Carlyle Credit Income Fund's Q2 2025: Key Contradictions in Interest Coverage, CLO Outlook, and Market Dynamics

Interest coverage ratio on default rates, CLO equity market outlook, impact of interest rate environment on CLO performance, out-of-court restructurings and market impact, and CLO equity market valuations and impact on NAV are the key contradictions discussed in Carlyle Credit Income Fund's latest 2025Q2 earnings call.



Dividend and Cash Flows:
- Carlyle Credit Income Fund maintained its monthly dividend at $0.1050 per share, supported by $0.49 of recurring cash flows for the quarter.
- The stability in dividend and cash flows is attributed to the fund's exposure to CLO equity investments, which are expected to benefit from loan repricings and future loss offsets.

CLO Investment Activity:
- New CLO investments totaled $30.3 million during the quarter, with a weighted average GAAP yield of 15.4%.
- The fund focused on high-quality CLO portfolios, leveraging Carlyle's global research and expertise, to manage risks and capitalize on periods of volatility.

Portfolio Performance and Future Outlook:
- The fund experienced a 12 basis points decline in the weighted average spread of the loan portfolios due to loan repricings.
- Despite this, the portfolio generated a cash-on-cash yield of 22.67%, supporting the fund's dividend. The fund remains positioned to capitalize on future opportunities due to the halt in loan repricing and wider spreads on new loans.

Default Rates and Credit Quality:
- The fund's LTM default rate is 1.3%, less than one-third of the market rate, reflecting its focus on high-quality CLOs and the use of Carlyle's in-house credit expertise.
- The fund continues to closely monitor industry trends and default rates, positioning its portfolio defensively with an emphasis on higher quality managers and structures with ample time left in the reinvestment period.