This report is transmitted to
the stockholders of Eagle Point Credit Company Inc. (“we”, “us”, “our” or the “Company”).
This report and the information and views herein do not constitute investment advice, or a recommendation or an offer to enter into any
transaction with the Company or any of its affiliates. This report is provided for informational purposes only, does not constitute an
offer to sell securities of the Company and is not a prospectus. From time to time, the Company may have a registration statement relating
to one or more of its securities on file with the US Securities and Exchange Commission (“SEC”). Any registration statement
that has not yet been declared effective by the SEC, and any prospectus relating thereto, is not complete and may be changed. Any securities
that are the subject of such a registration statement may not be sold until the registration statement filed with the SEC is effective.
The information and its contents
are the property of Eagle Point Credit Management LLC (the “Adviser”) and/or the Company. Any unauthorized dissemination,
copying or use of this presentation is strictly prohibited and may be in violation of law. This presentation is being provided for informational
purposes only.
An investment in the Company is
not appropriate for all investors. The investment program of the Company is speculative, entails substantial risk and includes investment
techniques not employed by traditional mutual funds. An investment in the Company is not intended to be a complete investment program.
Shares of closed-end investment companies, such as the Company, frequently trade at a discount from their net asset value (“NAV”),
which may increase investors’ risk of loss. Past performance is not indicative of, or a guarantee of, future performance.
The performance and certain other portfolio information quoted herein represents information as of September 30, 2022. Nothing herein
should be relied upon as a representation as to the future performance or portfolio holdings of the Company. Investment return and principal
value of an investment will fluctuate, and shares, when sold, may be worth more or less than their original cost. The Company’s
performance is subject to change since the end of the period noted in this report and may be lower or higher than the performance data
shown herein.
Neither the Adviser nor the Company
provide legal, accounting or tax advice. Any statement regarding such matters is explanatory and may not be relied upon as definitive
advice. Investors should consult with their legal, accounting and tax advisors regarding any potential investment. The information presented
herein is as of the dates noted herein and is derived from financial and other information of the Company, and, in certain cases, from
third party sources and reports (including reports of third party custodians, CLO managers and trustees) that have not been independently
verified by the Company. As noted herein, certain of this information is estimated and unaudited, and therefore subject to change. We
do not represent that such information is accurate or complete, and it should not be relied upon as such.
About Eagle Point Credit Company
Inc.
This report may contain “forward-looking
statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements other than statements of historical
facts included in this report may constitute forward-looking statements and are not guarantees of future performance or results and involve
a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of
a number of factors, including those described in the Company’s filings with the SEC. The Company undertakes no duty to update any
forward-looking statement made herein. All forward-looking statements speak only as of the date of this report.
(expressed in U.S. dollars)
Eagle Point Credit Company Inc. &
Subsidiaries
Consolidated Schedule of Investments
As of September 30, 2022
(expressed in U.S. dollars)
(Unaudited)
Issuer
(1) | |
Investment | |
Maturity
Date | |
Reference
Rate and Spread | |
Interest
Rate/Effective Yield | |
Acquisition
Date (2) | |
Principal
Amount | | |
Cost | | |
Fair
Value (3) | | |
%
of Net Assets |
Asset Backed
Securities (4) (5) (7) | |
| |
| |
| |
| |
| |
| | | |
| | | |
| | | |
|
Structured Finance | |
| |
| |
| |
| |
| |
| | | |
| | | |
| | | |
|
Autonoria Spain 2022 FT (12) | |
Class G
Notes | |
1/31/2040 | |
1M
EURIBOR+12.00% | |
12.70% | |
09/14/22 | |
$ | 2,700,000 | | |
$ | 2,694,195 | | |
$ | 2,646,135 | | |
|
0.54% |
Deutsche
Bank Aktiengesellschaft | |
LOFT
2022-1A Class C Notes | |
2/28/2032 | |
3M
LIBOR+19.00% | |
20.54% | |
08/22/22 | |
| 1,700,000 | | |
| 1,700,000 | | |
| 1,666,000 | | |
0.34% |
| |
| |
| |
| |
| |
| |
| | | |
| 4,394,195 | | |
| 4,312,135 | | |
0.88% |
| |
| |
| |
| |
| |
| |
| | | |
| | | |
| | | |
|
Bank Debt
Term Loan (4) (5) | |
| |
| |
| |
| |
| |
| | | |
| | | |
| | | |
|
Consumer Products | |
| |
| |
| |
| |
| |
| | | |
| | | |
| | | |
|
JP Intermediate
B LLC | |
Term B 1L Senior
Secured Loan | |
11/20/25 | |
3M LIBOR+5.50% | |
8.31% | |
03/02/21 | |
| 584,024 | | |
| 562,024 | | |
| 440,938 | | |
0.09% |
| |
| |
| |
| |
| |
| |
| | | |
| | | |
| | | |
|
Common Stock
(4) | |
| |
| |
| |
| |
| |
| | | |
| | | |
| | | |
|
Oil &
Gas | |
| |
| |
| |
| |
| |
| | | |
| | | |
| | | |
|
McDermott International
Ltd | |
Common Stock | |
N/A | |
N/A | |
N/A | |
12/31/20 | |
| 243,875 | | |
| 126,820 | | |
| 87,795 | | |
0.02% |
| |
| |
| |
| |
| |
| |
| | | |
| | | |
| | | |
|
Leisure | |
| |
| |
| |
| |
| |
| | | |
| | | |
| | | |
|
All Day Holdings
LLC | |
Common Stock | |
N/A | |
N/A | |
N/A | |
08/19/22 | |
| 560 | | |
| - | | |
| 294 | | |
0.00% |
| |
| |
| |
| |
| |
| |
| | | |
| | | |
| | | |
|
Financial Services | |
| |
| |
| |
| |
| |
| | | |
| | | |
| | | |
|
Lender
MCS Holdings, Inc. | |
Common
Stock | |
N/A | |
N/A | |
N/A | |
08/12/22 | |
| 589 | | |
| - | | |
| 19,732 | | |
0.00% |
| |
| |
| |
| |
| |
| |
| | | |
| 126,820 | | |
| 107,821 | | |
0.02% |
| |
| |
| |
| |
| |
| |
| | | |
| | | |
| | | |
|
Corporate
Bonds (5) | |
| |
| |
| |
| |
| |
| | | |
| | | |
| | | |
|
Chemicals | |
| |
| |
| |
| |
| |
| | | |
| | | |
| | | |
|
Unifrax Escrow
Issuer Corp (4) | |
Secured | |
09/30/28 | |
N/A | |
5.25% | |
09/15/21 | |
| 512,000 | | |
| 522,102 | | |
| 398,080 | | |
0.08% |
Unifrax Escrow
Issuer Corp (4) | |
Senior Unsecured | |
09/30/29 | |
N/A | |
7.50% | |
09/16/21 | |
| 171,000 | | |
| 176,017 | | |
| 114,570 | | |
0.02% |
| |
| |
| |
| |
| |
| |
| | | |
| | | |
| | | |
|
Financial Services | |
| |
| |
| |
| |
| |
| | | |
| | | |
| | | |
|
Owl Rock Core
Income Corp (4) | |
Senior Unsecured | |
9/16/2027 | |
N/A | |
7.75% | |
09/09/22 | |
| 1,900,000 | | |
| 1,894,897 | | |
| 1,871,557 | | |
0.38% |
| |
| |
| |
| |
| |
| |
| | | |
| | | |
| | | |
|
Oil &
Gas | |
| |
| |
| |
| |
| |
| | | |
| | | |
| | | |
|
Energy Ventures
Gom LLC / EnVen Finance Corp (4) | |
Second Lien | |
04/15/26 | |
N/A | |
11.75% | |
06/15/21 | |
| 599,000 | | |
| 620,113 | | |
| 622,960 | | |
0.13% |
GAC Holdco Inc
(4) | |
Secured | |
08/15/25 | |
N/A | |
12.00% | |
10/18/21 | |
| 425,000 | | |
| 443,367 | | |
| 452,094 | | |
0.09% |
| |
| |
| |
| |
| |
| |
| | | |
| | | |
| | | |
|
Pipelines | |
| |
| |
| |
| |
| |
| | | |
| | | |
| | | |
|
NGL Energy Partners
LP / NGL Energy Finance Corp | |
Senior Unsecured | |
03/01/25 | |
N/A | |
6.125% | |
06/24/21 | |
| 1,010,000 | | |
| 947,413 | | |
| 813,050 | | |
0.17% |
| |
| |
| |
| |
| |
| |
| | | |
| | | |
| | | |
|
Real Estate Investment
Trusts | |
| |
| |
| |
| |
| |
| | | |
| | | |
| | | |
|
Service Properties
Trust | |
Senior Unsecured | |
09/15/25 | |
N/A | |
7.50% | |
06/24/21 | |
| 797,400 | | |
| 838,016 | | |
| 747,563 | | |
0.15% |
| |
| |
| |
| |
| |
| |
| | | |
| | | |
| | | |
|
Transportation | |
| |
| |
| |
| |
| |
| | | |
| | | |
| | | |
|
Seaspan
Corp (4) | |
Senior
Unsecured | |
08/01/29 | |
N/A | |
5.50% | |
07/09/21 | |
| 901,000 | | |
| 888,999 | | |
| 700,528 | | |
0.14% |
| |
| |
| |
| |
| |
| |
| | | |
| 6,330,924 | | |
| 5,720,402 | | |
1.16% |
Warrants (4) | |
| |
| |
| |
| |
| |
| | | |
| | | |
| | | |
|
Oil &
Gas | |
| |
| |
| |
| |
| |
| | | |
| | | |
| | | |
|
GAC Holdco Inc | |
Warrant | |
08/15/26 | |
N/A | |
N/A | |
10/18/21 | |
| 502 | | |
| 26,355 | | |
| 188,250 | | |
0.04% |
| |
| |
| |
| |
| |
| |
| | | |
| | | |
| | | |
|
Total
investments at fair value as of September 30, 2022 | |
| |
| |
| |
| |
| |
| | | |
$ | 847,676,801 | | |
$ | 680,526,099 | | |
138.45% |
| |
| |
| |
| |
| |
| |
| | | |
| | | |
| | | |
|
Liabilities
at fair value (14) | |
| |
| |
| |
| |
| |
| | | |
| | | |
| | | |
|
6.6875% Unsecured
Notes due 2028 | |
Unsecured Note | |
| |
| |
| |
| |
$ | (32,423,800 | ) | |
$ | (32,423,800 | ) | |
$ | (31,846,656 | ) | |
-6.48% |
5.375% Unsecured
Notes due 2029 | |
Unsecured Note | |
| |
| |
| |
| |
| (93,250,000 | ) | |
| (93,250,000 | ) | |
| (80,454,235 | ) | |
-16.37% |
6.75% Unsecured
Notes due 2031 | |
Unsecured Note | |
| |
| |
| |
| |
| (44,850,000 | ) | |
| (44,850,000 | ) | |
| (41,221,097 | ) | |
-8.39% |
6.50%
Series C Term Preferred Stock due 2031 | |
Preferred
Stock | |
| |
| |
| |
| |
| (54,313,825 | ) | |
| (54,499,190 | ) | |
| (47,187,851 | ) | |
-9.60% |
Total
liabilities at fair value as of September 30, 2022 | |
| |
| |
| |
| |
| |
| | | |
$ | (225,022,990 | ) | |
$ | (200,709,839 | ) | |
-40.84% |
| |
| |
| |
| |
| |
| |
| | | |
| | | |
| | | |
|
Net assets above (below) fair value of investments and liabilities at fair value | | |
| | | |
| 11,572,329 | | |
|
| |
| |
| |
| |
| |
| |
| | | |
| | | |
| | | |
|
Net assets as of September 30, 2022 | |
| |
| |
| | | |
| | | |
$ | 491,388,589 | | |
|
|
|
(1) |
The Company is not affiliated with, nor does it "control" (as such term is defined in the Investment Company Act of 1940 (the "1940 Act")), any of the issuers listed. In general, under the 1940 Act, the Company would be presumed to "control" an issuer if it owned 25% or more of its voting securities. |
(2) |
Acquisition date represents the initial date of purchase or the date the investment was contributed to the Company. |
(3) |
Fair value is determined by the Adviser in accordance with written valuation policies and procedures, subject to oversight by the Company’s Board of Directors, in accordance with Rule 2a-5 under the 1940 Act. |
(4) |
Securities exempt from registration under the Securities Act of 1933, and are deemed to be “restricted securities”. As of September 30, 2022, the aggregate fair value of these securities is $679.0mm, or 138.13% of the Company’s net assets. |
(5) |
CLO debt, asset backed securities, bank debt term loan and corporate bond positions reflect the interest rate as of the reporting date. |
(6) |
As of September 30, 2022, the investment includes interest income capitalized as additional investment principal ("PIK" Interest). The PIK interest rate for CLO debt positions represents the interest rate at payment date when PIK interest is received. See Note 2 "Summary of Significant Accounting Policies" for further discussion. |
(7) |
