Eagle Point Credit Company Inc. (the “Company”) (NYSE: ECC,
ECCA, ECCB, ECCX, ECCY) today announced financial results for the
quarter and fiscal year ended December 31, 2018, net asset value
(“NAV”) as of December 31, 2018 and certain portfolio activity
through February 14, 2019.
FOURTH QUARTER AND FULL YEAR 2018 HIGHLIGHTS
- Net investment income (“NII”) and
realized capital losses of $0.38 per weighted average common share1
for the fourth quarter of 2018.
- NAV per common share of $12.40 as of
December 31, 2018.
- Fourth quarter 2018 GAAP net loss
(inclusive of unrealized mark-to-market losses) of $83.7 million,
or $3.62 per weighted average common share.
- Weighted average effective yield of the
Company’s collateralized loan obligation (“CLO”) equity portfolio
was 13.30% as of December 31, 2018.
- Deployed $58.2 million in gross
capital, received $27.9 million in proceeds from the sale of
investments and received $28.0 million in cash distributions from
the Company’s investment portfolio in the fourth quarter of
2018.
- 4 of the Company’s CLO investments were
reset during the fourth quarter of 2018.
SUBSEQUENT EVENTS
- NAV per common share estimated to be
between $13.66 and $13.76 as of January 31, 2019.
- Deployed $21.1 million in gross capital
and received $16.7 million in proceeds from the sale of investments
from January 1, 2019 through February 14, 2019; received cash
distributions from the Company’s investment portfolio of $24.7
million over the same period.
“The fourth quarter saw a long-expected shift in investor
sentiment and an increase in loan market price volatility which
impacted our NAV, but also keenly underscored a key advantage
offered by CLOs in such a volatile environment – the value of CLOs’
locked in, long term non-mark-to-market financing,” said Thomas
Majewski, Chief Executive Officer. “While prices of many CLO
securities fell during the quarter, we believe this was driven by a
technical sell-off in loans, and not a fundamental concern about
CLO securities or an increase in corporate defaults. Indeed, of the
over 1,400 loans tracked by S&P Capital IQ, a mere 6 actually
defaulted in the fourth quarter of 2018. We believe the locked-in
financing of CLOs provides stability and allows many CLOs to profit
by reinvesting principal repayments from existing loans into
additional loans at lower prices and/or with wider spreads, as well
as make relative value trades within each CLO portfolio. In other
words, we view the long-term debt issued by the CLOs in which we
invest to be more ‘in the money’ in volatile markets, such as those
at the end of 2018, than in calmer markets like we saw several
months ago.”
“Overall, we believe loan market fundamentals remain solid, as
evidenced by the lagging 12-month default rate remaining well under
the historical average and actually improving from where it stood
at the end of 2017, as well as continued GDP growth in the United
States,” continued Mr. Majewski. “During this period of heightened
volatility, we completed another 4 CLO resets, thus further
lengthening the reinvestment period in each transaction and, in
certain circumstances, locking in a lower cost of CLO debt. This
brings the total number of such CLO equity positions that were
reset or refinanced since January 1, 2017 to 27 and 28,
respectively. Benefits from our refinancing and reset program are
already evident and we believe that we will see greater benefits
from our efforts reflected in our CLO investments’ 2019
distributions and portfolio activities.”
“During the fourth quarter, we recorded NII and realized capital
losses per share of $0.38, as continued modest spread compression
and write-downs of residual amortized cost associated with a few
called investments impacted our results,” noted Mr. Majewski.
“However, we have seen a strong recovery in the price of CLO
securities thus far in the first quarter as the midpoint of
management’s estimated NAV range for January 2019 represents a
10.6% increase from the year-end NAV level.”
FOURTH QUARTER 2018 RESULTS
The Company’s NII and realized capital losses for the quarter
ended December 31, 2018 was $0.38 per weighted average common
share. This compared to NII and realized capital gains of $0.41 per
weighted average common share for the quarter ended September 30,
2018, and $0.49 per weighted average common share for the quarter
ended December 31, 2017.
For the quarter ended December 31, 2018, the Company recorded a
GAAP net loss of $83.7 million, or $3.62 per weighted average
common share. Net loss was comprised of total investment income of
$17.7 million, offset by net unrealized depreciation (or unrealized
mark-to-market losses on investments) of $92.4 million, net
realized capital losses on investments of $0.7 million, and total
expenses of $8.3 million.
NAV as of December 31, 2018 was $287.1 million, or $12.40 per
common share, which is $4.15 per common share lower than the
Company’s NAV as of September 30, 2018, and $4.37 per common share
lower than the Company’s NAV as of December 31, 2017.
During the quarter ended December 31, 2018, the Company deployed
$58.2 million in gross capital and $30.3 million in net capital.
The weighted average effective yield of new CLO equity investments
made by the Company during the quarter, which includes a provision
for credit losses, was 14.75% as measured at the time of
investment. Additionally, during the quarter, the Company received
$27.9 million of proceeds from the sale of investments.
