Eagle Point Credit Company Doubles Down on Preferred Stock Offering Amid Strong Investor Demand

Eagle Point Credit Company Inc. (NYSE: ECC) has significantly expanded its public offering of 7.00% Series AA and Series AB Convertible Perpetual Preferred Stock, increasing the total target from an initial $20.3 million to $200 million. This move underscores the company’s confidence in its strategy of deploying capital into high-yield collateralized loan obligations (CLOs) while capitalizing on investor appetite for stable income streams in uncertain markets.

The Offering’s Terms and Expansion

The expanded offering, announced on April 22, 2025, allows Eagle Point to raise up to $200 million through the sale of 8 million shares priced at $25 apiece. Each share carries a fixed annual dividend of 7.00%, paid monthly, with the first distribution accruing from the original issuance date. The securities are rated “BBB” by Egan-Jones Ratings, signaling moderate credit risk. Notably, the preferred stock is convertible into common stock or cash at the company’s discretion, offering investors flexibility in volatile environments.

This expansion marks a tenfold increase from the initial $20.3 million raised through the first quarter of 2025, during which 794,892 Series AA shares and 100,586 Series AB shares were issued. The surge reflects robust demand for ECC’s preferred stock, driven by its unique blend of principal stability, predictable dividends, and exposure to CLOs—a sector benefiting from rising interest rates and robust corporate debt markets.

Strategic Rationale and Market Appeal

Eagle Point’s focus on CLO equity and junior debt tranches aligns with its core expertise. These instruments typically offer higher yields than senior CLO tranches, though with greater risk. The company’s external advisor, Eagle Point Credit Management LLC, has a proven track record in managing such assets, generating consistent returns for investors.

The decision to expand the preferred stock offering highlights several strategic advantages:
1. Capital Flexibility: Perpetual preferred stock avoids maturity date constraints, allowing ECC to deploy capital over extended periods.
2. Cost Efficiency: The 7.00% dividend rate, while higher than some fixed-income alternatives, is competitive given the asset class’s risk profile.
3. Demand for Income: In an era of market volatility, investors are gravitating toward securities offering steady cash flows.

Risks and Considerations

While the offering presents opportunities, risks persist. The BBB rating from Egan-Jones underscores the company’s moderate creditworthiness, but a downturn in CLO performance or a sharp rise in interest rates could strain liquidity. Additionally, the convertibility feature—while a benefit—could dilute common shareholders if exercised en masse.

ECC’s management has mitigated risks by structuring the offering as part of its “at-the-market” program, enabling gradual capital raises and minimizing market disruption. The proceeds will directly fund investments in CLOs, which currently offer attractive yields amid strong demand for leveraged loans.

Conclusion: A Calculated Move for Income Seekers

Eagle Point’s $200 million preferred stock expansion is a strategic response to investor demand for stable, high-yielding instruments. With a 7.00% dividend rate and a BBB rating, the offering balances risk and reward for income-focused portfolios. The company’s deep expertise in CLOs, combined with the perpetual structure’s flexibility, positions it to navigate market cycles effectively.

Investors should, however, remain mindful of the BBB rating’s limitations and the inherent risks of junior CLO tranches. For those seeking to capitalize on the current yield environment without overextending into equities, ECC’s preferred stock presents a compelling option. As Thomas Majewski, CEO, noted, the securities offer “principal stability, fixed dividends, and liquidity flexibility”—a rare combination in today’s markets.

In a landscape where fixed-income alternatives are scarce, Eagle Point’s move to scale up its preferred stock offering is both shrewd and timely. For income investors willing to accept moderate risk, this could prove a rewarding allocation.