The fair value of CLO equity, loan accumulation facility and asset backed security investments are classified as Level III investments. See Note 3 "Investments" for further discussion. |
(8) |
CLO subordinated notes and income notes are considered CLO equity positions. CLO equity positions are entitled to recurring distributions which are generally equal to the remaining cash flow of payments made by underlying assets less contractual payments to debt holders and fund expenses. The effective yield is estimated based upon the current projection of the amount and timing of these recurring distributions in addition to the estimated amount of terminal principal payment. It is the Company's policy to update the effective yield for each CLO equity position held within the Company’s portfolio at the initiation of each investment and each subsequent quarter thereafter. The effective yield and investment cost may ultimately not be realized. As of September 30, 2022, the Company's weighted average effective yield on its aggregate CLO equity positions, based on current amortized cost, was 16.16%. When excluding called CLOs, the Company's weighted average effective yield on its CLO equity positions was 16.29%. |
(9) |
As of September 30, 2022 the investment has been called. Expected value of residual distributions, once received, is anticipated to be recognized as return of capital, pending any remaining amortized cost, and/or realized gain for any amounts received in excess of such amortized cost. |
(10) |
Fair value includes the Company's interest in fee rebates on CLO subordinated and income notes. |
(11) |
As of September 30, 2022, the effective yield has been estimated to be 0%. The aggregate projected amount of future recurring distributions and terminal principal payment is less than the amortized investment cost. Future recurring distributions, once received, will be recognized solely as return of capital until the aggregate projected amount of future recurring distributions and terminal principal payment exceeds the amortized investment cost. |
(12) |
Investment is denominated in EUR. |
(13) |
Loan accumulation facilities are financing structures intended to aggregate loans that may be used to form the basis of a CLO vehicle. |
(14) |
The Company has accounted for its 6.6875% Notes due 2028, 5.375% Notes due 2029, 6.75% Notes due 2031 and 6.50% Series C Term Preferred Stock utilizing the fair value option election under ASC Topic 825. Accordingly, the aforementioned notes and preferred stock are carried at their fair value. See Note 2 "Summary of Significant Accounting Policies" for further discussion. |
See accompanying notes to the
consolidated financial statements
Eagle Point Credit Company Inc. &
Subsidiaries
Consolidated Statement of Operations
For the nine months ended September 30,
2022
(expressed in U.S. dollars)
(Unaudited)
INVESTMENT INCOME | |
| |
Interest income | |
$ | 80,436,550 | |
Other income | |
| 5,481,293 | |
Total Investment Income | |
| 85,917,843 | |
| |
| | |
EXPENSES | |
| | |
Incentive fee | |
| 12,049,308 | |
Interest expense | |
| 10,720,599 | |
Management fee | |
| 7,306,340 | |
Commission expense | |
| 3,078,132 | |
Professional fees | |
| 1,151,999 | |
Administration fees | |
| 830,972 | |
Directors' fees | |
| 298,125 | |
Tax expense | |
| 75,677 | |
Other expenses | |
| 846,132 | |
Total Expenses | |
| 36,357,284 | |
| |
| | |
Incentive fee voluntarily waived by the Adviser (Note 4) | |
| (302,087 | ) |
| |
| | |
Net Expenses | |
| 36,055,197 | |
| |
| | |
NET INVESTMENT INCOME | |
| 49,862,646 | |
| |
| | |
6.75% Series D Preferred Stock distributions | |
| (1,363,328 | ) |
| |
| | |
REALIZED AND UNREALIZED GAIN (LOSS) | |
| | |
Net realized gain (loss) on investments, foreign currency and cash equivalents | |
| 5,049,475 | |
Net realized gain (loss) on extinguishment of Preferred Stock (Note 6) | |
| (744,281 | ) |
Net realized gain (loss) on extinguishment of Unsecured Notes (Note 7) | |
| (766,155 | ) |
Net change in unrealized appreciation (depreciation) on investments, foreign currency and cash equivalents | |
| (170,105,984 | ) |
Net change in unrealized (appreciation) depreciation on liabilities at fair value under the fair value option | |
| 5,660,261 | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | |
| (160,906,684 | ) |
| |
| | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | |
$ | (112,407,366 | ) |
See accompanying notes to the
consolidated financial statements
Eagle Point Credit Company Inc. &
Subsidiaries
Consolidated Statement of Comprehensive
Income
For the nine months ended September 30,
2022
(expressed in U.S. dollars)
(Unaudited)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | |
$ | (112,407,366 | ) |
| |
| | |
OTHER COMPREHENSIVE INCOME (LOSS) (1) | |
| | |
Change in unrealized (appreciation) depreciation on liabilities at fair value under the fair value option | |
| 21,911,243 | |
Total Other Comprehensive Income (Loss) | |
| 21,911,243 | |
| |
| | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM COMPREHENSIVE INCOME | |
$ | (90,496,123 | ) |
(1) |
See Note 2 "Summary of Significant Accounting Policies- Other Financial Assets
and Financial Liabilities at Fair Value" for further discussion relating
to other comprehensive income. |
See accompanying notes to the
consolidated financial statements
Eagle Point Credit Company Inc. &
Subsidiaries
Consolidated Statements of
Operations
(expressed in U.S. dollars)
(Unaudited)
| |
For the | | |
For the | |
| |
nine months ended | | |
nine months ended | |
| |
September 30, 2022 | | |
September 30, 2021 | |
INVESTMENT INCOME | |
| | | |
| | |
Interest income | |
$ | 80,436,550 | | |
$ | 56,722,539 | |
Other income | |
| 5,481,293 | | |
| 4,712,995 | |
Total Investment Income | |
| 85,917,843 | | |
| 61,435,534 | |
| |
| | | |
| | |
EXPENSES | |
| | | |
| | |
Incentive fee | |
| 12,049,308 | | |
| 7,716,227 | |
Interest expense | |
| 10,720,599 | | |
| 10,303,548 | |
Management fee | |
| 7,306,340 | | |
| 6,684,635 | |
Commission expense | |
| 3,078,132 | | |
| 2,568,223 | |
Professional fees | |
| 1,151,999 | | |
| 1,428,119 | |
Administration fees | |
| 830,972 | | |
| 718,852 | |
Directors' fees | |
| 298,125 | | |
| 298,125 | |
Tax expense | |
| 75,677 | | |
| 75,389 | |
Other expenses | |
| 846,132 | | |
| 777,511 | |
Total Expenses | |
| 36,357,284 | | |
| 30,570,629 | |
| |
| | | |
| | |
Incentive fee voluntarily waived by the Adviser (Note 4) | |
| (302,087 | ) | |
| - | |
| |
| | | |
| | |
Net Expenses | |
| 36,055,197 | | |
| 30,570,629 | |
| |
| | | |
| | |
NET INVESTMENT INCOME | |
| 49,862,646 | | |
| 30,864,905 | |
| |
| | | |
| | |
6.75% Series D Preferred Stock distributions | |
| (1,363,328 | ) | |
| - | |
| |
| | | |
| | |
REALIZED AND UNREALIZED GAIN (LOSS) | |
| | | |
| | |
Net realized gain (loss) on investments, foreign currency and cash equivalents | |
| 5,049,475 | | |
| 2,787,298 | |
Net realized gain (loss) on extinguishment of Preferred Stock (Note 6) | |
| (744,281 | ) | |
| - | |
Net realized gain (loss) on extinguishment of Unsecured Notes (Note 7) | |
| (766,155 | ) | |
| - | |
Net change in unrealized appreciation (depreciation) on investments, foreign currency and cash equivalents | |
| (170,105,984 | ) | |
| 91,197,004 | |
Net change in unrealized (appreciation) depreciation on liabilities at fair value under the fair value option | |
| 5,660,261 | | |
| (475,680 | ) |
NET REALIZED AND UNREALIZED GAIN (LOSS) | |
| (160,906,684 | ) | |
| 93,508,622 | |
| |
| | | |
| | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | |
$ | (112,407,366 | ) | |
$ | 124,373,527 | |
Note: The above Consolidated Statements of Operations represents the nine months ended September 30, 2022, and the nine months ended September 30, 2021 and has been provided as supplemental information to the consolidated financial statements.
See accompanying notes to the
consolidated financial statements
Eagle Point Credit Company Inc. &
Subsidiaries
Consolidated Statements of
Operations
(expressed in U.S. dollars)
(Unaudited)
| |
For the | | |
For the | | |
For the | |
| |
three months ended | | |
six months ended | | |
nine months ended | |
| |
September 30, 2022 | | |
June 30, 2022 | | |
September 30, 2022 | |
INVESTMENT INCOME | |
| | | |
| | | |
| | |
Interest income | |
$ | 28,349,381 | | |
$ | 52,087,169 | | |
$ | 80,436,550 | |
Other income | |
| 1,844,606 | | |
| 3,636,687 | | |
| 5,481,293 | |
Total Investment Income | |
| 30,193,987 | | |
| 55,723,856 | | |
| 85,917,843 | |
| |
| | | |
| | | |
| | |
EXPENSES | |
| | | |
| | | |
| | |
Incentive fee | |
| 4,552,386 | | |
| 7,496,922 | | |
| 12,049,308 | |
Interest expense | |
| 3,408,504 | | |
| 7,312,095 | | |
| 10,720,599 | |
Management fee | |
| 2,426,745 | | |
| 4,879,595 | | |
| 7,306,340 | |
Commission expense | |
| 1,267 | | |
| 3,076,865 | | |
| 3,078,132 | |
Professional fees | |
| 376,171 | | |
| 775,828 | | |
| 1,151,999 | |
Administration fees | |
| 245,432 | | |
| 585,540 | | |
| 830,972 | |
Directors' fees | |
| 99,375 | | |
| 198,750 | | |
| 298,125 | |
Tax expense | |
| 25,271 | | |
| 50,406 | | |
| 75,677 | |
Other expenses | |
| 389,056 | | |
| 457,076 | | |
| 846,132 | |
Total Expenses | |
| 11,524,207 | | |
| 24,833,077 | | |
| 36,357,284 | |
| |
| | | |
| | | |
| | |
Incentive fee voluntarily waived by the Adviser (Note 4) | |
| - | | |
| (302,087 | ) | |
| (302,087 | ) |
| |
| | | |
| | | |
| | |
Net Expenses | |
| 11,524,207 | | |
| 24,530,990 | | |
| 36,055,197 | |
| |
| | | |
| | | |
| | |
NET INVESTMENT INCOME | |
| 18,669,780 | | |
| 31,192,866 | | |
| 49,862,646 | |
| |
| | | |
| | | |
| | |
6.75% Series D Preferred Stock Distributions | |
| (460,239 | ) | |
| (903,089 | ) | |
| (1,363,328 | ) |
| |
| | | |
| | | |
| | |
REALIZED AND UNREALIZED GAIN (LOSS) | |
| | | |
| | | |
| | |
Net realized gain (loss) on investments, foreign currency and cash equivalents | |
| 3,369,661 | | |
| 1,679,814 | | |
| 5,049,475 | |
Net realized gain (loss) on extinguishment of Preferred Stock (Note 6) | |
| - | | |
| (744,281 | ) | |
| (744,281 | ) |
Net realized gain (loss) on extinguishment of Unsecured Notes (Note 7) | |
| - | | |
| (766,155 | ) | |
| (766,155 | ) |
Net change in unrealized appreciation (depreciation) on investments, foreign currency and cash equivalents | |
| (11,607,853 | ) | |
| (158,498,131 | ) | |
| (170,105,984 | ) |
Net change in unrealized (appreciation) depreciation on liabilities at fair value under the fair value option | |
| (292,789 | ) | |
| 5,953,050 | | |
| 5,660,261 | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | |
| (8,530,981 | ) | |
| (152,375,703 | ) | |
| (160,906,684 | ) |
| |
| | | |
| | | |
| | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | |
$ | 9,678,560 | | |
$ | (122,085,926 | ) | |
$ | (112,407,366 | ) |
Note: The above Consolidated Statements of Operations represents the three months ended September 30, 2022, the six months ended June 30, 2022, and the nine months ended September 30, 2022 and has been provided as supplemental information to the consolidated financial statements.
