Eagle Point Credit Company Inc. Announces First Quarter 2018 Financial Results
GREENWICH, Conn.--(BUSINESS WIRE)--May 17, 2018--Eagle Point Credit Company Inc. (the “Company”) (NYSE:ECC, ECCA, ECCB, ECCX, ECCY, ECCZ) today announced financial results for the quarter ended March 31, 2018, net asset value (“NAV”) as of March 31, 2018 and certain portfolio activity through May 11, 2018.
FIRST QUARTER 2018 HIGHLIGHTSNet investment income (“NII”) and realized capital gains of $0.50 per weighted average common share 1. NAV per common share of $16.65 as of March 31, 2018. First quarter 2018 GAAP net income (inclusive of unrealized mark-to-market losses) of $8.1 million, or $0.39 per weighted average common share. Weighted average effective yield of the Company’s collateralized loan obligation (“CLO”) equity portfolio was 14.54% as of March 31, 2018. Deployed $41.1 million in net capital and received $22.7 million in cash distributions from the Company’s investment portfolio in the first quarter of 2018. 4 of the Company’s CLO investments were reset during the first quarter of 2018. Completed an underwritten public offering of 2,242,500 shares of common stock (including full exercise of the underwriters’ overallotment option) at a premium to NAV resulting in net proceeds to the Company of approximately $38.8 million.
SUBSEQUENT EVENTSNAV per common share estimated to be between $16.71 and $16.81 as of April 30, 2018. Deployed $15.8 million in net capital from April 1, 2018 through May 11, 2018; received cash distributions from the Company’s investment portfolio of $28.8 million over the same period. The Company completed an underwritten public offering of $67.3 million in aggregate principal amount of 6.6875% notes due 2028 (ECCX), including a partial exercise of the underwriters’ overallotment option, resulting in net proceeds to the Company of approximately $64.9 million. In April 2018, the Company announced it will redeem 100% of its 7.00% notes due 2020 (ECCZ), or $60.0 million aggregate principal amount, on May 24, 2018.
“We continued to actively manage the Company’s portfolio, prudently deploying capital while also opportunistically selling certain investments and realizing gains,” said Thomas Majewski, Chief Executive Officer. “During the quarter, we deployed $91.6 million into new investments and reset 4 of the Company’s CLO investments, lengthening the reinvestment periods in each transaction. Our focus remains on the long term and seeking to lock in lower cost CLO debt for a longer duration.”
“Our NII and realized capital gains per share increased slightly from the prior quarter to $0.50 per common share and our CLO equity portfolio’s weighted average effective yield increased versus the prior quarter,” noted Mr. Majewski. “We have also been active in managing the Company’s balance sheet. In January, we completed a common stock offering with net proceeds of $38.8 million. That stock was sold at a premium to NAV, which increases NAV for all shareholders, and much of that capital has already been deployed into new investments.”
“Subsequent to quarter end, we took advantage of strong market conditions and looked to effectively refinance our 7% ECCZ unsecured notes by completing a new notes offering,” added Mr. Majewski. “The new unsecured notes (ECCX) have a fixed coupon of 6.6875%, 31.25 basis points lower than the ECCZ notes they are replacing and represent our lowest cost of debt at the Company to date. Importantly, the ECCX notes have a ten-year maturity compared to the less than three years remaining on the life of the ECCZ notes. As a result of the issuance and announced redemption of the ECCZ notes, the pro-forma weighted average maturity on the Company’s outstanding notes and preferred stock is now just over eight years, with the nearest maturity being a little over four years away. Importantly, all of the Company’s financing is fixed rate, providing us added certainty in a rising rate environment.”
FIRST QUARTER 2018 RESULTS
The Company’s NII and realized capital gains for the quarter ended March 31, 2018 was $0.50 per weighted average common share. This compared to $0.49 per weighted average common share for the quarter ended December 31, 2017, and $0.60 per weighted average common share for the quarter ended March 31, 2017.
For the quarter ended March 31, 2018, the Company recorded GAAP net income of $8.1 million, or $0.39 per weighted average common share. Net income was comprised of total investment income of $17.0 million and net realized capital gains on investments of $1.8 million, offset by total expenses of $8.5 million and net unrealized depreciation (or unrealized mark-to-market loss on investments) of $2.2 million.
NAV as of March 31, 2018 was $355.2 million, or $16.65 per common share, which is $0.12 per common share lower than the Company’s NAV as of December 31, 2017, and $0.48 per common share lower than the Company’s NAV as of March 31, 2017.
During the quarter ended March 31, 2018, the Company deployed $91.6 million in gross capital and $41.1 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 17.37% as measured at the time of investment. Additionally, during the quarter, the Company received $50.5 million of proceeds from the sale of investments and converted 1 of its existing loan accumulation facilities into a new CLO.
During the quarter ended March 31, 2018, the Company received $22.7 million of cash distributions from its investment portfolio, or $1.10 per weighted average common share, including amounts received from called investments. Excluding proceeds from called investments, the Company received cash distributions of $1.04 per weighted average common share during the quarter.
During the quarter ended March 31, 2018, 4 of the Company’s CLO investments were reset, bringing the total number of such CLO equity positions that were refinanced or reset since January 1, 2017 to 26 and 10, respectively.
