year-end, the non-CLO portion of our portfolio was approximately 26% of our total investment portfolio. We've been selectively making private credit investments beyond CLOs since 2022 within ECC. The company has been served quite well by these investments. Of the $97 million of investments that have gone full cycle and been fully realized, our gross IRR on those investments has been approximately 18%. This portfolio strategy of increasing assets away from CLO equity reflects an intentional decision on our part and is designed to maximize total return for our shareholders. Importantly, our adviser has expertise in these other credit strategies and has invested in them for some time for other funds and accounts that are managed by our adviser. Over time, we could expect to see the portion of our portfolio invested in credit assets other than CLO equity to increase further based on where we see the most attractive investment opportunities. We advanced strategic initiatives in our portfolio, both last year and into 2026, continuing our support of Muzinich's U.S. CLO collateral management platform and separately, we back the firm's launch of a new European CLO collateral management platform. Our investment commitment of over $40 million in the U.S. business is fully deployed, and Muzinich recently had its first close on a fund designed to support their further U.S. CLO issuance. This should help grow the value of our top line revenue share. The European partnership is in its beginning stages with the first loan accumulation facility open and ramping. Due to Muzinich's strong presence in Europe, we anticipate a faster growth trajectory compared to the pace of the growth in the early stages of our U.S. venture with them. We also launched a new joint venture with a strategic investment partner in the first quarter. This joint venture will invest in more regulatory capital relief transactions. You'll see the JV appear in our Q1 financials when published some point in the second quarter. We are seeking to add other JVs to our portfolio over time and believe like many of the other private and non-CLO investments we've made, they can be return enhancing for the company. During the fourth quarter, we implemented several initiatives aimed at continued optimization of our capital structure. We announced the redemption of our 8% Series F term preferred stock, the Fs were our highest cost of financing at 8% and were fully redeemed on January 30. Additionally, we proactively repurchased $9 million of our other $25 par securities in the open market at discounts to par during the fourth quarter. From an issuance perspective, we issued approximately $29 million of our 7% Series AA and BB and AB convertible perpetual preferred stock during the quarter. We believe the 7% distribution rate on this perpetual preferred stock represents a very attractive cost of capital for the company and provides additional flexibility to support our investment strategy. We're aware of no other publicly traded entity that invests primarily in CLO equity with perpetual financing and consider this to be a material competitive advantage for the company. We issued a total of $155 million of the Series AA and BB convertible perpetual preferred stock through the end of 2025. We concluded that offering at the end of the year and plan to evaluate other perpetual preferred issuance opportunities with potentially even lower costs in the future. We distributed $0.42 per share to holders of our common stock in the fourth quarter, paid in 3 monthly distributions of $0.14 each. And in the fourth quarter, we declared the same distributions for the first quarter of 2026. Earlier today, we declared 3 monthly distributions of $0.06 per share for the second quarter of 2026. When determining the new distribution level, the company's Board considered several factors such as GAAP earnings, recurring cash flow and our requirements to distribute substantially all of our taxable income. We believe this new distribution rate is in line with the company's near-term earnings potential. The Board also authorized a $100 million common stock repurchase program. The repurchase program will allow us to opportunistically buy our stock in the open market if it trades at a material discount to NAV. Looking ahead to 2026, we see attractive opportunities for capital deployment in both CLO equity and other credit asset classes. By resetting the distribution rate, we plan to retain more capital for investments with attractive risk-adjusted returns. We believe this approach supports sustained cash flow and long-term total return with an important goal of contributing to a stable or hopefully growing NAV over time. Ken will now discuss our financial results in a little more detail, and then I'll follow up with some comments on the broader loan and CLO markets.