See accompanying notes to the
consolidated financial statements
Eagle Point Credit Company Inc. &
Subsidiaries
Consolidated Statements of
Changes in Net Assets
(expressed in U.S. dollars, except
share amounts)
(Unaudited)
| |
For the | | |
For the | |
| |
nine months ended | | |
year ended | |
| |
September 30, 2022 | | |
December 31, 2021 | |
Net increase (decrease) in net assets resulting from operations: | |
| | | |
| | |
Net investment income | |
$ | 49,862,646 | | |
$ | 44,678,902 | |
6.75% Series D Preferred Stock distributions | |
| (1,363,328 | ) | |
| (150,000 | ) |
Net realized gain (loss) on investments, foreign currency and cash equivalents | |
| 5,049,475 | | |
| 3,365,121 | |
Net realized gain (loss) on extinguishment of Preferred Stock (Note 6) | |
| (744,281 | ) | |
| (766,122 | ) |
Net realized gain (loss) on extinguishment of Unsecured Notes (Note 7) | |
| (766,155 | ) | |
| - | |
Net change in unrealized appreciation (depreciation) on investments, foreign currency and cash equivalents | |
| (170,105,984 | ) | |
| 85,334,382 | |
Net change
in unrealized (appreciation) depreciation on liabilities at fair value under the fair value option | |
| 5,660,261 | | |
| (756,021 | ) |
Total net increase (decrease) in net assets resulting from operations | |
| (112,407,366 | ) | |
| 131,706,262 | |
| |
| | | |
| | |
Other comprehensive income (loss): | |
| | | |
| | |
Net change in unrealized
(appreciation) depreciation on liabilities at fair value under the fair value option | |
| 21,911,243 | | |
| (2,739,575 | ) |
Total other comprehensive income (loss) | |
| 21,911,243 | | |
| (2,739,575 | ) |
| |
| | | |
| | |
Common stock distributions: | |
| | | |
| | |
Total earnings distributed | |
| (51,586,026 | ) | |
| (57,679,486 | ) |
Common stock distributions from tax return of capital | |
| - | | |
| - | |
Total common stock distributions | |
| (51,586,026 | ) | |
| (57,679,486 | ) |
| |
| | | |
| | |
Capital share transactions: | |
| | | |
| | |
Issuance of shares of common stock pursuant
to the Company's "at the market" program, net of commissions and offering expenses | |
| 125,066,099 | | |
| 67,073,258 | |
Issuance of shares of common stock pursuant to the Company's dividend reinvestment plan | |
| 6,100,304 | | |
| 2,283,188 | |
Total capital share transactions | |
| 131,166,403 | | |
| 69,356,446 | |
| |
| | | |
| | |
Total increase (decrease) in net assets | |
| (10,915,746 | ) | |
| 140,643,647 | |
Net assets at beginning of period | |
| 502,304,335 | | |
| 361,660,688 | |
Net assets at end of period | |
$ | 491,388,589 | | |
$ | 502,304,335 | |
| |
| | | |
| | |
Capital share activity: | |
| | | |
| | |
Shares of common stock sold pursuant to the Company's "at the market" program | |
| 9,997,004 | | |
| 5,001,120 | |
Shares of common stock issued pursuant to the Company's dividend reinvestment plan | |
| 501,229 | | |
| 170,800 | |
Total increase (decrease) in capital share activity | |
| 10,498,233 | | |
| 5,171,920 | |
See accompanying notes to the
consolidated financial statements
Eagle Point Credit Company Inc. &
Subsidiaries
Consolidated Statement of Cash
Flows
For the nine months ended September 30,
2022
(expressed in U.S. dollars)
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES | |
| |
Net increase (decrease) in net assets resulting from operations | |
$ | (112,407,366 | ) |
| |
| | |
Adjustments to reconcile net increase
(decrease) in net assets resulting from operations to net cash provided by (used in) operating activities: | |
| | |
Purchases of investments | |
| (302,548,988 | ) |
Proceeds from sales of investments and repayments of principal (1) | |
| 193,963,174 | |
Payment-in-kind interest | |
| (21,777 | ) |
Net realized (gain) loss on investments, foreign currency and cash equivalents | |
| (5,049,475 | ) |
Net realized (gain) loss on extinguishment of Preferred Stock (Note 6) | |
| 744,281 | |
Net realized gain (loss) on extinguishment of Unsecured Notes (Note 7) | |
| 766,155 | |
Net change in unrealized (appreciation) depreciation on investments, foreign currency and cash equivalents | |
| 170,105,984 | |
Net change in unrealized appreciation (depreciation) on liabilities at fair value under the fair value option | |
| (5,660,261 | ) |
Amortization (accretion) included in interest expense | |
| (39,002 | ) |
Amortization (accretion) of premiums or discounts on debt securities | |
| (43,993 | ) |
Changes in assets and liabilities: | |
| | |
Interest receivable | |
| (5,017,987 | ) |
Prepaid expenses | |
| 183,036 | |
Incentive fee payable | |
| 1,803,993 | |
Management fee payable | |
| (179,949 | ) |
Professional fees payable | |
| (196,954 | ) |
Directors' fees payable | |
| (99,375 | ) |
Administration fees payable | |
| 27,553 | |
Due to affiliates | |
| 725 | |
Tax expense payable | |
| (2,212,114 | ) |
Other expenses payable | |
| (28,062 | ) |
Net cash provided by (used in) operating activities | |
| (65,910,402 | ) |
| |
| | |
CASH FLOWS FROM FINANCING ACTIVITIES | |
| | |
Common stock distributions, net of change in common stock distribution payable | |
| (70,050,908 | ) |
Issuance of shares of common stock pursuant
to the Company's "at the market" program, net of commissions and offering expenses | |
| 125,066,099 | |
Issuance of shares of common stock pursuant
to the Company's dividend reinvestment plan, net of change in receivable for shares of common stock issued | |
| 5,746,512 | |
Issuance of 6.50% Series C Term Preferred Stock due 2031 pursuant to the Company's "at the market" program | |
| 8,142,875 | |
Share issuance premium associated with 6.50% Series C Term Preferred Stock due 2031 | |
| 42,790 | |
Issuance of 6.75% Series D Term Preferred Stock pursuant to the Company's "at the market" program | |
| 2,251,135 | |
Issuance of 5.375% Unsecured Notes due 2029 | |
| 93,250,000 | |
Partial Redemption of 6.6875% Unsecured Notes due 2028 | |
| (32,423,775 | ) |
Redemption of 6.75% Unsecured Notes due 2027 | |
| (28,887,200 | ) |
Redemption of Series B Term Preferred Stock due 2026 | |
| (26,959,550 | ) |
Net cash provided by (used in) financing activities | |
| 76,177,978 | |
| |
| | |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | |
| 10,267,576 | |
| |
| | |
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | |
| (48,484 | ) |
| |
| | |
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | |
| 13,916,601 | |
| |
| | |
CASH AND CASH EQUIVALENTS, END OF PERIOD | |
$ | 24,135,693 | |
| |
| | |
Supplemental disclosures: | |
| | |
Cash paid for interest expense | |
$ | 10,759,601 | |
Cash paid for excise tax | |
$ | 2,170,000 | |
Cash paid for 6.75% Series D Preferred Stock distributions | |
$ | 1,363,328 | |
Cash paid for franchise taxes | |
$ | 80,050 | |
| (1) | Proceeds from
sales or maturity of investments includes $69,441,165 of return of capital on CLO equity investments from recurring cash flows and distributions
from called deals |
See accompanying notes to the
consolidated financial statements
Eagle Point Credit Company Inc. &
Subsidiaries
Notes to Consolidated Financial
Statements
September 30, 2022
(Unaudited)
Eagle Point Credit Company
Inc. (the “Company”) is an externally managed, non-diversified closed-end management investment company registered under the
Investment Company Act of 1940, as amended (the “1940 Act”). The Company’s primary investment objective is to generate
high current income, with a secondary objective to generate capital appreciation. The Company seeks to achieve its investment objectives
by investing primarily in equity and junior debt tranches of collateralized loan obligations (“CLOs”) that are collateralized
by a portfolio consisting primarily of below investment grade U.S. senior secured loans with a large number of distinct underlying borrowers
across various industry sectors. The Company may also invest in other related securities and instruments or other securities and instruments
that Eagle Point Credit Management LLC (the “Adviser”) believes are consistent with the Company’s investment objectives,
including senior debt tranches of CLOs, loan accumulation facilities (“LAFs”) and securities and instruments of corporate
issuers. From time to time, in connection with the acquisition of CLO equity, the Company may receive fee rebates from the CLO issuer.
The CLO securities in which the Company primarily seeks to invest are unrated or rated below investment grade and are considered speculative
with respect to timely payment of interest and repayment of principal. The Company’s common stock is listed on the New York Stock
Exchange (the “NYSE”) under the symbol “ECC.”
As of September 30,
2022, the Company had two wholly-owned subsidiaries: Eagle Point Credit Company Sub (Cayman) Ltd. (“Sub I”), a Cayman Islands
exempted company, and Eagle Point Credit Company Sub II (Cayman) Ltd (“Sub II”), a Cayman Islands exempted company. As of
September 30, 2022, Sub I and Sub II represent 37.2% and 5.1% of the Company’s net assets, respectively.
The Company was initially
formed on March 24, 2014 as Eagle Point Credit Company LLC, a Delaware limited liability company and a wholly-owned subsidiary of
Eagle Point Credit Partners Sub Ltd., a Cayman Island exempted company (the “Sole Member”), which, in turn, is a subsidiary
of Eagle Point Credit Partners LP, a private fund managed by the Adviser.
The Company commenced
operations on June 6, 2014, the date the Sole Member contributed, at fair value, a portfolio of cash and securities to the Company.
For the period of June 6,
2014 to October 5, 2014, the Company was a wholly-owned subsidiary of the Sole Member. As of October 5, 2014, the Company had
2,500,000 units issued and outstanding, all of which were held by the Sole Member.
On October 6, 2014,
the Company converted from a Delaware limited liability company into a Delaware corporation (the “Conversion”). At the time
of the Conversion, the Sole Member became a stockholder of Eagle Point Credit Company Inc. In connection with the Conversion, the Sole
Member converted 2,500,000 units of the Delaware limited liability company into shares of common stock in the Delaware corporation at
$20 per share, resulting in 8,656,057 shares and an effective conversion rate of 3.4668 shares per unit. On October 7, 2014, the
Company priced its initial public offering (the “IPO”) and sold an additional 5,155,301 shares of its common stock at a public
offering price of $20 per share. On October 8, 2014, the Company’s shares began trading on the NYSE.
Computershare Corporate
Trust serves as the Company’s custodian.
The Company intends
to operate so as to qualify to be taxed as a regulated investment company (“RIC”) under subchapter M of the Internal Revenue
Code of 1986, as amended (the “Code”), for federal income tax purposes.
The Adviser is the investment
adviser of the Company and manages the investments of the Company subject to the supervision of the Company’s Board of Directors
(the “Board”). The Adviser is registered as an investment adviser with the U.S. Securities and Exchange Commission (the “SEC”)
under the Investment Advisers Act of 1940, as amended. Eagle Point Administration LLC, an affiliate of the Adviser, is the administrator
of the Company (the “Administrator”).
Eagle Point Credit Company Inc. &
Subsidiaries
Notes to Consolidated Financial
Statements
September 30, 2022
(Unaudited)
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Basis of Accounting
The consolidated financial
statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts have been eliminated upon
consolidation. The Company is considered an investment company under accounting principles generally accepted in the United States of
America (“U.S. GAAP”). The Company follows the accounting and reporting guidance applicable to investment companies in the
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946 Financial
Services – Investment Companies. Items included in the consolidated financial statements are measured and presented in United
States dollars.
Use of Estimates
The preparation of the
consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions which affect the
reported amounts included in the consolidated financial statements and accompanying notes as of the reporting date. Actual results may
differ from those estimates.
Valuation of Investments
The most significant
estimate inherent in the preparation of the consolidated financial statements is the valuation of investments. In the absence of readily
determinable fair values, the Adviser determines the fair value of the Company’s investments in accordance with its written valuation
policy, subject to Board oversight. Due to the uncertainty of valuation, this estimate may differ significantly from the value that would
have been used had a ready market for the investments existed, and the differences could be material.
There is no single method
for determining fair value in good faith. As a result, determining fair value requires judgment be applied to the specific facts and circumstances
of each portfolio investment while employing a consistently applied valuation process for the types of investments held by the Company.
The Company accounts
for its investments in accordance with U.S. GAAP, and fair values its investment portfolio in accordance with the provisions of the FASB
ASC Topic 820, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value
and requires enhanced disclosures about fair value measurements. Investments are reflected in the consolidated financial statements at
fair value. Fair value is the estimated amount that would be received to sell an asset, or paid to transfer a liability, in an orderly
transaction between market participants at the measurement date (i.e., the exit price). In accordance with Rule 2a-5 under the 1940
Act adopted by the SEC in December 2020, the Board has designated the Adviser to perform the determination of fair value of the Company’s
investment portfolio, subject to Board oversight and certain other conditions.
The fair value hierarchy
prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability
is impacted by a number of factors, including the type of investment, the characteristics specific to the investment and the state of
the marketplace (including the existence and transparency of transactions between market participants). Investments with readily available
actively quoted prices, or for which fair value can be measured from actively quoted prices in an orderly market, will generally have
a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.
Investments measured
and reported at fair value are classified and disclosed in one of the following categories based on inputs:
| • | Level I – Observable, quoted prices for identical investments in active markets as of the
reporting date. |
| | |
| • | Level II – Quoted prices for similar investments in active markets or quoted prices for identical
investments in markets that are not active as of the reporting date. |
| | |
| • | Level III – Pricing inputs are unobservable for the investment and little, if any, active
market exists as of the reporting date. Fair value inputs require significant judgment or estimation from the Adviser. |
Eagle Point Credit Company Inc. &
Subsidiaries
Notes to Consolidated Financial
Statements
September 30, 2022
(Unaudited)
In certain cases, inputs
used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the determination of which category
within the fair value hierarchy is appropriate for any given investment is based on the lowest level of input significant to that fair
value measurement. The assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment
and consideration of factors specific to the investment.
Investments for which
observable, quoted prices in active markets do not exist are reported at fair value based on Level III inputs. The amount determined to
be fair value may incorporate the Adviser’s own assumptions (including assumptions the Adviser believes market participants would
use in valuing investments and assumptions relating to appropriate risk adjustments for nonperformance and lack of marketability), as
provided for in the Adviser’s valuation policy.
An estimate of fair
value is made for each investment at least monthly taking into account information available as of the reporting date. For financial reporting
purposes, valuations are determined by the Adviser on a quarterly basis.
See Note 3 “Investments”
for further discussion relating to the Company’s investments.