During the quarter ended December 31, 2018, the Company received
$28.0 million of cash distributions from its investment portfolio,
or $1.21 per weighted average common share, including amounts
received from called investments. Excluding proceeds from called
investments, the Company received cash distributions of $0.97 per
weighted average common share during the quarter, which was in
excess of the Company’s aggregate quarterly common distribution and
other recurring operating costs.
During the quarter ended December 31, 2018, 4 of the Company’s
CLO investments were reset.
As of December 31, 2018, the weighted average effective yield on
the Company’s CLO equity portfolio was 13.30%, compared to 13.99%
as of September 30, 2018. As of December 31, 2017, that measure
stood at 14.42%.
Pursuant to the Company’s “at-the-market” offerings, the Company
sold 35,748 shares of common stock at a premium to NAV and 17,142
shares of Series B Term Preferred Stock during the fourth quarter
for total net proceeds to the Company of approximately $0.9
million.
FULL YEAR 2018 HIGHLIGHTS AND PORTFOLIO STATUS
For the fiscal year ended December 31, 2018, the Company
recorded a net loss of $54.8 million. Fiscal year net loss was
comprised of total investment income of $69.7 million and realized
capital gains on investments of $0.6 million, offset by total
expenses of $35.0 million and net unrealized depreciation (or
unrealized mark-to-market loss on investments) of $90.1
million.
For the fiscal year ended December 31, 2018, the Company
received a total of $111.8 million of cash payments from its
portfolio (inclusive of proceeds from called investments), or $5.11
per weighted average common share.
As of December 31, 2018, on a look-through basis, and based on
the most recent CLO trustee reports received by such date, the
Company had indirect exposure to approximately 1,481 unique
corporate obligors. The largest look-through obligor represented
0.92% of the Company’s CLO equity and loan accumulation facility
portfolio. The top-ten largest look-through obligors together
represented 6.6% of the Company’s CLO equity and loan accumulation
facility portfolio.
The look-through weighted average spread of the loans underlying
the Company’s CLO equity and related investments was 3.52% as of
December 2018. This is a modest decline of two basis points from
3.54% as of September 2018.
As of December 31, 2018, the Company had debt and preferred
securities outstanding which totaled approximately 40.6% of its
total assets (less current liabilities). Over the long term,
management expects the Company to operate under current market
conditions generally with leverage within a range of 25% to 35% of
total assets. Based on applicable market conditions at any given
time, or should significant opportunities present themselves, the
Company may incur leverage outside of this range, subject to
applicable regulatory limits.
FIRST QUARTER 2019 PORTFOLIO ACTIVITY THROUGH FEBRUARY 14,
2019 AND OTHER UPDATES
From January 1, 2019 through February 14, 2019, the Company
received $24.7 million of cash distributions from its investment
portfolio, or $1.06 per weighted average common share, including
amounts received from called investments. Excluding proceeds from
called investments, the Company received cash distributions of
$1.05 per weighted average common share for the same period. As of
February 14, 2019, some of the Company’s investments had not yet
reached their payment date for the quarter. Also from January 1,
2019 through February 14, 2019, the Company deployed $4.4 million
in net capital.
As of February 14, 2019, the Company has approximately $15.9
million of cash available for investment.
As previously published on the Company’s website, management’s
estimate of the Company’s range of NAV per common share as of
January 31, 2019 was $13.66 to $13.76.
PREVIOUSLY DECLARED DISTRIBUTIONS AND ADDITIONAL
UPDATES
The Company paid a monthly distribution of $0.20 per common
share on January 31, 2019 to stockholders of record as of January
14, 2019. Additionally, and as previously announced, the Company
declared distributions of $0.20 per share of common stock payable
on February 28, 2019 and March 29, 2019, to stockholders of record
as of February 12, 2019 and March 12, 2019, respectively.
The Company paid distributions of $0.161459 per share of the
Company’s 7.75% Series A Term Preferred Stock due 2022 (NYSE: ECCA)
and 7.75% Series B Term Preferred Stock due 2026 (NYSE: ECCB) on
January 31, 2019, to stockholders of record as of January 14, 2019.
The distributions represented a 7.75% annualized rate, based on the
$25 liquidation preference per share for each series of preferred
stock. Additionally, and as previously announced, the Company
declared distributions of $0.161459 per share on each series of
preferred stock, payable on each of February 28, 2019 and March 29,
2019, to stockholders of record as of February 12, 2019 and March
12, 2019, respectively.
As one of the requirements for the Company to maintain its
ability to be taxed as a “regulated investment company” (which it
has elected to be), the Company is generally required to pay
distributions to holders of its common stock in an amount equal to
substantially all of the Company’s taxable income within one year
of the end of its tax year, which is November 30. Based on current
market conditions and assuming limited resets of CLOs in which the
Company is invested, the Company currently estimates its taxable
income for the tax year ending November 30, 2019 to be
approximately $2.40 per common share. Based on this current
estimate, the Company does not intend to reduce the $0.20 per
common share monthly distribution for the current fiscal year. The
final taxable income of the Company for the tax year ending
November 30, 2019 will not be known until the Company files its tax
returns for the current tax year.