Kenneth Onorio: Thank you, Tom, and thanks, everyone, for joining our call today. For the fourth quarter of 2025, the company recorded net investment income less realized losses from investments of negative $33 million or negative $0.26 per share. Net investment income was $0.23 per share and was offset by realized losses of $0.49 per share. This compares to NII less realized losses from investments of $0.16 per share in the third quarter and NII realized losses of $0.12 per share in the fourth quarter of 2024. Realized losses recorded for the quarter were comprised of $0.40 attributable in large part to the rotation out of underperforming collateral managers and $0.09 associated with the reclassification of unrealized losses to realized for 10 called legacy CLO equity positions. Including unrealized losses, the company recorded a GAAP net loss attributable to common stock of $110 million or $0.84 per share for the fourth quarter. This compares to GAAP net income of $0.12 per share in the prior quarter and $0.41 per share in the fourth quarter of 2024. The company's fourth quarter GAAP net loss was comprised of investment income of $51 million, offset by net unrealized losses on investments of $69 million, realized losses on investments of $64 million, financing costs and operating expenses of $20 million, distributions and amortization of offering costs on perpetual preferred stock of $6 million and net unrealized losses on certain liabilities recorded at fair value of $1 million. In addition, the company recorded an other comprehensive loss attributable to changes in the mark-to-market of certain liabilities recorded at fair value of $5 million for the fourth quarter. Our leverage ratio, a measure of our debt and preferred equity over total assets less current liabilities, was 48% at the end of the fourth quarter, which is above our target range of generally operating the company between 27.5% to 37.5% under normal market conditions. As of January 31, our leverage was 46% based on the midpoint of management's unaudited estimated range of the company's January NAV which reflected the redemption of the Series F term preferred stock. We plan to bring the company's leverage ratio back to our target range over time. Importantly, the company remains in compliance with all applicable regulatory and financing covenants. Consistent with our disciplined financing strategy for the company, all of our financing remains fixed rate, and we have no maturities prior to April 2028. In addition, a significant portion of our preferred stock financing is perpetual with no set maturity date. So far, in the current quarter through January 31, we've collected $57 million in recurring cash flows and expect additional collections throughout the balance of the quarter. Additionally, management's unaudited estimate of the company's NAV as of January month end was between $5.44 and $5.54 per share. With that, I'll turn it back to Tom for a look at market insights and closing thoughts.
Thomas Majewski: Great. Thank you, Ken. Loan market fundamentals remain largely stable through the year despite occasional bouts of volatility due to headlines concerning tariffs, interest rates and geopolitical factors. Corporate revenues and EBITDA growth remained positive throughout the year for leveraged loan borrowers, contributing to relatively healthy credit performance. The U.S. -- the S&P UBS leverage loan index posted a 1.2% return for the fourth quarter and a 5.9% return for the full year 2025. Demand for loans remained strong, though they were tempered by ongoing spread compression. Total loan repayments reached $294 billion or approximately 19% of the market in 2025, resulting in a 12-month trailing prepayment rate of 21%. Gross issuance of $400 billion translated into net new issuance of $106 billion for the year. Importantly, the maturity profile of the loan market continues to improve and only 3.1% of loans underlying our CLO equity positions are scheduled to mature prior to 2028. The trailing 12-month default rate decreased from 1.5% in September to 1.2% as of December 31, still considerably below the 2.6% long-term average. As of December 31, our portfolio's exposure to defaulted loans was 24 basis points. Anticipated rate declines should continue to support the low rate default rate environment as issuers are able to save somewhat on interest costs. CLO new issuance volumes rose slightly to $55 billion in the fourth quarter bringing the total to $209 billion for all of 2025, surpassing 2024's record of $202 billion. The fourth quarter resets and refinancings totaled $54 billion and $20 billion, respectively. Combined full year CLO issuance, including resets and refinancings, hit $546 billion for 2025, exceeding last year's total of $511 billion. Our CLO equity portfolio metrics continue to stand out versus the broader market. As of quarter end, CCC rated exposures within our CLO equity portfolio stood at 4.1% which is lower than the market average of 4.3%. In addition, only 3% -- 3.6% of the loans in our CLOs were trading below 80 compared to 4.4% across the market. Similarly, our weighted average junior OC cushion stood at 4.5%, significantly above the market average of 3.9%. Put simply, we believe our CLO equity portfolio was materially better than the market. These quantitative measures show the quality of our CLO equity portfolio and its strength relative to the broader market. Changes in base rates, including the Fed's current easing cycle, tend to have limited direct impact on CLO since it's principally a spread arbitrage product. In fact, lower base rates can be constructive at the margin as borrowers have reduced interest expense. Looking ahead, we do remain excited about our robust pipeline of refinancings and resets of CLOs in our portfolio. We do see value in new CLO issuances -- CLO equity issuances selectively particularly where we have a top line revenue share or are otherwise able to take advantage of the recent AI-driven volatility in the loan market. We're also excited about our existing portfolio of investments in credit sectors beyond CLO equity as well as our adviser's origination pipeline and other sectors of the credit markets. In fact, this is where we see some of the most attractive risk-adjusted returns available today. Our objective remains consistent to generate steady cash flow and long-term total return for our shareholders including focusing on a stable or even growing NAV. We thank you for your time and interest in Eagle Point Credit Company. Ken and I will now open the call to your questions.