As of March 31, 2018, the weighted average effective yield on the Company’s CLO equity portfolio was 14.54%, an increase from 14.42% as of December 31, 2017. As of March 31, 2017, that measure stood at 16.21%.
Pursuant to the Company’s “at-the-market” offering program under which the Company may issue shares of common stock and 7.75% Series B Term Preferred Stock due 2026 (“Series B Term Preferred Stock”), the Company sold 295,969 shares of common stock at a premium to NAV during the first quarter for total net proceeds to the Company of approximately $5.2 million.
As of March 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 1,295 unique corporate obligors. The largest look-through obligor represented 0.98% of the Company’s CLO equity and loan accumulation facility portfolio. The top-ten largest look-through obligors together represented 6.28% 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 3.59% as of March 2018.
As of March 31, 2018, the Company had debt and preferred securities outstanding which totaled approximately 35% 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.
SECOND QUARTER 2018 PORTFOLIO ACTIVITY THROUGH MAY 11, 2018 AND OTHER UPDATES
From April 1, 2018 through May 11, 2018, the Company received $28.8 million of cash distributions from its investment portfolio, or $1.35 per weighted average common share, including amounts received from called investments. Excluding proceeds from called investments, the Company received cash distributions of $0.99 per weighted average common share for the same period. As of May 11, 2018, some of the Company’s investments had not yet reached their payment date for the quarter. Also from April 1, 2018 through May 11, 2018, the Company deployed $15.8 million in net capital. From April 1, 2018 through May 11, 2018, 1 of the Company’s CLO investments was reset.
As of May 11, 2018, the Company has approximately $16.7 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 April 30, 2018 was $16.71 to $16.81.
PREVIOUSLY DECLARED DISTRIBUTIONS AND ADDITIONAL UPDATES
The Company paid a monthly distribution of $0.20 per common share on April 30, 2018 to stockholders of record as of April 12, 2018. Additionally, and as previously announced, the Company declared distributions of $0.20 per share of common stock payable on May 31, 2018 and June 29, 2018, to stockholders of record as of May 11, 2018 and June 12, 2018, respectively.
The Company paid distributions of $0.161459 per share of the Company’s 7.75% Series A Term Preferred Stock (NYSE: ECCA) and Series B Term Preferred Stock (NYSE: ECCB) on April 30, 2018, to stockholders of record as of April 12, 2018. 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 May 31, 2018 and June 29, 2018, to stockholders of record as of May 11, 2018 and June 12, 2018, 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. The Company currently estimates its taxable income for the tax year ended November 30, 2017 to be slightly below the Company’s overall distributions on its shares of common stock for the applicable year, in large part due to the impact of accelerating certain tax deductions within the Company’s CLOs in conjunction with refinancing and resetting certain CLOs in the Company’s investment portfolio during such period. As such, the Company does not currently expect to pay a special distribution for the tax year ended November 30, 2017.
For periods subsequent to the quarter ended March 31, 2018, the Company is changing its accounting policy related to newly issued debt securities and preferred stock by electing to recognize debt issuance costs in the period in which such costs are incurred. For prior periods, when issuing debt securities or preferred stock, the Company amortized such expenses over the stated maturity of the security. For securities issued beginning in the quarter ending June 30, 2018, the Company will now take a one-time upfront charge of such expenses. For the quarter ending June 30, 2018, management estimates the non-recurring cost relating to the issuance of the ECCX notes and the acceleration of unamortized issuance costs associated with the redemption of the ECCZ notes during the quarter will impact NII and realized gains/losses for the quarter by approximately $0.20 per common share.
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 ended March 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 2160819 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 June 18, 2018. To hear the replay, please dial (800) 585-8367 (domestic) or (416) 621-4642 (international). For the replay, enter conference ID 2160819.
The Company has made available on its website, www.eaglepointcreditcompany.com (in the financial statements and reports section) its unaudited consolidated financial statements as of and for the period ended March 31, 2018. The Company has also filed this report with the Securities and Exchange Commission. 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 ended March 31, 2018.
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.
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 AND PROSPECTIVE FINANCIAL INFORMATION
The (1) estimates of the Company’s taxable income and distributions for the tax year ended November 30, 2017 and (2) projection of the estimated impact of the Company’s recognition of debt securities and preferred stock issuance costs reflects management’s judgment as of the date of this press release of conditions currently existing and that it expects to exist with respect to the tax year ended November 30, 2017 and the redemption of the ECCZ notes, as applicable. The estimates regarding taxable income 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 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, 2017 and the Company’s unaudited consolidated financial statements for the fiscal quarter ended March 31, 2018. Accordingly, there can be no assurance that actual results will not differ materially from those presented in the estimates.
The projection of the estimated impact of the Company’s recognition of debt securities and preferred stock issuance costs was not prepared with a view toward complying with the guidelines established by the American Institute of Certified Public Accountants and Financial Accounting Standards Board, as modified by Regulation S-X under the Securities Act of 1933, as amended, with respect to prospective financial information. Rather such estimate, and the estimate of the Company’s taxable income for the tax year ended November 30, 2017, 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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KEYWORD: UNITED STATES NORTH AMERICA CONNECTICUT
INDUSTRY KEYWORD: PROFESSIONAL SERVICES BANKING FINANCE
SOURCE: Eagle Point Credit Company Inc.
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PUB: 05/17/2018 08:00 AM/DISC: 05/17/2018 08:01 AM