Eagle Point Credit Releases Quarterly Update Presentation

Specialty finance company Eagle Point Credit (NASDAQ:ECC) has released their 3rd quarter investor presentation.

ECC is a holder of CLO’s (collateralized loan obligations) and has been as transparent with their data as any similar company.  While we personally believe that companies that hold CLOs have a very high risk in a poor economy they provide some decent returns with a trending or growing economy.

ECC has 2 term preferred issues outstanding and 2 baby bonds outstanding that income investors hold and thus this overview might be of interest.

The term preferreds and baby bond issues currently outstanding can be perused here.

The new investor presentation can be looked at here.

Any bonds or preferred stocks issued by ECC are unrated-thus considered junk (junk means less than investment grade rated).

 

13 thoughts on “Eagle Point Credit Releases Quarterly Update Presentation”

  1. I got out of them, due to my concerns about the debt markets. I hear today that GE is now having issues with its debt. The questions is… will we see a issue on highly in debt companies? I expect we may see that in the future.

    1. Yes Dave–there is a slide in the presentation coverage on leverage of large companies and coverage ratios on large companies. It is a bit scary as the coverage ratios are now at 2006-2007 levels. Scary.

      1. Not sure, I would classify 50M in EBITDA as a large company on the leveraged ration slide. With that said, yes the debt held by companies has gotten extreme. I am also concerned with the credit agency ratings again. Their lenient ratings were part of the 2007 crisis. As an example, I really don’t understand how they could continue to classify AT&T as investment grade after the Time Warner Merger. Very high debt. Yes it’s scary time, we have gone a long time without a recession. When we get one, it may not be a “great recession(I pray)” but it may get very ugly with all the debt.

        BTW : I do own a very small amount of ECCA at least as long as GDP growth continues to be reasonable

  2. Tim, thanks for a timely update.
    Like Dave, I sold ECC to reduce holdings with leverage. The recent weakness was a concern, so I bailed on the bounce to mid 17. Plan to increase cash levels through the New Year.

  3. Bonds taking a dip in yield again. GDP deflator has been extremely tame, oil dropping, inflation fears calming. Spread between Europe and US yields still very wide and German 10 year almost half the yield it was earlier this year. Glad I loaded up on KTH. The actual underlying 2028 PECO bond is now trading today up to $116.25 for a 5.18% YTM while KTH is still trading around a 6.15% YTM today even though its now up to $29.45.
    PECO looking real solid with their rate hike and solid coverage ratios. But I am fine with 6.25% for 9.5 years from a ute. Others may not though, depends on the goals and strategy.

    1. Gridbird, Totally agree. Average LT yield is in the neighborhood of 7% and we’re pulling 6%+ on term-dated IG-rated issues while surfacing from historic low yields – don’t mind locking in a few of these. Especially like not having to stare at them as I trade less and less. Had thought about holding off until the one or two of the proposed Fed hikes occur though there’s also an opportunity cost in waiting. In addition to your above criteria PMI is rolling over, an indicator for me rates too may roll-over or at least plateau. Also – see any housing price cuts in your neighborhood? It’s happening here. Also take a look at KTN. Glad I locked a few of those into the stack. Also picking up a few classic div stocks. Value opportunities are returning.

      1. I agree Alpha! KTH had some more shares trickle out lower and I pounced on 300 plus more at $29.22 today. Got a nice slug and will be fine holding until maturity if need be. Read their recent regulatory filings and their numbers in most areas are stronger than industry norm. Plus they got a little rate hike just passed also. The telling sign is the actual 5.18% YTM of the underlying bond that last traded over $116 today. I will take high quality (the bond is now currently over 20 years old) 6.25% for 9.5 years and be very comfortable owning. Funny you mentioned KTN… I have been eyeing its drop too. I was wanting $29 and thought I would get it, but it has moved back towards $30, so I am still in watchful waiting mode to pounce!
        The advantage KTH has over KTN is the $27.10 redemption price. The PECO bonds issued in 1998 were purchased in late 2000 when yields were higher and were bought at $92, not $100, so one realizes the cap gain at maturity when the bonds bought near $92 are redeemed at par $100.
        Alpha, I am also trying to circle the wagons and have more just in hold mold until maturity.

        1. Reading the prospectus, the words imply that the $27.10 redemption for KTH is for an early redemption and if the stock goes to maturity, the redemption is $25.00.

          1. Jag, go down to S-12….See the $2.10 isnt a “free bee bonus”. It is the cap gain recieved upon the redemption of the underlying debt. The debt was issued in 1998 at $100 par. The debt put in trust was bought over 2 years later when the bonds were trading in $92 range. Thus when the bonds are redeemed it will be at par, and thus the cap gain. This is how a 7 3/8% debt can yield 8% as its purchase price was lower than issue price. You will get to $2.12 no matter what because a redemption outside of bankruptcy is at par. Only a taxable event (ie change in tax laws) can free Peco from this obligation as it was set up for a tax benefit to company. No such action has occured in 20 years to impair this, but it is what is and that has to be known before purchase. You have to understand (it is quirky) ii and iii go together. If its redeemed on Apr. 6, you disregard the OR part on ii and proceed to iii.

            (ii) a distribution of principal equal to $25 per Certificate on April 6, 2028,
            or if any such day is not a Business Day, the next succeeding Business Day, or upon early redemption and (iii) an additional distribution of principal equal to $2.10 per Certificate on April 6, 2028, or if any such day is not a Business Day, the next succeeding Business Day, or $2.10 per Certificate or greateramount on such earlier date on which the Trust redeems your Certificates.

        2. Gridbird, I still cannot figure out how to compare KTN and KTH.
          KTN has better credit rating and current yield even though redemption price is at 25. How did you come up with 29 as a good entry price?

          1. Limit, that comes from your own personal goal of what an acceptable yield is. For me, though I do trade, I assume the YTM yield which is way less than current yield. For KTN its YTM at $29 is still only 5.70% ish. That still is a bit light for me though its maturity is over a year earlier than KTH which must be noted. I personally mostly like a 6 handle on my duration issues. So I would actually be more interested under $29. KTH has the $27.10 redemption so it trades closer to par in effect now. I also have a preference for utility issues over insurance, but that is me. Or at least utilities that dont operate under reverse condemnation laws like CA utes do….

  4. Oppenheimer analyst Chris Kotowski downgrades Eagle Point Credit Co (NYSE:ECC) from Outperform to Perform

    also of interest,

    Morgan Stanley analyst Stephen Byrd downgrades PG&E (NYSE:PCG) from Overweight to Equal-Weight and lowers the price target from $67 to $31.

  5. What a brilliant call by Byrd. Right up there with Kramer for the timeliness of his recommendations.

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