Operator: [Operator Instructions]. Our first question today come from Mickey Schleien from Clear Street.
Mickey Schleien: Tom, in your remarks, you mentioned the increasing amount of captive CLO equity funds. And I've heard anecdotally, they were the vast majority of last year's CLO creation. Last week, 2 large credit platforms announced a new JV for captive CLOs with no fees at either the CLOs themselves or the JV. How do you see this type of structure impacting fee structures for third-party CLOs. And what's your outlook for the ability of third parties to even compete with captive funds at this point?
Thomas Majewski: A very good question. We're aware of the -- I think, the same joint venture you're talking about. Obviously, there's still -- based on my understanding of the funds, buying those, putting the capital into the JV, the fees are born at the shareholder level of the JV -- the different shareholders of the JV. So that's where we see the economics getting form. And I think I know the reasons why they set the vehicle up, although I won't speculate to it. And indeed, CLOs without the burden of internal management fees, all else equal, will have the potential to outperform those that would have internal management fees. Against that, your point is correct on the significant portion of the market last year of newly created CLOs was purchased by captive funds, different fee structures and all of those different entities for sure. What none of them are immune to regardless of their fees is spread compression. And we consider those funds broadly to be unsponsored private equity and that the people who make fees and even in the case of the venture you're referring to, the investment managers make fees that the funds that are investing in the JV. They earn those fees turn on when the money goes in the ground. And what we've seen again and again, this is very reminiscent of 2017 and 2018 and when we're in what we call the risk retention period in the United States for syndicated CLOs where -- so let's say, $10 billion hypothetically was raised that creates approximately $100 billion of incremental demand for loans in $1.25 billion, $1.5 billion market. The loan market has headlines that there was $0.5 billion or $1 billion of mutual fund inflow sometimes in that -- that moves in the millions, now we're talking $100 billion. So we're definitely seeing the distortion, both on the asset side and liability driven by those vehicles. Interestingly, back in the risk retention days, there were not a lot of fund, too. There were a few but not too many. In many cases, those vehicles, while they did invest in primary often with no or reduced underlying fee load, what they didn't do, in my opinion, well enough was proactively manage the ongoing life of a CLO and that there's a natural conflict between doing a reset and doing a new issue CLO. If you're a collateral manager and you're doing a new CLO, you're raising AUM, if you're doing a reset, you're merely extending. And in my opinion, some CLOs held in captive vehicles going back to the last batch of them, probably were not properly stewarded or called when they should have been as well. That said, a question we've asked ourselves is this a short-term blip in the market? Is this a permanent shift in the market? And in my opinion, it's somewhere in between. It's an other than short-term phenomenon in the market, which is why we're pivoting some of our investment strategy to areas where we're increasing where we have top line revenue shares in the CLO collateral managers. So we'll benefit from the growth of those platforms through revenue shares even beyond just CLOs that we're involved in. I was discrete and did not use the word captive fund when I described our joint venture, launching a fund to invest in CLO, their own CLOs, but indeed, that is a captive fund. And we hope that one does tremendously well, of course. But a lot of our focus has been -- and I think we said 26% of the portfolio at present is in credit assets other than CLO equity at this point. And while we're not completely moving away from CLO equity by any stretch, and it's still the majority of the portfolio where we're seeing the best return opportunities in general in many cases today is away from the CLO equity asset class. And indeed, well, we believe, a super majority, probably more than 75% of all CLOs created in the second half of 2025 were taken by captive funds. And that's distorting to the market. Our job is, first and foremost, to deliver strong returns for our shareholders. And the way we think we can do that the best in the medium term is increasing our allocation to credit asset classes beyond just CLO equity. Importantly, these are all asset classes that we have years and years of experience investing in dedicated teams in. We own the same or similar assets and other funds we manage. And when we think about our performance at GAAP total return or return on equity of negative 14.6%, that's obviously we're a levered vehicle, as you're aware. There are costs in our vehicle. Despite the cost and leverage, you think with leverage, we'd be down more than the market, our total return was actually modestly less bad than Nomura's estimate of the total market. So I think in that regard, our strategy of rotating the portfolio somewhat away from CLO equity last year has certainly helped us. A levered vehicle, in theory should be down more than the unlevered index, if it's owning those assets. And we think both the quality of the CLOs we have and the portfolio rotation strategy that we've put in place served us well as a strong statement in a negative year but met the -- has helped us versus had we not done that and we expect to increase that allocation somewhat over time as opportunities present themselves.
