Carlyle Credit Income Fund (CCIF) Q3 Earnings call transcript Aug 22, 2024

Carlyle Credit Income Fund (CCIF) held its Q3 2024 earnings call, providing insights into the company's financial performance and strategic moves. The call, led by CEO Jane Cai, featured updates on the Fund's dividend, new CLO investments, and market trends.

Financial Performance and Dividend

CCIF maintained its dividend at $0.105 per share, with a 14.81% annualized dividend based on the share price as of August 20, 2024. This dividend is supported by $0.81 of recurring cash flows. The Fund's new CLO investments during the quarter totaled $12.2 million with a weighted average GAAP yield of 19.49%.

Market Environment and Strategic Moves

CCIF has made strategic moves since taking over as the investment adviser of the Fund on July 14, 2023. The company rotated the portfolio into a diverse pool of CLO equity positions, generating a GAAP yield of 20.26%, with no CLOs having an over-collateralization cushion of less than 3%. The Fund has also increased its dividend from 8% to 16.5% based on the Fund's net asset value as of July 31, 2024.

Market Trends and Opportunities

The earnings call provided insights into the current market environment, with a focus on the CLO and loan markets. The tightening of CLO liability spreads has supported the arbitrage for CLO equity, leading to higher new issue volumes. The CLO market has seen record activity, with $53 billion of issuance in the past quarter. This trend is expected to continue, as CLO refinancing and reset activity have outpaced 2023 levels.

CCIF's U.S. loan portfolio, comprising over 600 borrowers, has remained resilient in the first quarter, indicating a healthy broadly syndicated loan market. Despite a decrease in underlying asset spreads, the company remains encouraged by CLO equity's attractive cash-on-cash distributions. The median CLO equity payments in July totaled 4.1%, slightly lower than April payments but still higher than the 10-year average of 3.8%.

Investor Questions and Insights

During the Q&A session, analysts asked about the impact of interest rate dynamics on CLO equity cash flows and the potential for CLO equity in a prolonged rate cut environment. Nishil Mehta, CCIF's Portfolio Manager, provided insights into the current market dynamics and the company's strategies to capitalize on opportunities.

The call concluded with CEO Lauren Basmadjian expressing optimism for the future and thanking investors for their support. Overall, the earnings call highlighted CCIF's strategic moves, financial performance, and the opportunities in the CLO and loan markets.