In valuing the Company’s
investments in CLO debt, CLO equity and LAFs, the Adviser considers a variety of relevant factors, including, as applicable, price indications
from a third-party pricing service, recent trading prices for specific investments, recent purchases and sales known to the Adviser in
similar securities and output from a third-party financial model. The third-party financial model contains detailed information on the
characteristics of CLOs, including recent information about assets and liabilities, and is used to project future cash flows. Key inputs
to the model, including, but not limited to assumptions for future loan default rates, recovery rates, prepayment rates, reinvestment
rates and discount rates are determined by considering both observable and third-party market data and prevailing general market assumptions
and conventions as well as those of the Adviser.
A third-party independent
valuation firm is used as an input by the Adviser to determine the fair value of the Company’s investments in CLO equity. The valuation
firm’s advice is only one factor considered in the valuation of such investments, and the Adviser does not solely rely on such advice
in determining the fair value of the Company’s investments in accordance with the 1940 Act.
Temporary Equity
The
Company’s 6.75% Series D Preferred Stock (the “Series D Preferred Stock”) is accounted for in the Company’s
Consolidated Statement of Assets and Liabilities as temporary equity. FASB ASC Topic 480-10-S99, Distinguishing Liabilities from Equity
(“ASC 480”), requires preferred stock that is contingently redeemable upon an occurrence of an event outside the Company’s
control to be classified as temporary equity. Deferred issuance costs on the Series D Preferred Stock consist of fees and
expenses incurred in connection with the issuance net of issuance premiums/(discounts), which are capitalized into temporary equity, and
are amortized only when it is probable the Series D Preferred Stock will become redeemable. As of September 30, 2022, the Company
is compliant with all contingent redemption provisions of the preferred offering; therefore, no deferred issuance costs have been amortized.
The following table reflects Series D Preferred Stock balances as of September 30, 2022.
| |
Shares
Outstanding | | |
Liquidation
Preference | | |
Deferred
Issuance Costs | | |
Carrying Value | |
Series D Preferred Stock | |
| 1,090,937 | | |
$ | 27,273,425 | | |
$ | (1,133,540 | ) | |
$ | 26,139,885 | |
Distributions paid on
the Series D Preferred Stock are included in the Consolidated Statement of Operations as a component of net increase (decrease) in
net assets resulting from operations.
Eagle
Point Credit Company Inc. & Subsidiaries
Notes
to Consolidated Financial Statements
September 30,
2022
(Unaudited)
Other Financial
Assets and Financial Liabilities at Fair Value
The
Fair Value Option (“FVO”) under FASB ASC Subtopic 825-10, Fair Value Option (“ASC 825”), allows companies
an irrevocable election to use fair value as the initial and subsequent accounting measurement for certain financial assets and liabilities.
The decision to elect the FVO is determined on an instrument-by-instrument basis and must be applied to an entire instrument. Assets and
liabilities measured at fair value are required to be reported separately from those instruments measured using another accounting method
and changes in fair value attributable to instrument-specific credit risk on financial liabilities for which the FVO is elected are
required to be presented separately in other comprehensive income. Additionally, upfront offering costs related to such instruments,
inclusive of the costs associated with issuances under the Company’s at-the-market (“ATM”) program, are recognized
in earnings as incurred and are not deferred.
The
Company elected to account for its 6.6875% Unsecured Notes due 2028 (the “Series 2028 Notes”), the 5.375% Unsecured Notes
due 2029 (the “Series 2029 Notes”), 6.75% Unsecured Notes due 2031 (the “Series 2031 Notes”), and 6.50%
Series C Term Preferred Stock due 2031 (the “Series C Term Preferred Stock”) utilizing the FVO under ASC 825.
The primary reason for electing the FVO is to reflect economic events in the same period in which they are incurred and address simplification
of reporting and presentation.
Investment Income
Recognition
Interest income from
investments in CLO debt is recorded using the accrual basis of accounting to the extent such amounts are expected to be collected. Interest
income on investments in CLO debt is generally expected to be received in cash. Amortization of premium or accretion of discount is recognized
using the effective interest method. The Company applies the provisions of Accounting Standards Update No. 2017-08 Premium Amortization
on Purchased Callable Debt Securities (“ASU 2017-08”) in calculating amortization of premium for purchased CLO debt securities.
In certain circumstances,
interest income may be paid in the form of additional investment principal, often referred to as payment-in-kind (“PIK”) interest.
PIK interest is included in interest income and interest receivable through the payment date. The PIK interest rate for CLO debt securities
represents the coupon rate at payment date when PIK interest is received. On the payment date, interest receivable is capitalized as additional
investment principal in the CLO debt security. To the extent the Company does not believe it will be able to collect PIK interest, the
CLO debt security will be placed on non-accrual status, and previously recorded PIK interest income will be reversed.
CLO equity investments
and fee rebates recognize investment income for U.S. GAAP purposes on the accrual basis utilizing an effective interest methodology based
upon an effective yield to maturity utilizing projected cash flows. ASC Topic 325-40, Beneficial Interests in Securitized Financial
Assets, requires investment income from CLO equity investments and fee rebates to be recognized under the effective interest method,
with any difference between cash distributed and the amount calculated pursuant to the effective interest method being recorded as an
adjustment to the cost basis of the investment. It is the Adviser’s policy to update the effective yield for each CLO equity position
held within the Company’s portfolio at the initiation of each investment and each subsequent quarter thereafter.
LAFs
recognize interest income according to the guidance noted in ASC Topic 325-40-35-1, Beneficial Interest in Securitized Financial
Assets, which states that the holder of a beneficial interest in securitized financial assets shall determine interest income over
the life of the beneficial interest in accordance with the effective yield method, provided such amounts are expected to be collected.
FASB ASC 325-40-20 further defines “beneficial interests,” among other things, as “rights to receive all or portions
of specified cash inflows received by a trust or other entity.” FASB ASC 325-40-15-7 also states that for income recognition purposes,
beneficial interests in securitized financial assets (such as those in LAFs) are within the scope of ASC 325-40 because it is customary
for certain industries, such as investment companies, to report interest income as a separate item in their income statements even though
the investments are accounted for at fair value. The amount of interest income from loan accumulation facilities recorded for the nine
months ended September 30, 2022 was $6.5 million.
Eagle
Point Credit Company Inc. & Subsidiaries
Notes
to Consolidated Financial Statements
September 30,
2022
(Unaudited)
Interest income from
investments in bank debt term loans and corporate bonds are recorded using the accrual basis of accounting to the extent such amounts
are expected to be collected. Interest income on investments in bank debt term loans and corporate bonds is generally expected to be received
in cash. Amortization of premium or accretion of discount is recognized using the effective interest method.
Other Income
Other income includes
the Company’s share of income under the terms of fee rebate agreements.
Interest Expense
Interest expense includes
the Company’s distributions associated with its 7.75% Series B Term Preferred Stock due 2026 (the “Series B Term
Preferred Stock”) and Series C Term Preferred Stock, and interest paid associated with its 6.75% Unsecured Notes due 2027 (the
“Series 2027 Notes”), Series 2028 Notes, Series 2029 Notes and Series 2031 Notes (collectively with the
Series 2027 Notes, Series 2028 Notes and Series 2029 Notes, the “Unsecured Notes”).
Interest expense also
includes the Company’s amortization of deferred issuance costs associated with its Series B Term Preferred Stock and Series 2027
Notes, as well as amortization of original issue premiums associated with its Series B Term Preferred Stock and Series C Term
Preferred Stock.
The following table
summarizes the components of interest expense for the nine months ended September 30, 2022:
| |
Series B Term
Preferred Stock | | |
Series C Term
Preferred Stock | | |
Series 2027
Notes | | |
Series 2028
Notes | | |
Series 2029
Notes | | |
Series 2031
Notes | | |
Total | |
Distributions declared and paid | |
$ | 348,229 | | |
$ | 2,572,328 | | |
$ | 238,319 | | |
$ | 1,891,276 | | |
$ | 3,438,918 | | |
$ | 2,270,531 | | |
$ | 10,759,601 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Amortization of deferred issuance costs | |
| 22,590 | | |
| - | | |
| 13,614 | | |
| - | | |
| - | | |
| - | | |
| 36,204 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Amortization of issuance premium | |
| (748 | ) | |
| (74,458 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| (75,206 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total interest expense | |
$ | 370,071 | | |
$ | 2,497,870 | | |
$ | 251,933 | | |
$ | 1,891,276 | | |
$ | 3,438,918 | | |
$ | 2,270,531 | | |
$ | 10,720,599 | |
The Company’s
Series B Term Preferred Stock, Series C Term Preferred Stock and Unsecured Notes had no interest payable outstanding as of September 30,
2022.
See Note 6 “Preferred
Stock” and Note 7 “Unsecured Notes” for further discussion relating to preferred stock issuances and Unsecured Notes
issuances, respectively.
Deferred Issuance
Costs
Deferred
issuance costs on liabilities, which the Company does not measure at fair value under the FVO, consist of fees and expenses incurred in
connection with the issuance of the Series 2027 Notes and Series B Term Preferred Stock. The deferred issuance costs are capitalized
at the time of issuance and amortized using the effective interest method over the respective terms of the Series 2027 Notes and
Series B Term Preferred Stock. Amortization of deferred issuance costs is reflected in interest expense in the Consolidated Statement
of Operations. Upon the redemption of the Series 2027 Notes and Series B Term Preferred Stock on February 14, 2022 and
February 28, 2022, respectively, the remaining balance of unamortized deferred issuance costs associated with such securities was
accelerated into net realized loss. See Note 6 “Preferred Stock” and Note 7 “Unsecured Notes” for further
discussion on the redemption of the Series B Term Preferred Stock and Series 2027 Notes, respectively.
Original Issue
Premiums
Consistent
with FASB ASC Topic 835-30-35-2, original issue premiums on liabilities consist of premiums received in connection with the issuance
of the Series B Term Preferred Stock and Series C Term Preferred Stock as part of the Company’s ATM program. The original
issue premiums are capitalized at the time of issuance and
Eagle Point Credit Company Inc. &
Subsidiaries
Notes to Consolidated Financial
Statements
September 30, 2022
(Unaudited)
amortized using
the effective interest method over the respective terms of the Series B Term Preferred Stock and Series C Term Preferred
Stock. Amortization of original issue premium is reflected as a contra expense under interest expense in the Consolidated Statement
of Operations.
Repurchase of Debt
Securities
The
Company records any gains from the repurchase of the Company’s debt at a discount through open market transactions and subsequent
retirement as a realized gain in the Consolidated Statement of Operations.
Securities Transactions
The Company records
the purchases and sales of securities on trade date. Realized gains and losses on investments sold are recorded on the basis of the specific
identification method.
In certain circumstances
where the Adviser determines it is unlikely to fully amortize a CLO equity or CLO debt investment’s remaining amortized cost, such
remaining cost is written-down to its current fair value and recognized as a realized loss in the Consolidated Statement of Operations.
Cash and Cash Equivalents
The Company has defined
cash and cash equivalents as cash and short-term, highly liquid investments with original maturities of three months or less from the
date of purchase. The Company maintains its cash in bank accounts, which, at times, may exceed federal insured limits. The Adviser monitors
the performance of the financial institution where the accounts are held in order to manage any risk associated with such accounts.
As of September 30,
2022, the Company held cash in a Computershare Corporate Trust interest earning cash deposit account with a balance of $24.1 million.
This account is classified as Level I in the fair value hierarchy.
Foreign Currency
The Company does not
isolate the portion of its results of operations resulting from changes in foreign exchange rates on investments from the fluctuations
arising from changes in the market price of such investments. Such fluctuations are included with the net change in unrealized appreciation
(depreciation) on investments, foreign currency and cash equivalents. Reported net realized foreign exchange gains or losses may arise
from sales of foreign currency, currency gains or losses realized between trade and settlement dates on investment transactions, and the
difference between the amounts of dividends and interest income recorded on the Company’s books and the U.S. dollar equivalent of
the amounts actually received.
Expense Recognition
Expenses are recorded
on the accrual basis of accounting.
Prepaid Expenses
Prepaid expenses consist
primarily of insurance premiums, filing fees, shelf registration expenses and ATM program expenses. Insurance premiums are amortized over
the term of the current policy. Prepaid shelf registration expenses and ATM program expenses represent fees and expenses incurred in connection
with the initial registration of the Company’s current shelf registration and ATM program. Such costs are allocated pro-rata based
on the amount issued relative to the total respective offering amount to paid-in-capital or expense depending on the security being issued
pursuant to the shelf registration and ATM program. Any subsequent costs incurred to maintain the Company’s ATM program are expensed
as incurred.
Any unallocated prepaid
expense balance associated with the shelf registration and the ATM program are accelerated into expense at the earlier of the end of the
program period or at the effective date of a new shelf registration or ATM program.
Offering Expenses
Offering expenses associated
with the issuance and sale of shares of common stock, inclusive of expenses incurred associated with offerings under the ATM program,
are charged to paid-in capital at the time the shares are sold in
Eagle Point Credit Company Inc. &
Subsidiaries
Notes to Consolidated Financial
Statements
September 30, 2022
(Unaudited)
accordance with guidance noted in FASB ASC Topic 946-20-25-5, Investment
Companies – Investment Company Activities – Recognition, during the period incurred.
Federal and Other
Taxes
The Company intends
to continue to operate so as to qualify to be taxed as a RIC under subchapter M of the Code and, as such, to not be subject to federal
income tax on the portion of its taxable income and gains distributed to stockholders. To qualify for RIC tax treatment, among other requirements,
the Company is required to distribute at least 90% of its investment company taxable income, as defined by the Code.