Mickey Schleien: And Tom, in terms of that shift that you've described, how does the Board feel about potentially changing the fund's investment objective to allow for even more of a move away from CLO equity?
Thomas Majewski: We've had preliminary talks with the Board, and we certainly discussed this broad change. Obviously, everyone follows the schedule of investments every single quarter. This has been increasing slowly since 2022 in our portfolio. Once we got to this mid-20s, it warranted having a further discussion with the Board. We're not buying gold mines or crypto or things like that. We're sticking within core credit competencies in asset classes that we invest in broadly at Eagle Point. And the proof is in the pudding of the investments that have gone full cycle, fully realized, we put our money out, we got all our money back. It's been about an 18 IRR coming into ECC. I wish every investment we had in ECC generated in an 18 IRR since 2022, as simple as that. So in a goal of making money for credit, with credit investments for our shareholders, our Board has been supportive and is supportive of gradually increasing the allocation away from CLOs as the opportunities present themselves. We're not completely moving away by any stretch. And should we see a big sell-off, which we're not predicting, but if we saw a big dip, we would certainly buy a bunch of CLOs or CLO BBs, but the Board has been supportive of the gradual realignment of the portfolio.
Mickey Schleien: And Tom, lastly, in terms of the opportunity set for this year, which you just mentioned, just looking back at last year, loan default rates, including LMEs which are effectively a default, right? We're about 3.4% and looser deal terms over time have driven recoveries down to around 60%. So the loss given default rate was relatively elevated at around 135 basis points, which impacts CLO equity, obviously. And the cash flows were also impacted by the tighter arbitrage that you talked about. And fundamentally, that resulted in the negative performance in that asset class last year. So how do you expect those trends to develop this year?
Thomas Majewski: So no one can accurately repeatedly and accurately predict the future. So we'll start with that. This is my opinion about the future. If I were to wake up and guess our loan spreads at 300 or 340 on July 1. My expectation is they'd be at 300 versus 340. I see a trend towards continuing spread compression. There has been some vol in the market and the people who are investing in AI, their stocks are volatile. Maybe they're investing too much in AI that companies that have the risk of AI disruption, their loans move around tremendously and rapidly. But overall, they seem to rebound quite quickly, and then the next sector gets attacked. So I net -- see a path to spread compression continued. I do see CLO tightening, but again, not at the same pace of loans is my crystal ball, but that's just one person's outlook. In terms of credit expense, I mean, indeed, when you bring in the LME factor, the default plus LME rate is higher than just the default rate, what I will say, LMEs come in 2 flavors, half or a bunch are pro rata where all vendors are treated equally. And others are non-pro rata where different lenders in the same loan have divergent outcomes. And certainly, a number of the loan managers in our portfolio have a good track record of being the -- on the winning end of the non-pro rata loan modifications in LMEs. So while LMEs in some cases, are bad for sure, and ideally, we had none, in some cases, our CLOs have actually been able to be the net winner almost a situation where a reverse Robinhood, where, in many cases, the bigger holders of the loans do better than the smaller holders of the loan. So it's not a direct one-to-one comp between LMEs and performance. It's certainly a factor. I wish we had fewer, but the devil is in the details on the LMEs. And for some CLO collateral managers maybe they've been a net benefit shifting the credit problem to weaker hands. I don't see that trend going away.
