Each evening (Monday through Thursday) I post ‘headlines of interest’with press releases from companys with preferreds and baby bonds outstanding. Most certainly I miss some headlines—but I scan thousands of press releases and many times pick up a ‘nugget’ or two each day.
Last nights headlines included the earnings from Eagle Point Income (EIC) and Eagle Point Credit Company (ECC). Both of these are CLO (collateralized loan obligation) owning companys. The key difference in these 2 firms is that EIC is focused on owning the ‘debt tranche’ of the CLO (they are about 2/3rds debt tranches) while ECC focuses on owning the ‘equity tranche’. As most folks know the equity tranche of the CLO is the highest risk portion–first to have their payments from the CLO cut in times of stress–thus EIC is considered to have less risk than ECC.
I love EIC–and own the 7.75% term preferred (EICB) which has a mandatory redemption in 2028. Shares are trading at $25.02–it essentially has traded flat since issuance in July, 2023–and I would expect this to continue–it is the nature of a short dated maturity issue. NAV of EIC has been increasing–in spite of an ‘at the money’ program (continuous sale of shares) in the common shares as well as the term preferred shares. It is the nature of these company’s to always be selling shares so I simply concern myself with NAV as well as the coverage ratio on the ‘senior securities’ (debt and preferreds) which is now at a 298% level–very nice for a CLO company.
I am adding to my EICB holdings today–very minor add (not much cash on hand). The 7.75% yield fits my target – I expect little share price movement day to day–simply a decent monthly dividend payout.
NOTE–not a recommendation–I am talking my book and everyone should do their due diligence on any purchase of any securities.
I’m less leery of EIC now after reading recent posts, so I did my own calculation of annualized YTM for EICA and EICB. The results are similar which may explain the price of EICA. (My calculation of YTM is approximate, but the two numbers are comparable.) EIC dividend yield is 15%!
symbol, maturity, last, coupon, CY, YTM
EICA, 10/30/26, 23.55, 5.00%, 5.31%, 7.60%
EICB, 07/31/28, 25.06, 7.75%, 7.73%, 7.68%
Personally I like the preferred in the Eagle Point and the Oxford Lane Credit funds. Adding these two together it is in an overweight.
Already own a over-weighted allotment of EICB at avg of $24.97 having started buying back in August. Enjoy the monthly divvy and 7.77% yield on cost. (And the stability)
Tim – Since Quantum shows EICB as “Variable” for the 15% tax rate, can you (or someone else) tell us what actual percentage of their payments have qualified for this in the past? Thanks.
Coaster—I would have to do some research. I have all of these types of issues as ‘variable’ as well.
https://innovativeincomeinvestor.com/security/eagle-point-income-company-inc-7-75-series-b-term-preferred-stock-due-2028/
I hold all of mine in tax deferred accounts so don’t concern myself with it. I will scour their website and see if they have a breakdown.
Costar,
I just went to Quantum and it stated:
Eagle Point Income Company Inc.7.75)% Series B Term Preferred Stock due 2028 liquidation preference $25 per share, redeemable at the issuer’s option on or after 07/30/2025 at $25 per share plus accrued and unpaid dividends, and maturing 07/31/2028.
Cumulative distributions of 7.75)% per annum ($1.9375 per annum or $0.1614583 per Month) will be paid monthly on last business day of the month to holders of record on the record date fixed by the board, not more than 20 days or less than 7 days prior to the payment date (NOTE: the ex-dividend date is one business day prior to the record date.
You can see on this page, under Tax Characteristics, that the EIC common distributions have been 0% qualified. Therefore you can expect the EICB distributions to also be 0% qualified.
https://www.eaglepointincome.com/our-fund
The CLO funds are always close to 100% non-qualified every year.
Do these companies have any exposure to CRE?
Rocky-Mountain – they may or may not. They are hugely diversified–in the case of most of them they are exposed to over 1000 different underlying loans–but I believe their largest exposure to any 1 borrower is .7% (or something like that). By and large I would say no–but one would have to scrutinize their entire portfolio and that is really time consuming and difficult.
Thanks, Tim!
Rocky,
They have no mortgages in any of the CLOs that the invest in. The CLOs which they do invest in are syndicated bank loans mostly made ot large public firms.
Tim, Already in. Had a couple stink bids out to add more on the hope for a drop in the market a few of us have been waiting for.
Now I may have to move up my bid.
Your site has been known to move the markets!
Charles M – yes my stuff can move markets–but not in an issue like this as we know (strongly believe) that the defined maturity will keep it around $25.