Because U.S.
federal income tax regulations differ from U.S. GAAP, distributions in accordance with tax regulations may differ from net
investment income and realized gains recognized for financial reporting purposes. Differences may be permanent or temporary.
Permanent differences are reclassified among capital accounts in the consolidated financial statements to reflect their tax
character. Temporary differences arise when certain items of income, expense, gain or loss are recognized at some time in the
future. Differences in classification may also result from the treatment of short-term gains as ordinary income for federal income
tax purposes. The tax basis components of distributable earnings may differ from the amounts reflected in the Consolidated Statement
of Assets and Liabilities due to temporary book/tax differences arising primarily from partnerships and passive foreign investment
company investments.
As
of September 30, 2022, the federal income tax cost and net unrealized depreciation on securities were as follows:
Cost for federal income tax purposes | |
$ | 837,573,621 | |
| |
| | |
Gross unrealized appreciation | |
$ | 24,638,017 | |
Gross unrealized depreciation | |
| (181,685,539 | ) |
Net unrealized depreciation | |
$ | (157,047,522 | ) |
For the nine months
ended September 30, 2022, the Company incurred $75,050 in Delaware franchise tax expense.
Distributions
The composition of distributions
paid to common stockholders from net investment income and capital gains are determined in accordance with U.S. federal income tax regulations,
which differ from U.S. GAAP. Distributions to common stockholders are comprised of net investment income, net realized capital gains and
return of capital for U.S. federal income tax purposes and are intended to be paid monthly. Distributions payable to common stockholders
are recorded as a liability on ex-dividend date. Unless a common stockholder opts out of the Company’s dividend reinvestment plan
(the “DRIP”), distributions are automatically reinvested in full shares of the Company as of the payment date, pursuant to
the DRIP. The Company’s common stockholders who opt-out of participation in the DRIP (including those common stockholders whose
shares are held through a broker who has opted out of participation in the DRIP) generally will receive all distributions in cash.
In addition to the regular
monthly distributions, and subject to available taxable earnings of the Company, the Company may make periodic special distributions representing
the excess of the Company’s net taxable income over the Company’s aggregate monthly distributions paid during the year (or
for other purposes).
For
the nine months ended September 30, 2022, the Company declared and paid monthly distributions on common stock of $51.6 million
or $1.20 per share. In addition, the Company paid a special distribution on common stock of $18.5 million or $0.50 per share, which was
payable on January 24, 2022 to shareholders of record as of December 23, 2021.
For
the nine months ended September 30, 2022, the Company declared and paid dividends on the Series B Term
Eagle Point Credit Company Inc. &
Subsidiaries
Notes to Consolidated Financial
Statements
September 30, 2022
(Unaudited)
Preferred Stock
of $0.3 million or approximately $0.32 per share.
For
the nine months ended September 30, 2022, the Company declared and paid dividends on the Series C Term Preferred Stock
of $2.6 million or approximately $1.22 per share.
For
the nine months ended September 30, 2022, the Company declared and paid dividends on the Series D Preferred Stock of
$1.4 million or approximately $1.27 per share.
The characterization
of distributions paid to common stockholders, as set forth in the Consolidated Financial Highlights, reflect estimates made by the Company
for federal income tax purposes. Such estimates are subject to change once the final determination of the source of all distributions
has been made by the Company.
Fair Value Measurement
The following tables
summarize the valuation of the Company’s investments measured and reported at fair value under the fair value hierarchy levels described
in Note 2 “Summary of Significant Accounting Policies” as of September 30, 2022:
Fair Value Measurement (in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level I |
|
|
Level II |
|
|
Level III |
|
|
Total |
|
Assets at Fair Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Equivalents |
|
$ |
24.1 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
24.1 |
|
CLO Debt |
|
|
- |
|
|
|
53.0 |
|
|
|
- |
|
|
|
53.0 |
|
CLO Equity |
|
|
- |
|
|
|
- |
|
|
|
594.2 |
|
|
|
594.2 |
|
Loan Accumulation Facilities |
|
|
- |
|
|
|
- |
|
|
|
22.5 |
|
|
|
22.5 |
|
Asset Backed Securities |
|
|
- |
|
|
|
- |
|
|
|
4.3 |
|
|
|
4.3 |
|
Bank Debt Term Loan |
|
|
- |
|
|
|
0.4 |
|
|
|
- |
|
|
|
0.4 |
|
Common Stock |
|
|
- |
|
|
|
0.1 |
|
|
|
- |
|
|
|
0.1 |
|
Corporate Bonds |
|
|
- |
|
|
|
5.7 |
|
|
|
- |
|
|
|
5.7 |
|
Warrants |
|
|
- |
|
|
|
0.2 |
|
|
|
- |
|
|
|
0.2 |
|
Total Assets at Fair Value |
|
$ |
24.1 |
|
|
$ |
59.4 |
|
|
$ |
621.0 |
|
|
$ |
704.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities at Fair Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2028 Notes |
|
$ |
31.8 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
31.8 |
|
Series 2029 Notes |
|
|
80.5 |
|
|
|
- |
|
|
|
- |
|
|
|
80.5 |
|
Series 2031 Notes |
|
|
41.2 |
|
|
|
- |
|
|
|
- |
|
|
|
41.2 |
|
Series C Term Preferred Stock |
|
|
47.2 |
|
|
|
- |
|
|
|
- |
|
|
|
47.2 |
|
Total Liabilities at Fair Value |
|
$ |
200.7 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
200.7 |
|
Eagle Point Credit Company Inc. &
Subsidiaries
Notes to Consolidated Financial
Statements
September 30, 2022
(Unaudited)
The changes in investments
classified as Level III are as follows for the nine months ended September 30, 2022:
Change in Investments Classified as Level III (in millions) |
|
|
|
|
|
|
|
|
|
|
|
CLO Equity |
|
|
Loan
Accumulation
Facilities |
|
|
Asset Backed
Securities |
|
|
Total |
|
Balance as of January 1, 2022 |
|
$ |
632.7 |
|
|
$ |
47.4 |
|
|
$ |
- |
|
|
$ |
680.1 |
|
Purchases of investments |
|
|
190.7 |
(1) |
|
|
74.1 |
|
|
|
4.3 |
|
|
|
269.1 |
|
Proceeds from sales or maturity of investments |
|
|
(70.3 |
)(2) |
|
|
(99.1 |
)(1) |
|
|
- |
|
|
|
(169.4 |
) |
Net realized gains (losses) and net
change in unrealized appreciation
(depreciation) |
|
|
(158.9 |
) |
|
|
0.1 |
|
|
|
- |
|
|
|
(158.8 |
) |
Balance as of September 30, 2022(3) |
|
$ |
594.2 |
|
|
$ |
22.5 |
|
|
$ |
4.3 |
|
|
$ |
621.0 |
|
Change in unrealized appreciation (depreciation) on investments still held as of September 30, 2022 |
|
$ |
(159.6 |
) |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
(159.6 |
) |
| (1) | Includes $77.8 million of proceeds from sales or
maturity of investments in loan accumulation facilities transferred to purchases of investments in CLO equity. |
| (2) | Includes $69.4
million of return of capital on CLO equity investments from recurring cash flows and distributions from called deals. |
| (3) | There were no
transfers into or out of level III investments during the period. |
The net realized gains
(losses) recorded for Level III investments are reported in the net realized gain (loss) on investments, foreign currency and cash equivalents
balance in the Consolidated Statement of Operations. Net changes in unrealized appreciation (depreciation) are reported in the net change
in unrealized appreciation (depreciation) on investments, foreign currency and cash equivalents balance in the Consolidated Statement
of Operations.
Valuation of
CLO Equity
The Adviser utilizes
the output of a third-party financial model to estimate the fair value of CLO equity investments. The model contains detailed information
on the characteristics of each CLO, including recent information about assets and liabilities from data sources such as trustee reports,
and is used to project future cash flows to the CLO note tranches, as well as management fees.
Asset Backed
Securities
Asset backed securities
held by the Company are generally valued using the mid-point of a non-binding indicative broker quotation as of the reporting date. The
Adviser categorizes asset backed securities held by the Company as Level III investments as an active market does not exist as of the
reporting date.
The following table
summarizes the quantitative inputs and assumptions used for investments categorized as Level III of the fair value hierarchy as of September 30,
2022. In addition to the techniques and inputs noted in the table below, the Adviser may use other valuation techniques and methodologies
when determining the fair value measurements of the Company’s investments, as provided for in the Adviser’s valuation policy
approved by the Board. The table below is not intended to be all-inclusive, but rather provides information on the significant Level III
inputs as they relate to the Company’s fair value measurements as of September 30, 2022. Unobservable inputs and assumptions
are periodically reviewed and updated as necessary to reflect current market conditions.
Eagle Point Credit Company Inc. &
Subsidiaries
Notes to Consolidated Financial
Statements
September 30, 2022
(Unaudited)
| |
| Quantitative Information about Level III Fair Value Measurements |
|
Assets | |
| Fair Value as of
September 30, 2022 | |
|
Valuation
Techniques/Methodologies | |
Unobservable Inputs | |
Range / Weighted Average(1) |
| |
| (in millions) | |
|
| |
| |
|
CLO Equity | |
$ | 568.6 | |
|
Discounted Cash Flows | |
Annual Default Rate (2) | |
0.00% - 9.73% |
| |
| | |
|
| |
Annual Prepayment Rate (2) (3) | |
20% - 25% |
| |
| | |
|
| |
Reinvestment Spread | |
3.33% - 5.09% / 3.59% |
| |
| | |
|
| |
Reinvestment Price (2) | |
95.00% - 99.50% |
| |
| | |
|
| |
Recovery Rate | |
67.76% - 70.00% / 69.60% |
| |
| | |
|
| |
Expected Yield | |
4.13% - 95.58% / 25.39% |
| |
| | |
|
| |
| |
|
Asset Backed Securities | |
| 4.3 | |
|
Indicative Broker Quotation | |
Broker Quotation | |
$98.00 - $98.01 / $98.00 |
| |
| | |
|
| |
| |
|
Total Fair Value of Level III Investments | |
$ | 572.9 | |
|
| |
| |
|
(1) Weighted average calculations are based on the fair value of investments.
(2) A weighted average is not presented as the input in the discounted cash flow model varies over the life of an investment.
(3) 0% is assumed for defaulted and non-performing assets.
Increases (decreases)
in the annual default rate, reinvestment price and expected yield in isolation would result in a lower (higher) fair value measurement.
Increases (decreases) in the reinvestment spread and recovery rate in isolation would result in a higher (lower) fair value measurement.
Changes in the annual prepayment rate may result in a higher (lower) fair value, depending on the circumstances. Generally, a change in
the assumption used for the annual default rate may be accompanied by a directionally opposite change in the assumption used for the annual
prepayment rate and recovery rate.
The Adviser categorizes
CLO equity as Level III investments. Certain pricing inputs may be unobservable. An active market may exist, but not necessarily for CLO
equity investments the Company holds as of the reporting date.
Certain
of the Company’s Level III investments have been valued using unadjusted inputs that have not been internally developed by the Adviser,
including third-party transactions and data reported by trustees. As a result, fair value assets of $22.5 million have been excluded from
the preceding table. Additionally, the preceding table excludes $6.1 million of fair value of newly issued CLO equity valued at
transacted cost and $19.5 million of fair value pertaining to called CLO equity that has not yet been fully paid down and CLO equity with
expected yields below 0% and over 100%.
Valuation of
CLO Debt
The Company’s
investments in CLO debt have been valued using an independent pricing service. The valuation methodology of the independent pricing service
includes incorporating data comprised of observable market transactions, executable bids, broker quotes from dealers with two sided markets,
as well as transaction activity from comparable securities to those being valued. As the independent pricing service contemplates real
time market data and no unobservable inputs or significant judgment has been used by the Adviser in the valuation of the Company’s
investment in CLO debt, such positions are considered Level II assets.
Valuation of
Bank Debt Term Loans, Corporate Bonds and Warrants
Bank debt term loans,
corporate bonds and warrants held by the Company are generally valued using the mid-point of an indicative broker quotation as of the
reporting date. The Adviser categorizes bank debt term loans, corporate bonds and warrants held by the Company as Level II investments
as an active market exists as of the reporting date.
Eagle Point Credit Company Inc. &
Subsidiaries
Notes to Consolidated Financial
Statements
September 30, 2022
(Unaudited)
Valuation of
Common Stock
Common stock held by
the Company is generally valued using the mid-point of an indicative broker quotation as of the reporting date. The Adviser categorizes
common stock held by the Company as a Level II investment as an active market exists as of the reporting date.
Valuation of
Loan Accumulation Facilities
The Adviser determines
the fair value of LAFs in accordance with FASB ASC Topic 820, Fair Value Measurements and Disclosures, utilizing the income approach
as noted in ASC 820-10-55-3F (the “Income Approach”), in which fair value measurement reflects current market expectations
about the receipt of future amounts (i.e. exit price). LAFs are typically short- to medium-term in nature and formed to acquire loans
on an interim basis that are expected to form part of a specific CLO transaction. Pursuant to LAF governing documents, loans acquired
by the LAF are typically required to be transferred to the contemplated CLO transaction at original cost plus accrued interest. In such
situations, because the LAF will receive its full cost basis in the underlying loan assets and the accrued interest thereon upon the consummation
of the CLO transaction, the Adviser determines the fair value of the LAF as follows: (A) the cost of the Company’s investment
(i.e., the principal amount invested), and (B) to the extent the LAF has realized gains (losses) on its underlying loan assets which
are reported by the Trustee during the applicable reporting period, its attributable portion of such realized gains (losses).