Mickey Schleien: Okay. But if you were to just at a high level, describe your outlook on credit this year, would -- how do you feel about credit quality and trends in credit expenses this year?
Thomas Majewski: My key leave is it's about the same as last year, which is not that bold of a call. Companies continue to work through things at a slow and measured pace. Weaker documents give them more runway to sit. Lower rates marginally help. The more troubled companies aren't the companies doing the -- aren't the ones doing the spread compressing, unfortunately, but they'll still benefit from lower rates. We're not predicting a significant uptick in credit expense, and we're also not seeing a significant improvement in it either.
Mickey Schleien: So I appreciate your patience. I just want to make sure I understand. To summarize, I think I heard you say that you wouldn't be surprised if spreads -- loan spreads continue to tighten, liability spreads do not tighten as quickly and the credit environment looks similar to last year. So that sounds a lot like '26 sort of mirroring '25. Is that fair?
Thomas Majewski: Or 2016 mirroring 2017. 2018 mirroring '17.
Operator: Our next question today is coming from Erik Zwick from Lucid Capital Markets.
Erik Zwick: I wanted to start quickly with a question on the new stock repurchase program and I think the kind of language you use that you would pretend to be active there when the stock is trading at a material discount to NAV, which I guess, material can have different definitions, but I would think potentially today's stock price would fit that definition. Just curious, if you agree with that characterization and how active you could potentially be with the stock repurchase program and how you weigh that relative to investment and you're using capital for investment opportunities?
Thomas Majewski: It's a collage of a number of factors that go into the decision to use that. From the other vehicle, we manage EIC, we've used the phrase aggressive in how we've used it and there are daily limits as to how much you can buy. And we've said we've been an aggressive user in the case of EIC. Within ECC, we'll balance all of the -- all of the collage of share price, looking at our leverage ratios is something we look at and looking at relative investment opportunities. I'll compare it again to EIC in a world where when the stock was at a 10% discount and BBs were at 90 -- BBs were at par rather, that was a pretty easy decision. Here, we have situations where we might be able to put investments in that hopefully perform as well as or even maybe better than some of our historic non-CLO investments in which case maybe we'd earn more that way. It's an art, not a science, it's not a formula that we have, but Ken and I watch it very closely. And when it makes sense to use, we will definitely plan on using it.
Erik Zwick: And then in terms of -- I believe it's towards the end of maybe your prepared comments, Tom, you mentioned that your -- some of the actions and the strategy kind of ships you're doing or you're hopeful for kind of growing or stable NAV over time. And maybe just kind of riding on the coattails of Mickey's last question in terms of '26 kind of shaping up to look more like '25 at this point where asset repricing seem to run ahead of the opportunities for resets and refis. So the arbitrage opportunity remains challenged, and that obviously had an impact on NAV. I guess what would it take in your mind, what needs to change for that NAV to be more stable? And are you seeing any signs of that in the near-term?
Thomas Majewski: Sure. Well, one immediate thing is paying out cash well in excess of net investment income. That we've changed for better or worse, but the new distribution rate at $0.06 a month becomes $0.18 a quarter. Our net investment income was what $0.21...
Kenneth Onorio: $0.23.
Thomas Majewski: $0.23 last quarter. So we baked in some cushion there, frankly. So we have -- we're husbanding capital a little bit in a way to keep capital on the balance sheet. So a nontrivial part of NAV decline from last year was simply from paying out cash to shareholders. And while we know obviously shareholders value cash, we're shareholders ourselves. We've also heard from shareholders, they value a stable NAV. And our view is a company that is earning distribution and that distribution is in the mid-teens. That's something that deserves to exist, frankly. So while we look at -- there's probably some more headwinds in the CLO market, if we had to read the tea leaves today, although that can snap very quickly as we know and when loans get cheap, that's why we focus on having as much weighted average remaining reinvestment period in our portfolio. When loans get cheap, we are able to capitalize on those within our CLOs and potentially add to our CLO portfolio. When we look at assets away from the CLO market, other private credit investments that we're making across the firm, we see paths for those, in many cases, to actually create gains sometimes through warrant upside and other things like that. ECC does have some capital loss carry forwards that to the extent we're fortunate to realize gains, if we do, in general, can be offset against those carry forwards, so it wouldn't create a distribution requirement related to those, and that could be one of our paths to increased NAV.