CONFERENCE CALL
The Company will host a conference call at 10:00 a.m. (Eastern
Time) today to discuss the Company’s financial results for the
quarter and fiscal year ended December 31, 2018, as well as a
portfolio update.
All interested parties may participate in the conference call by
dialing (833) 231-8253 (domestic) or (647) 689-4099
(international), and entering Conference ID 3177217 approximately
10 to 15 minutes prior to the call. A live webcast will also be
available on the Company’s website
(www.eaglepointcreditcompany.com) – please go to the Investor
Relations section at least 15 minutes prior to the call to
register, download and install any necessary audio software.
An archived replay of the call will be available shortly
afterwards until March 22, 2019. To hear the replay, please dial
(800) 585-8367 (domestic) or (416) 621-4642 (international). For
the replay, enter conference ID 3177217.
ADDITIONAL INFORMATION
The Company has made available on its website,
www.eaglepointcreditcompany.com (in the financial statements and
reports section), its 2018 Stockholder Letter and Annual Report,
which includes the Company’s audited consolidated financial
statements as of and for the period ended December 31, 2018. The
Company also published on its website (in the investor
presentations and portfolio information section) an investor
presentation which contains additional information about the
Company and its portfolio as of and for the quarter and year ended
December 31, 2018. The Company has filed these reports with the
Securities and Exchange Commission.
ABOUT EAGLE POINT CREDIT COMPANY
The Company is a non-diversified, closed-end management
investment company. The Company’s investment objectives are to
generate high current income and capital appreciation primarily
through investment in equity and junior debt tranches of
collateralized loan obligations. The Company is externally managed
and advised by Eagle Point Credit Management LLC.
The Company makes certain unaudited portfolio information
available each month on its website in addition to making certain
other unaudited financial information available on its website
(www.eaglepointcreditcompany.com). This information includes (1) an
estimated range of the Company’s net investment income (“NII”) and
realized capital gains or losses per weighted average share of
common stock for each calendar quarter end, generally made
available within the first fifteen days after the applicable
calendar month end, (2) an estimated range of the Company’s NAV per
share of common stock for the prior month end and certain
additional portfolio-level information, generally made available
within the first fifteen days after the applicable calendar month
end, and (3) during the latter part of each month, an updated
estimate of NAV, if applicable, and, with respect to each calendar
quarter end, an updated estimate of the Company’s NII and realized
capital gains or losses for the applicable quarter, if
available.
FORWARD-LOOKING STATEMENTS
This press release may contain “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act
of 1995. Statements other than statements of historical facts
included in this press release may constitute forward-looking
statements and are not guarantees of future performance or results
and involve a number of risks and uncertainties. Actual results may
differ materially from those in the forward-looking statements as a
result of a number of factors, including those described in the
Company’s filings with the U.S. Securities and Exchange Commission
(“SEC”). The Company undertakes no duty to update any
forward-looking statement made herein. All forward-looking
statements speak only as of the date of this press release.
FURTHER INFORMATION REGARDING ESTIMATED TAX
INFORMATION
The estimates of the Company’s taxable income for the tax year
ending November 30, 2019 reflects management’s judgment as of
the date of this press release of conditions it expects to exist
and the course of action it expects the Company to take with
respect to the tax year ending November 30, 2019. The estimates are
based on taxable income reported to date and assumptions relating
to the underlying tax characteristics of income and other items as
reported to the Company. Although the Company considers its
assumptions to be reasonable as of the date of this press release,
such assumptions are subject to a wide variety of significant
uncertainties that could cause actual results to differ materially
from those contained in the estimates, including risks and
uncertainties relating to the completeness and accuracy of
preliminary information reported or received by the Company from
underlying investments, and those described in the notes to the
Company’s audited consolidated financial statements for the fiscal
year ended December 31, 2018. Accordingly, there can be no
assurance that actual results will not differ materially from those
presented in the estimates.
The estimate of taxable income was prepared on a reasonable
basis and reflects the best currently available estimates and
judgment of Company management. However, this estimate is not fact
and readers of this press release should not rely upon this
information or place undue reliance on such estimate.
Neither the Company’s independent registered public accounting
firm nor any other independent accountants has compiled, examined
or performed any procedures with respect to estimated information
contained herein, or expressed any opinion or assurance with
respect to the estimated information or its achievability, and
accordingly each assumes no responsibility for, and disclaims any
association with, the estimates.
1 “Per weighted average common share” data are on a weighted
average basis based on the average daily number of shares of common
stock outstanding for the period and “per common share” refers to
per share of the Company’s common stock.
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