In certain circumstances,
the LAF documents can contemplate transferring the underlying loans at a price other than original cost plus accrued interest or the Adviser
may determine that, despite the initial expectation that a CLO transaction would result from a LAF, such a transaction is in fact unlikely
to occur and, accordingly, it is unlikely the loans held by the LAF will be transferred at cost. Rather, the loans held by the LAF will
most likely be sold at market value. In such situations, the Adviser will continue to fair value the LAF consistent with the Income Approach,
but modify the fair value measurement to reflect the change in exit strategy of the LAF to incorporate market expectations of the receipt
of future amounts (i.e. exit price). As such, the fair value of the LAF is most appropriately determined by reference to the market value
of the LAF’s underlying loans, which is reflective of the price at which the LAF could sell its loan assets in an orderly transaction
between market participants. As such, in these situations, the Adviser will continue utilizing the Income Approach and determine the fair
value of the LAF as follows: (A) the cost of the Company’s investment (i.e., the principal amount invested), (B) the Company’s
attributable portion of the unrealized gain (loss) on the LAF’s underlying loan assets, and (C) to the extent the LAF has realized
gains (losses) on its underlying loan assets which are reported by the Trustee during the applicable reporting period, its attributable
portion of such realized gains (losses). The Adviser’s measure of the Company’s attributable portion of the unrealized gain
(loss) on the LAF’s underlying loan assets takes into account the Adviser’s current market expectations of the receipt of
future amounts on such assets, which may be impacted by various factors including any applicable change in market conditions or new information.
The Adviser categorizes
LAFs as Level III investments. There is no active market and prices are unobservable.
Valuation of
Series 2028 Notes, Series 2029 Notes, Series 2031 Notes and Series C Term Preferred Stock
The Series 2028
Notes, Series 2029 Notes, Series 2031 Notes and Series C Term Preferred Stock are considered Level I securities and are
valued at their official closing price, taken from the NYSE.
Investment Risk Factors
and Concentration of Investments
The following list is
not intended to be a comprehensive list of all of the potential risks associated with the Company. The Company’s prospectus provides
a detailed discussion of the Company’s risks and considerations. The risks described in the prospectus are not the only risks the
Company faces. Additional risks and uncertainties not currently known to the Company or that are currently deemed to be immaterial also
may materially and adversely affect its business, financial condition and/or operating results.
Eagle Point Credit Company Inc. &
Subsidiaries
Notes to Consolidated Financial
Statements
September 30, 2022
(Unaudited)
Global Economic
Risks
Terrorist acts, acts
of war, natural disasters, outbreaks or pandemics may disrupt the Company’s operations, as well as the operations of the businesses
in which it invests. Such acts have created, and continue to create, economic and political uncertainties and have contributed to global
economic instability. For example, many countries have experienced outbreaks of infectious illnesses in recent decades, including swine
flu, avian influenza, SARS and COVID-19. Since December 2019, the spread of COVID-19 has caused social unrest and commercial disruption
on a global scale.
Global economies and
financial markets are highly interconnected, and conditions and events in one country, region or financial market may adversely impact
issuers in a different country, region or financial market. The COVID-19 pandemic has magnified these risks and has had, and may continue
to have, a material adverse impact on local economies in the affected jurisdictions and also on the global economy, as cross border commercial
activity and market sentiment have been impacted by the outbreak and government and other measures seeking to contain its spread. The
effects of the COVID-19 pandemic contributed to increased volatility in global financial markets and have affected countries, regions,
companies, industries and market sectors more dramatically than others. The COVID-19 pandemic has had, and any other outbreak of an infectious
disease or serious environmental or public health concern could have, a significant negative impact on economic and market conditions,
could exacerbate pre-existing political, social and economic risks in certain countries or regions and could trigger a prolonged period
of global economic slowdown, which may impact the Company and its underlying investments.
Following the onset
of the pandemic, certain CLOs held by the Company experienced increased defaults by underlying borrowers. Obligor defaults and rating
agency downgrades caused, and may in the future cause, payments that would have otherwise been made to the CLO equity or CLO debt securities
that the Company held to instead be diverted to buy additional loans within a given CLO or paid to senior CLO debt holders as an early
amortization payment. In addition, defaults and downgrades of underlying obligors caused, and may in the future cause, a decline in the
value of CLO securities generally. If CLO cash flows or income decrease as a result of the pandemic, the portion of the Company’s
distribution comprised of a return of capital could increase or distributions could be reduced.
Concentration Risk
The Company is classified
as “non-diversified” under the 1940 Act. As a result, the Company can invest a greater portion of its assets in obligations
of a single issuer than a “diversified” fund. The Company may therefore be more susceptible than a diversified fund to being
adversely affected by any single corporate, economic, political or regulatory occurrence.
Liquidity Risk
The securities issued
by CLOs generally offer less liquidity than below investment grade or high-yield corporate debt, and are subject to certain transfer restrictions
imposed on certain financial instruments and other eligibility requirements on prospective transferees. Other investments the Company
may purchase through privately negotiated transactions may also be illiquid or subject to legal restrictions on their transfer. As a result
of this illiquidity, the Company’s ability to sell certain investments quickly, or at all, in response to changes in economic and
other conditions and to receive a fair price when selling such investments may be limited, which could prevent the Company from making
sales to mitigate losses on such investments.
Risks of Investing
in CLOs
The Company’s
investments consist primarily of CLO securities and the Company may invest in other related structured finance securities. CLOs and structured
finance securities are generally backed by an asset or a pool of assets (typically senior secured loans and other credit-related assets
in the case of a CLO) which serve as collateral. The Company and other investors in CLOs and related structured finance securities ultimately
bear the credit risk of the underlying collateral. If there are defaults or the relevant collateral otherwise underperforms, scheduled
payments to senior tranches of such securities take precedence over those of junior tranches, and scheduled payments to junior tranches
have a priority in the right of payment to subordinated/equity tranches. Therefore, CLO and other structured finance securities may present
risks similar to those of the other types of debt obligations
Eagle Point Credit Company Inc. &
Subsidiaries
Notes to Consolidated Financial
Statements
September 30, 2022
(Unaudited)
and, in fact, such
risks may be of greater significance in the case of CLO and other structured finance securities. In addition to the general risks
associated with investing in debt securities, CLO securities carry additional risks, including, but not limited to: (1) the
possibility that distributions from collateral assets will not be adequate to make interest or other payments; (2) the quality
of the collateral may decline in value or default; (3) the fact that investments in CLO equity and junior debt tranches will
likely be subordinate in the right of payment to other senior classes of CLO debt; and (4) the complex structure of the
security may not be fully understood at the time of investment and may produce disputes with the issuer or unexpected investment
results.
Risks of Investing
in Loan Accumulation Facilities
The Company invests
in LAFs, which are short- to medium-term facilities often provided by a bank that will serve as placement agent or arranger in a CLO transaction
and which acquire loans on an interim basis that are expected to form part of the portfolio of a future CLO. Investments in LAFs have
risks similar to those applicable to investments in CLOs. Leverage is typically utilized in such a facility and as such the potential
risk of loss will be increased for such facilities employing leverage. In the event a planned CLO is not consummated, or the loans are
not eligible for purchase by the CLO, the Company may be responsible for either holding or disposing of the loans. This could expose the
Company primarily to credit and/or mark-to-market losses, and other risks.
Interest Rate Risk
The fair value of certain
investments held by the Company may be significantly affected by changes in interest rates. In general, rising interest rates will negatively
affect the price of a fixed rate debt instrument and falling interest rates will have a positive effect on the price of a fixed rate instrument.
Although senior secured loans are generally floating rate instruments, the Company’s investments in senior secured loans through
equity and junior debt tranches of CLOs are sensitive to interest rate levels and volatility. Although CLOs are generally structured to
mitigate the risk of interest rate mismatch, there may be some difference between the timing of interest rate resets on the assets and
liabilities of a CLO. Such a mismatch could have a negative effect on the amount of funds distributed to CLO equity investors. In addition,
in the event of a significant rising interest rate environment and/or economic downturn, loan defaults may increase and result in credit
losses which may adversely affect the Company’s cash flow, fair value of its assets and operating results. In the event that the
Company’s interest expense were to increase relative to income, or sufficient financing became unavailable, return on investments
and cash available for distribution to stockholders or to make other payments on the Company’s securities would be reduced.
LIBOR Risk
Certain CLO equity and
debt securities in which the Company invests earn interest at, and certain CLOs in which it invests obtain financing at, a floating rate
based on LIBOR.
On July 27, 2017,
the Chief Executive of the Financial Conduct Authority (“FCA”), the United Kingdom's financial regulatory body and regulator
of LIBOR, announced that after 2021 it would cease its active encouragement of banks to provide the quotations needed to sustain LIBOR
due to the absence of an active market for interbank unsecured lending and other reasons. On March 5, 2021, the FCA announced that
all LIBOR settings would either cease to be provided by any administrator, or no longer be representative (i) immediately after December 31,
2021 for all GBP, EUR, CHF and JPY LIBOR settings and one-week and two-month US dollar LIBOR settings, and (ii) immediately after
June 30, 2023 for the remaining US dollar LIBOR settings, including three-month US dollar LIBOR.
Replacement rates that
have been identified include the Secured Overnight Financing Rate (SOFR, which is intended to replace U.S. dollar LIBOR and measures the
cost of overnight borrowings through repurchase agreement transactions collateralized with U.S. Treasury securities) and the Sterling
Overnight Index Average Rate (SONIA, which is intended to replace GBP LIBOR and measures the overnight interest rate paid by banks for
unsecured transactions in the sterling market), although other replacement rates could be adopted by market participants. On July 29,
2021, the Alternative Reference Rates Committee (“ARRC”) announced that it recommended Term SOFR, a similar forward-looking
term rate which will be based on SOFR, for business loans. As of the date of the consolidated financial statements, senior secured loans
in which CLOs invest, and CLO debt
Eagle Point Credit Company Inc. &
Subsidiaries
Notes to Consolidated Financial
Statements
September 30, 2022
(Unaudited)
securities, have begun
to transition to utilizing SOFR based interest rates.
Because loans held
by CLO issuers and other issuers in which the Company invests may reference LIBOR, the termination of LIBOR presents risks to such issuers
and, indirectly, the Company. Investors should be aware that: (a) the transition away from LIBOR could affect the level of the published
rate, including to cause it to be lower and/or more volatile than it would otherwise be; (b) if the applicable rate of interest
on any CLO security is calculated with reference to a tenor which is discontinued, such rate of interest will then be determined by the
provisions of the affected CLO security, which may include determination by the relevant calculation agent in its discretion; (c) the
administrator of LIBOR will not have any involvement in the CLOs or loans and may take any actions in respect of LIBOR without regard
to the effect of such actions on the CLOs or loans; and (d) any uncertainty in the value of LIBOR or, the development of a widespread
market view that LIBOR has been manipulated or any uncertainty in the status of LIBOR as a benchmark interest rate due to its anticipated
discontinuation may adversely affect the liquidity of the securities in the secondary market and their market value. Any of the above
or any other significant change to the setting of LIBOR could have a material adverse effect on the value of, and the amount payable
under, (i) any underlying assets of a CLO which pay interest linked to a LIBOR rate and (ii) the CLO securities in which the
Company invests.
Once LIBOR is eliminated
as a benchmark rate, market participants (including the Company) may be subject to the risk that an acceptable transition mechanism may
not be found or may not be suitable for a particular issuer. In addition, any alternative reference rate and any pricing adjustments
required in connection with the transition from LIBOR may impose costs on issuers or may not be suitable to close out positions and enter
into replacement trades. Any such consequence could have a material adverse effect on an issuer in whose securities the Company may invest
(or its underlying obligors) and their ability to make distributions or service outstanding debt. While the issuers and the trustee of
a CLO may enter into a reference rate amendment or the collateral manager may designate a designated reference rate, in each case, subject
to the conditions described in a CLO indenture, there can be no assurance that a change to any alternative benchmark rate (a) will
be adopted, (b) will effectively mitigate interest rate risks or result in an equivalent methodology for determining the interest
rates on the floating rate instrument, (c) will be adopted prior to any date on which the issuer suffers adverse consequences from
the elimination or modification or potential elimination or modification of LIBOR or (d) will not have a material adverse effect
on the holders of the CLO securities.
To the extent that
any replacement rate utilized for senior secured loans differs from that utilized for a CLO that holds those loans, the CLO would experience
an interest rate mismatch between its assets and liabilities, which could have an adverse impact on the Company’s net investment
income and portfolio returns.
Rising Interest
Rate Environment
As of the date of the
financial statements, the U.S. Federal Reserve has increased certain interest rates as part of its efforts to combat rising inflation.
The prospect of further rate increases magnifies the risks associated with rising interest rates described under “Interest Rate
Risk,” above. The senior secured loans underlying the CLOs in which the Company invests typically have floating interest rates.