Operator: Next question today is coming from Timothy D'Agostino from B. Riley Securities.
Timothy D'Agostino: Yes. Thanks for all the commentary before. I guess kind of you backing off the whole conversation where '26 could look like '25. In terms of resets and refinances, you had 34 resets in 27 refis in 2025. The outlook for '26, could we see a similar amount of resets and refinances from ECC? I guess it's obviously hard for you guys to kind of predict and say what's going to happen. But I guess, kind of the outlook of what you could or can do for resets and refis in '26?
Thomas Majewski: It's nontrivial. I can't say we're going to be at the same level we were last year and some of it depends on where AAA spreads move and the steepness of the curve for refinancings, which are often tighter than resets, but have a different buyer base. There's some investors who focus just on the refis because they're shorter bonds. So it's difficult to predict for sure. But there are dozens of CLOs in the portfolio to the extent we see AAAs continue to trickle tighter. And you can see when we publish -- if you even look at the Q4 -- the Q3 report, which has each position of our CLO equity portfolio with the AAA spread market today, kind of 115 to 120. So if you look across those, we list the AAA for every single one, you could count and say, how many of those are 5 to 10 basis points or more wide of the market. And those would be certainly in general, the ones we would be focused on first. If AAAs tighten 15 bps, that list gets a lot longer. If AAAs widen 15 bps, which I don't think they will, but lots of things can happen. If they were to widen that much, then obviously, the list slow significantly shortened significantly. If we have AAAs widening 15 bps, we have loans probably at a discount than loan repricing stopping. So we've got a pretty robust calendar of investments slated and you can kind of form your view. We give the portfolio with AAA spread and non-call date for every investment. And kind of think of it a 115, 120 bogey today that we'd have to -- that we'd be refinancing or resetting into.
Timothy D'Agostino: Okay. Great. And then as a second question, touching on the private credit investment outside of CLOs. I guess, as we look going forward, could you kind of talk to maybe some of the private credit products or just private credit instruments that you're interested in or you see a good opportunity in '26 or '27. I guess just putting a little bit more color around what we could see in a private credit investment as we look forward.
Thomas Majewski: Sure. And I'm just going to pull up our Q3 schedule of investments here. Bear with me one second. So this is all on our website for those who are interested, and I'm looking at our -- this is the September 30 schedule of investments, and I apologize, we don't have the Q4 schedule out yet, but we just wanted to -- in light of all the things going on with other CLO funds and chatter in the market, we just wanted to get this information out as quickly as possible. We'll have the full report published in a normal time. But when we look across our schedule of investments, you can see asset-backed securities, which includes like Carvana and Chase, autos, PenFed autos that's about 8.4%. This is as of September 30 of our portfolio. collateralized fund obligations, which are pretty interesting thing. These are pools typically of private credit funds, represents about 5% of the portfolio. Other areas we -- I wish we had more of some pretty attractive equipment leases. We've got some stuff with Applied Digital. That's only about 35 basis points right now, although there's other leasing things going on in the portfolio. where you can see our other kind of financial services type investments total about 3.86%. Notably, we have just looking across here. One other joint venture were invested in Senior Credit Corp 2022 LLC. Here, we have a senior note and we have equity in that entity. That's been a very strong performer. That's actually sort of a venture lending joint venture we have with another partner who does direct origination of those assets. And then moving a little further down, you can see some degree of regulatory capital relief. That totals about 5% of the portfolio. And in general, these are corporate and in some cases, consumer assets. These are synthetic securitizations by banks, which have -- they behave a little differently than CLO equity. They have some similarities in that typically, they're the residual class against a pool of credits. Once in a while, the bank has a little bit subordinate to you, but that's the exception. It could be -- so similar levered exposure to credit, a drawback of these regulatory capital relief transactions is there's not a discounted reinvestment option. And think about one of the things we love with CLOs, if loans go to 80, CLOs can buy those loans really cheap. These regulatory capital options because those transactions don't have that. Against that, when the regular RCR transaction reaches its maturity date, if the loan has not had a default, the bank unwinds the transaction at par. So you're immunized to some degree from NAV volatility. In a CLO, if at the end of the reinvestment period, all the loans are at 95, let's say, you're going to have a lower CLO price than if all the loans are at 100. So there's -- you lose on the ability to reinvest cheap in a regulatory capital transaction, but you take away a big part of NAV volatility and that any loan that doesn't default is worth par. So we've been investing in these certainly since 2022, and actually even further back than that, as a firm, we've invested probably approaching certainly over $750 million at this point. And frankly, some of these assets that are -- we've been balance sheeting, we plan to contribute to that joint venture with an outside strategic partner. We may be able to get a little bit of financing on those as well, which might further help the returns. But so those -- if you look through the SOI from September 30 and then when you see the December 31 SOI, we'll give you the flavor of stuff that we're investing in. In general, we're not making loans to companies at SOFR plus 475 or something like that, that BDCs are doing. But these are typically mid-teens type return investment opportunities, obviously, some higher, some lower. But give you a broad flavor of other kind of private credit, a little bit not mainstream, a little bit of structural complexity for sure, but asset classes, we have a lot of experience in an asset classes that have, as we've shared with you from our track record of everything that's gone fully realized, performed well for us.
Timothy D'Agostino: Okay. Great. That's super helpful. And then just quickly, you said financials will be out like kind of normalized time. Could we expect it to be out around EIC's earning release or just kind of question there.
Thomas Majewski: Yes. So it's statutorily required by the end of February, I think so.
Kenneth Onorio: That's the plan by the end of next week, they'll be out.
Operator: Next question today is coming from Christopher Nolan from Ladenburg Thalmann.
Christopher Nolan: Tom, are you seeing higher provisioning at the banks originating the loans and the CLOs? Or is the bank simply funneling these new originations into the CLOs? And in that case, you might get adverse selection?
Thomas Majewski: So the syndicated loan market for all major banks is -- for all major banks, at least, is an originate to distribute model, while they invariably keep some of the loan on their balance sheet, the vast majority is distributed. But there's not a decision -- very rarely is there someone saying make a decision, should we syndicate this one or keep this one? If XYZ bank says we're going to originate underwrite a $2 billion loan for KKR's next LBO, the loan market, the loan desk syndication head is involved in that underwrite because it's essentially always a plan to distribute. Do they sometimes bridge things for a little while or stuff like that? Yes, but I don't think it's an adverse selection situation from banks keeping the good ones and syndicating the bad ones. By and large, if I could wave my wand and change one thing from last year, I would keep loan spreads flat. I would accept the credit expense, be it the default, some of the shadow defaults from LMEs and just keep spreads flat. If I could have -- retroactively have waived my magic wand and change 2025, that's the principal driver. And it's banks out promulgating these reset lower pricing on loans and its loan managers buying them for whatever reason they need the loans, they need to roll. That's the bigger issue facing the market right now is the tightening of loan spreads versus the tightening of AAA spreads. We can take any loan spread as long as AAAs are tight enough we've just not seen the AAAs tighten as fast as the loans. But if I could change one thing, I would take another year of last year's credit performance, if I could keep spreads flat.
Christopher Nolan: Great. And then you mentioned earlier, if I heard correctly, that your new dividend policy of $0.18 for the second quarter is a bit on a conservative side. Given that, is there a possibility of dividend supplements going forward?
Thomas Majewski: Obviously, the Board will consider all factors, and we have to distribute substantially all of our taxable income. We do have some degree of spillover income possibility. So if we had a bunch of spillover, we can certainly roll that into 2027. As we talked about the policy, one of our Board members, it certainly came up at the Board, are we going to now have to pay a big special at some point in the future. That's not a prediction. I'd love for that to be my biggest problem in the future. Right now, we're -- that's -- unfortunately, that's an aspirational issue for us. But we'll make the decisions at the right time as we have the information. We certainly are not expecting a special or supplemental distribution anytime this year. And there's obviously the potential in the future if we're under distributed, although we would also consider the ability to use the spillover and pay the small excise tax.