A rising interest rate environment may increase loan defaults, resulting in losses for the CLOs in which the Company invests. In addition,
increasing interest rates may lead to higher prepayment rates, as corporate borrowers look to avoid escalating interest payments or refinance
floating rate loans. Further, a general rise in interest rates will increase the financing costs of the CLOs. However, since many of
the senior secured loans within these CLOs have benchmark rate floors, if the applicable benchmark rate is below the floor, there may
not be corresponding increases in investment income, which could result in the CLO not having adequate cash to make interest or other
payments on the securities which the Company holds.
Leverage Risk
The Company has incurred
leverage through the issuance of preferred stock and unsecured notes, and the Company may incur additional leverage, directly or indirectly,
through one or more special purpose vehicles, including indebtedness for borrowed money and leverage in the form of derivative transactions,
repurchase agreement transactions, short sale transactions, additional shares of preferred stock and other structures and
Eagle Point Credit Company Inc. &
Subsidiaries
Notes to Consolidated Financial
Statements
September 30, 2022
(Unaudited)
instruments, in significant
amounts and on terms the Adviser and the Board deem appropriate, subject to applicable limitations under the 1940 Act. Such leverage
may be used for the acquisition and financing of the Company’s investments, to pay fees and expenses and for other purposes. Any
such leverage does not include embedded or inherent leverage in CLO structures in which the Company invests or in derivative instruments
in which the Company may invest. Accordingly, there is effectively a layering of leverage in the Company’s overall structure. The
more leverage is employed, the more likely a substantial change will occur in the Company’s net asset value (“NAV”).
For instance, any decrease in the Company’s income would cause net income to decline more sharply than it would have had the Company
not borrowed. In addition, any event adversely affecting the value of an investment would be magnified to the extent leverage is utilized.
Highly Subordinated
and Leveraged Securities Risk
The Company’s
portfolio includes equity and junior debt investments in CLOs, which involve a number of significant risks. CLO equity and junior debt
securities are typically very highly leveraged (with CLO equity securities typically being leveraged nine to thirteen times), and therefore
the junior debt and equity tranches in which the Company invests are subject to a higher degree of risk of total loss. In particular,
investors in CLO securities indirectly bear risks of the collateral held by such CLOs. The Company generally has the right to receive
payments only from the CLOs, and generally does not have direct rights against the underlying borrowers or the entity that sponsored
the CLO.
Credit Risk
If
a CLO in which the Company invests, an underlying asset of any such CLO or any other type of credit investment in the Company’s
portfolio declines in price or fails to pay interest or principal when due because the issuer or debtor, as the case may be, experiences
a decline in its financial status either or both the Company’s income and NAV may be adversely impacted. Non-payment would result
in a reduction of the Company’s income, a reduction in the value of the applicable CLO security or other credit investment experiencing
non-payment and, potentially, a decrease in the Company’s NAV. To the extent the credit rating assigned to a security in the Company’s
portfolio is downgraded, the market price and liquidity of such security may be adversely affected. In addition, if a CLO in which the
Company invests triggers an event of default as a result of failing to make payments when due or for other reasons, the CLO would be
subject to the possibility of liquidation, which could result in full loss of value to the CLO equity and junior debt investors. CLO
equity tranches are the most likely tranche to suffer a loss of all of their value in these circumstances. Heightened inflationary
pressures could increase the risk of default by our underlying obligors.
Low Or Unrated Securities
Risks
The Company invests
primarily in securities that are rated below investment grade or, in the case of CLO equity securities, are not rated by a national securities
rating service. The primary assets underlying the CLO security investments are senior secured loans, although these transactions may
allow for limited exposure to other asset classes including unsecured loans, high-yield bonds, emerging market loans or bonds and structured
finance securities with underlying exposure to collateralized loan obligation and other collateralized debt obligation tranches, residential
mortgage backed securities, commercial mortgage backed securities, trust preferred securities and other types of securitizations. CLOs
generally invest in lower-rated debt securities that are typically rated below Baa/BBB by Moody’s, S&P or Fitch. In addition,
the Company may obtain direct exposure to such financial assets/instruments. Securities that are not rated or are rated lower than Baa
by Moody’s or lower than BBB by S&P or Fitch are sometimes referred to as “high-yield” or “junk.” High-yield
debt securities have greater credit and liquidity risk than investment grade obligations. High-yield debt securities are generally unsecured
and may be subordinated to certain other obligations of the issuer thereof. The lower rating of high-yield debt securities and below
investment grade loans reflects a greater possibility that adverse changes in the financial condition of an issuer or in general economic
conditions or both may impair the ability of the issuer thereof to make payments of principal or interest.
Risks Related to
Russia’s Invasion of Ukraine
Russia’s military
incursion into Ukraine, the response of the United States and other countries, and the potential for wider conflict, has increased volatility
and uncertainty in the financial markets and may adversely affect the
Eagle Point Credit Company Inc. &
Subsidiaries
Notes to Consolidated Financial
Statements
September 30, 2022
(Unaudited)
Company. Immediately
following Russia’s invasion, the United States and other countries imposed wide-ranging economic sanctions on Russia, individual
Russian citizens, and Russian banking entities and other businesses, including those in the energy sector. These unprecedented sanctions
have been highly disruptive to the Russian economy and, given the interconnectedness of today’s global economy, could have broad
and unforeseen macroeconomic implications. The ultimate nature, extent and duration of Russia’s military actions (including the
potential for cyberattacks and espionage), and the response of state governments and businesses, cannot be predicted at this time. However,
further escalation of the conflict could result in significant market disruptions, and negatively affect global supply chains, inflation
and global growth. These and any related events could negatively impact the performance of the Company’s underlying obligors and/or
the market value of our common shares or preferred stock.
4. | RELATED PARTY TRANSACTIONS |
Investment Adviser
On June 6, 2014,
the Company entered into an investment advisory agreement with the Adviser, which was amended and restated on May 16, 2017 (the
“Advisory Agreement”). Pursuant to the terms of the Advisory Agreement, the Company pays the Adviser a management fee and
an incentive fee for its services.
The management fee
is calculated and payable quarterly, in arrears, at an annual rate equal to 1.75% of the Company’s “total equity base.”
“Total equity base” means the net asset value attributable to the common stock and the paid-in, or stated, capital of the
Preferred Stock. The management fee is calculated based on the “total equity base” at the end of the most recently completed
calendar quarter end, and, with respect to any common stock or preferred stock issued or repurchased during such quarter, is adjusted
to reflect the number of days during such quarter that such common stock and/or preferred stock, if any, was outstanding. The management
fee for any partial quarter is pro-rated (based on the number of days actually elapsed at the end of such partial quarter relative to
the total number of days in such calendar quarter). The Company was charged management fees of $7.3 million for the nine months ended
September 30, 2022, and has a payable balance of $2.4 million as of September 30, 2022.
The incentive fee is
calculated and payable quarterly, in arrears, based on the pre-incentive fee net investment income (the “PNII”) of the Company
for the immediately preceding calendar quarter. For this purpose, PNII means interest income, dividend income and any other income (including
any other fees, such as commitment, origination, structuring, diligence and consulting fees or other fees the Company receives from an
investment) accrued during the calendar quarter, minus the Company’s operating expenses for the quarter (including the base management
fee, expenses payable under the Administration Agreement (as defined below) and any interest expense and distributions paid on any issued
and outstanding preferred stock or debt, but excluding the incentive fee). PNII includes, in the case of investments with a deferred
interest feature (such as original issue discount, debt instruments with payment in-kind interest and zero coupon securities), accrued
income that the Company has not yet received in cash. PNII does not include any realized or unrealized capital gains or realized or unrealized
capital losses. The portion of incentive fee that is attributable to deferred interest (such as payment-in-kind interest or original
issue discount) will be paid to the Adviser, without interest, only if and to the extent the Company actually receives such deferred
interest in cash, and any accrual thereof will be reversed if and to the extent such interest is reversed in connection with any write-off
or similar treatment of the investment giving rise to any deferred interest accrual.
PNII, expressed as
a rate of return on the value of the Company’s net assets at the end of the immediately preceding calendar quarter, is compared
to a hurdle rate of 2.00% per quarter. The Company pays the Adviser an incentive fee with respect to the Company’s PNII in each
calendar quarter as follows: (1) no incentive fee in any calendar quarter in which the Company’s PNII does not exceed the
hurdle rate of 2.00%; (2) 100% of the Company’s PNII with respect to that portion of such PNII, if any, exceeding the hurdle
rate but equal to or less than 2.50% in any calendar quarter; and (3) 20% of the amount of the Company’s PNII, if any, exceeding
2.50% in any calendar quarter. The Company incurred incentive fees of $12.0 million for the nine months ended September 30, 2022,
Eagle Point Credit Company Inc. &
Subsidiaries
Notes to Consolidated Financial
Statements
September 30, 2022
(Unaudited)
and has a payable
balance of $5.3 million as of September 30, 2022. For the nine months ended September 30, 2022, the Adviser has
voluntarily waived a portion of the incentive fee in the amount of $0.3 million. The waived incentive fee is not subject to
recoupment by the Adviser.
Administrator
Effective June 6,
2014, the Company entered into an administration agreement (the “Administration Agreement”) with the Administrator, an affiliate
of the Adviser. Pursuant to the Administration Agreement, the Administrator performs, or arranges for the performance of, the Company’s
required administrative services, which include being responsible for the financial records which the Company is required to maintain
and preparing reports which are disseminated to the Company’s stockholders. In addition, the Administrator provides the Company
with accounting services, assists the Company in determining and publishing its net asset value, oversees the preparation and filing
of the Company’s tax returns, monitors the Company’s compliance with tax laws and regulations, and prepares and assists the
Company with any audits by an independent public accounting firm of the consolidated financial statements. The Administrator is also
responsible for printing and disseminating reports to the Company’s stockholders and maintaining the Company’s website, providing
support to investor relations, generally overseeing the payment of the Company’s expenses and the performance of administrative
and professional services rendered to the Company by others, and providing such other administrative services as the Company may from
time to time designate.
Payments under the
Administration Agreement are equal to an amount based upon the Company’s allocable portion of the Administrator’s overhead
in performing its obligations under the Administration Agreement, including rent, the fees and expenses associated with performing compliance
functions and the Company’s allocable portion of the compensation of the Company’s chief compliance officer, chief financial
officer, chief operating officer and the Company’s allocable portion of the compensation of any related support staff. The
Company’s allocable portion of such compensation is based on an allocation of the time spent on the Company relative to other matters.
To the extent the Administrator outsources any of its functions, the Company pays the fees on a direct basis, without profit to the Administrator.
Certain accounting and other administrative services have been delegated by the Administrator to SS&C Technologies, Inc. (“SS&C”).
The Administration Agreement may be terminated by the Company without penalty upon not less than sixty days’ written notice to
the Administrator and by the Administrator upon not less than ninety days’ written notice to the Company. The Administration Agreement
is approved by the Board, including by a majority of the Company’s independent directors, on an annual basis.
For the nine months
ended September 30, 2022, the Company was charged a total of $0.8 million in administration fees consisting of $0.6 million and
$0.2 million, relating to services provided by the Administrator and SS&C, respectively, which are included in the Consolidated Statement
of Operations and, of which $0.2 million was payable as of September 30, 2022.
Affiliated Ownership
As of September 30,
2022, the Adviser and senior investment team held an aggregate of 3.3% of the Company’s common stock. This represented 3.1% of
the total outstanding voting stock of the Company as of September 30, 2022. Additionally, the senior investment team held an aggregate
of 0.4% of the Series 2028 Notes, respectively, as of September 30, 2022.
Exemptive Relief
On March 17, 2015,
the SEC issued an order granting the Company exemptive relief to co-invest in certain negotiated investments with affiliated investment
funds managed by the Adviser, subject to certain conditions.
As of December 31,
2021, there were 100,000,000 shares of common stock authorized, of which 37,526,810 shares were issued and outstanding.
Eagle Point Credit Company Inc. &
Subsidiaries
Notes to Consolidated Financial
Statements
September 30, 2022
(Unaudited)
Pursuant to a prospectus
supplement filed with the SEC on December 20, 2021, the Company launched an ATM offering to sell up to $125.0 million aggregate
amount of its common stock. Pursuant to a prospectus supplement filed with the SEC on June 10, 2022, the Company updated the ATM
offering to allow the Company to sell up to $225.0 million aggregate amount of its common stock (exclusive of any shares of common stock
previously sold under the offering).
For the nine months
ended September 30, 2022, the Company sold 9,997,004 shares of its common stock, pursuant to the ATM offerings for total net proceeds
to the Company of $125.1 million. In connection with such sales, the Company paid a total of $2.2 million in sales agent commissions.
For the nine months
ended September 30, 2022, 501,229 shares of common stock were issued in connection with the DRIP for total net proceeds to the Company
of $6.1 million.
As of September 30,
2022, there were 100,000,000 shares of common stock authorized, of which 48,025,043 shares were issued and outstanding.
As of September 30,
2022, there were 20,000,000 shares of preferred stock authorized, par value $0.001 per share, of which 2,172,553 shares of Series C
Term Preferred Stock were issued and outstanding and 1,090,937 shares of Series D Preferred Stock were issued and outstanding.
Except where otherwise
stated in the 1940 Act or the Company’s certificate of incorporation, each holder of Preferred Stock will be entitled to one vote
for each share of preferred stock held on each matter submitted to a vote of the Company’s stockholders. The Company’s preferred
stockholders and common stockholders will vote together as a single class on all matters submitted to the Company’s stockholders.