Operator: Our final question today is coming from Gaurav Mehta from Alliance Global Partners.
Gaurav Mehta: I have a question on the balance sheet. Just wondering if you could touch upon your leverage expectations and given where your stock is and where your leverage is, what kind of sources of capital would you have available to you guys to deploy capital this year?
Thomas Majewski: Sure. So the portfolio generates gobs and gobs of cash. That's the important measure. I think we had $80 million or so last quarter. We've got high 50s in the bank so far this quarter and more investments still to pay. Stuff gets paid off, stuff gets called. We'll have a bunch of -- our expectation is we'll have a bunch of excess cash flow from our portfolio well in excess of expenses and distributions to be able to continue to invest as well as make portfolio rotations where it makes sense. I mean we have sold investments and we will continue to sell where we see better relative value. In general, across our investments, both the CLO equity and then the 26% away from CLO equity, by and large, the vast majority of those generate a lot of cash flow. So the portfolio should organically create enough cash to continue to invest and where we see value, we'll make relative value trades liquidating some investments moving on to others. So I'm not particularly worried. I'm not thinking about issuance of stock or preferred or debt as a source of financing of capital for new investments. The one exception to that, to the extent we have one or more joint ventures, which may use financing, those perhaps could be a source of capital, but I'm not particularly focused on raising new debt or common stock at ECC itself, the portfolio should organically generate enough cash.
Gaurav Mehta: All right. Thanks for that detail. As a follow-up on the balance sheet, I don't know if you talked about it, but the redemption of the preferred stock that you guys had, was that done with cash?
Thomas Majewski: Yes. Yes. So the ECCX was paid in full January 31. It was our highest cost of financing. And while we did conclude the 7% perpetual program, at the end of last year, we raised about $155 million on that. And part of our strategy was paying off 8s and issuing -- 8s with the maturity and issuing perpetual with a 7 that seems like a good long-term decision. At some point, could we consider adding a new perpetual program with rates falling perhaps even at a lower rate, I think that's a possibility at some point in the future, but we haven't made any specific plans or any arrangements to that end. We do have other financing with nontrivial costs as well. One of the things we like to do is keep a long of a balance sheet as possible. I think our nearest maturity is...
Kenneth Onorio: '28.
Thomas Majewski: April '28 or something like it, '28 maturity. Not that, that's anywhere near-term, but continuing to get as much tenor as possible in our portfolio is something we're going to keep focusing on. But looking here at our chart, the ECCX is due in 2028. That's our nearest then the one after that, the Vs are due in 2029. Those are [ 5 in 3A ], so that's pretty cheap money. But will we seek to lengthen the balance sheet as much as possible while slightly reducing the overall financing at the company are things we'll be working on over time.
Operator: We reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments.
Thomas Majewski: Great. Thank you very much, everyone. We recognize some challenging developments for the company. We wanted to get the news out as quickly as possible. We saw the stock moving around as other companies in our sector made other changes. We want to get the information in the hands of investors as quickly as possible to avoid speculation. We are very excited about the investments going in the ground. I shared certainly a candid outlook on the credit markets for this year. Obviously, those are opinions. If nothing else, we live in interesting times, for sure, things could get better or things could get worse there. We're very excited about the non-CLO component of our portfolio. We plan to -- we certainly, as opportunities present itself, we'll plan to increase that. And then we will also, as we continue to evolve and expand that portfolio, provide additional detail and transparency on it to it as the portfolio was -- as the non-CLO portion was smaller, maybe becomes less relevant as it's getting bigger and bigger, we'll seek to provide more information in the coming quarters around that portfolio. So we appreciate your time and questions. We know there's a lot of news today. If there's follow-up questions, Ken and I will be available throughout the day. Thank you very much for your time and interest in Eagle Point Credit Company.
Operator: Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.