Additionally, the Company’s preferred stockholders will have the right to elect two Preferred Directors at all times, while the
Company’s preferred stockholders and common stockholders, voting together as a single class, will elect the remaining members of
the Board.
Mandatorily Redeemable
Preferred Stock
The Company has accounted
for its Series B Term Preferred Stock and Series C Term Preferred Stock as Liabilities under ASC 480 due to their mandatory
redemption requirements.
On February 28,
2022, the Company redeemed the outstanding 1,078,382 shares of Series B Term Preferred Stock at a redemption price of $25 per share
plus accrued and unpaid dividends to but excluding the date of redemption. Upon the redemption of the Series B Term Preferred Stock,
the Company accelerated $0.7 million of unamortized deferred issuance costs into net realized loss on extinguishment of Preferred Stock
in the Consolidated Statement of Operations.
The Company is required
to redeem all outstanding shares of the Series C Term Preferred Stock on June 30, 2031, at a redemption price of $25 per share
(the “Series C Liquidation Preference”), plus accrued but unpaid dividends, if any. At any time on or after June 16,
2024, the Company may, at its sole option, redeem the outstanding shares of the Series C Term Preferred Stock.
The Company has elected
the FVO under ASC 825 for its Series C Term Preferred Stock. Accordingly, the Series C Term Preferred Stock is measured at
fair value.
The estimated change
in fair value of the Series C Term Preferred Stock attributable to market risk for the nine months ended September 30, 2022
is $1.6 million, which is recorded as unrealized (appreciation) depreciation on liabilities at fair value under the FVO on the Consolidated
Statement of Operations.
Eagle Point Credit Company Inc. &
Subsidiaries
Notes to Consolidated Financial
Statements
September 30, 2022
(Unaudited)
The estimated change
in fair value of the Series C Term Preferred Stock attributable to instrument-specific credit risk for the nine months ended September 30,
2022 is $6.1 million, which is recorded as unrealized (appreciation) depreciation on liabilities at fair value under the FVO on the Consolidated
Statement of Comprehensive Income. The Company defines the change in fair value attributable to instrument-specific credit risk as the
excess of the total change in fair value over the change in fair value attributable to changes in a base market rate, such as a Markit
CDX North America Investment Grade Index with a similar maturity to the instrument being valued.
Preferred Stock
The Company has accounted
for its Series D Preferred Stock as temporary equity under ASC 480. Accordingly, the Series D Preferred Stock
is reflected in the Consolidated Statement of Assets and Liabilities at its $25 per share liquidation preference (the “Series D
Liquidation Preference”), net of deferred issuance costs. The deferred issuance costs will remain unamortized until it is probable
the Series D Preferred Stock will be redeemed.
At any time on or after
November 29, 2026, the Company may, at its sole option, redeem the outstanding shares of the Series D Preferred Stock at the
Series D Liquidation Preference, plus accrued but unpaid dividends.
ATM Program
Pursuant to a prospectus
supplement filed with the SEC on December 20, 2021, the Company launched an ATM offering to sell up to 1,900,000 shares of Series C
Term Preferred Stock and 2,500,000 shares of Series D Preferred Stock with an aggregate liquidation preference of $47.5 million
and $62.5 million, respectively. Pursuant to a prospectus supplement filed with the SEC on June 10, 2022, the Company updated the
ATM offering to allow the Company to sell up to 800,000 shares of Series C Term Preferred Stock and 200,000 shares of Series D
Preferred Stock with an aggregate liquidation preference of $20.0 million and $5.0 million, respectively (in each case, exclusive of
any shares of such preferred stock previously sold pursuant to the ATM offering).
For the nine months
ended September 30, 2022, the Company sold 325,715 shares of its Series C Term Preferred Stock and 90,937 shares of its Series D
Preferred Stock, pursuant to the ATM offerings for total proceeds to the Company of $10.2 million. In connection with such sales, the
Company paid a total of $0.2 million in sales agent commissions.
See Note 8 “Asset
Coverage” for further discussion on the Company’s calculation of asset coverage with respect to its Preferred Stock.
As of September 30,
2022, there was $32.4 million in aggregate principal amount of Series 2028 Notes, $93.3 million in aggregate principal amount of
Series 2029 Notes, and $44.9 million in aggregate principal amount of Series 2031 Notes issued and outstanding.
The Unsecured Notes
were issued in minimum denominations of $25 and integral multiples of $25 in excess thereof.
On January 24,
2022, the Company closed an underwritten public offering of $87.0 million in aggregate principal amount of its Series 2029 Notes,
resulting in net proceeds to the Company of $83.9 million after payment of underwriting discounts and commissions of $2.7 million and
offering expenses of $0.4 million.
Subsequently, on January 28,
2022, the underwriters purchased an additional $6.3 million in aggregate principal amount of the Series 2029 Notes pursuant to the
underwriters’ overallotment option, which resulted in additional net proceeds to the Company of $6.1 million after payment of underwriting
discounts and commissions of $0.2 million.
Eagle Point Credit Company Inc. &
Subsidiaries
Notes to Consolidated Financial
Statements
September 30, 2022
(Unaudited)
The Series 2029
Notes will mature on January 31, 2029 and 100% of the aggregate principal amount will be paid at maturity. The Company may redeem
the Series 2029 Notes in whole or in part at any time or from time to time at the Company’s option, on or after January 31,
2025.
The Company has accounted
for its Series 2029 Notes utilizing the FVO under ASC 825. Accordingly, the Series 2029 Notes are measured at
their fair value and issuance costs in the aggregate amount of $3.3 million, which consisted of $2.9 million of underwriting commissions,
$0.4 million of professional fees and other expenses, were expensed as incurred in the nine months ended September 30, 2022.
On
February 14, 2022, the Company redeemed the total aggregate principal amount of $28.9 million related to the issued and outstanding
Series 2027 Notes at a redemption price of $25 per Series 2027 Note plus accrued and unpaid interest to, but excluding the
date of redemption. Upon redemption of the Series 2027 Notes, the Company accelerated $0.8 million
of unamortized deferred issuance costs into net realized loss on extinguishment of Unsecured Notes in the Consolidated Statement of Operations.
On February 14,
2022, the Company redeemed 50% or $32.4 million of the aggregate principal amount of the issued and outstanding Series 2028 Notes
at a redemption price of $25 per Series 2028 Note plus accrued and unpaid interest to, but excluding the date of redemption.
The Series 2028
Notes will mature on April 30, 2028 and 100% of the remaining aggregate principal amount will be paid at maturity. The Company may
redeem the Series 2028 Notes in whole or in part at any time or from time to time at the Company’s option.
The Company has accounted
for its Series 2028 Notes utilizing the FVO under ASC 825. Accordingly, the Series 2028 Notes are measured at fair value under
the FVO.
The Series 2031
Notes will mature on March 31, 2031 and 100% of the aggregate principal amount will be paid at maturity. The Company may redeem
the Series 2031 Notes in whole or in part at any time or from time to time at the Company’s option, on or after March 29,
2024.
The Company has accounted
for its Series 2031 Notes utilizing the FVO under ASC 825. Accordingly, the Series 2031 Notes are measured at fair value under
the FVO.
The estimated change
in fair value of the Series 2028 Notes, Series 2029 Notes and Series 2031 Notes attributable to market risk for the nine
months ended September 30, 2022 is $1.1 million, $1.8 million and $1.2 million, respectively, which is recorded as unrealized (appreciation)
depreciation on liabilities at fair value under the FVO on the Consolidated Statement of Operations.
The estimated change
in fair value of the Series 2028 Notes, Series 2029 Notes and Series 2031 Notes attributable to instrument-specific credit
risk for the nine months ended September 30, 2022 is $0.3 million, $11.0 million, and $4.5 million, respectively, which is recorded
as unrealized (appreciation) depreciation on liabilities at fair value under the FVO on the Consolidated Statement of Comprehensive Income.
The Company defines the change in fair value attributable to instrument-specific credit risk as the excess of the total change in fair
value over the change in fair value attributable to changes in a base market rate, such as a Markit CDX North America Investment Grade
Index with a similar maturity to the instrument being valued.
The Company has engaged
a broker-dealer to repurchase opportunistically, on the Company’s behalf, a portion of the Company’s Unsecured Notes through
open market transactions. The price and other terms of any such repurchases will depend on prevailing market conditions, the Company’s
liquidity and other factors. Depending on market conditions, the amount of Unsecured Note repurchases may be material and may continue
through year-end 2022; however, the Company may reduce or extend this timeframe in its discretion and without notice. Any Unsecured Note
repurchases will comply with the provisions of the 1940 Act and the Securities Exchange Act of 1934. Upon repurchase, the Company
intends to retire the Unsecured Notes reducing the Company’s
Eagle Point Credit Company Inc. &
Subsidiaries
Notes to Consolidated Financial
Statements
September 30, 2022
(Unaudited)
outstanding leverage.
The Company did not repurchase Unsecured Notes for the nine months ended September 30, 2022.
See Note 8 “Asset
Coverage” for further discussion on the Company’s calculation of asset coverage with respect to its Unsecured Notes.
Under the provisions
of the 1940 Act, the Company is permitted to issue senior securities, including debt securities and preferred stock, and borrow from
banks or other financial institutions, provided that the Company satisfies certain asset coverage requirements.
With respect to senior
securities that are stocks, such as the Preferred Stock, the Company is required to have asset coverage of at least 200%, as measured
at the time of issuance of any such senior securities that are stocks and calculated as the ratio of the Company’s total consolidated
assets, less all liabilities and indebtedness not represented by senior securities, over the aggregate amount of the Company’s
outstanding senior securities representing indebtedness plus the aggregate liquidation preference of any outstanding shares of senior
securities that are stocks.
With respect to senior
securities representing indebtedness, such as the Unsecured Notes or any bank borrowings (other than temporary borrowings as defined
under the 1940 Act), the Company is required to have asset coverage of at least 300%, as measured at the time of borrowing and calculated
as the ratio of the Company’s total consolidated assets, less all liabilities and indebtedness not represented by senior securities,
over the aggregate amount of the Company’s outstanding senior securities representing indebtedness.
If the Company’s
asset coverage declines below 300% (or 200%, as applicable), the Company would be prohibited under the 1940 Act from incurring additional
debt or issuing additional preferred stock and from declaring certain distributions to its stockholders. In addition, the terms of the
Preferred Stock and the Unsecured Notes require the Company to redeem shares of the Preferred Stock and/or a certain principal amount
of the Unsecured Notes, if such failure to maintain the applicable asset coverage is not cured by a certain date.
The following table
summarizes the Company’s asset coverage with respect to its Preferred Stock and Unsecured Notes, as of September 30, 2022,
and as of December 31, 2021:
Asset Coverage of Preferred Stock and Debt Securities | |
| | |
| |
| |
As of | | |
As of | |
| |
September 30,
2022 | | |
December
31, 2021 | |
Total assets | |
$ | 737,164,538 | | |
$ | 768,039,682 | |
Less liabilities and
indebtedness not represented by senior securities | |
| (18,740,860 | ) | |
| (28,016,464 | ) |
Net total assets and liabilities | |
$ | 718,423,678 | | |
$ | 740,023,218 | |
| |
| | | |
| | |
Preferred Stock | |
$ | 81,587,250 | | |
$ | 98,130,500 | |
Unsecured Notes | |
| 170,523,800 | | |
| 138,584,775 | |
| |
$ | 252,111,050 | | |
$ | 236,715,275 | |
| |
| | | |
| | |
Asset
coverage of preferred stock (1) | |
| 285% | | |
| 313% | |
Asset
coverage of debt securities (2) | |
| 421% | | |
| 534% | |
(1) The
asset coverage of preferred stock is calculated in accordance with section 18(h) of the 1940 Act, as generally described above. |
(2) The
asset coverage ratio of debt securities is calculated in accordance with section 18(h) of the 1940 Act, as generally described
above. |
Eagle Point Credit Company Inc. &
Subsidiaries
Notes to Consolidated Financial
Statements
September 30, 2022
(Unaudited)
9. | COMMITMENTS AND CONTINGENCIES |
The Company is not
currently subject to any material legal proceedings. From time to time, the Company may be a party to certain legal proceedings in the
ordinary course of business, including proceedings relating to the enforcement of the Company’s rights under contracts. While the
outcome of these legal proceedings cannot be predicted with certainty, the Company does not expect these proceedings will have a material
effect upon its financial condition or results of operations.
On January 28,
2022, the Company agreed to co-invest with a third-party investment firm through Double Eagle Holdings JV LLC, an unconsolidated Delaware
limited liability company (“Double Eagle JV”). Double Eagle JV is expected to make investments in certain corporate debt
obligations and other opportunistic, credit-oriented investments consistent with the Company’s investment objectives and strategies.
Double Eagle JV may incur leverage in the future. Double Eagle JV is managed by a four-member board of managers, on which the Company
and its joint venture partner each have equal representation. Investment decisions generally must be unanimously approved by a quorum
of the board of managers. The Company has committed to fund $40 million into Double Eagle JV, representing approximately 80% economic
ownership. As of September 30, 2022, no contributions have been made to Double Eagle JV and operations have not commenced.
Under the Company’s
organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their
duties to the Company. In addition, during the normal course of business, the Company enters into contracts containing a variety of representations
which provide general indemnifications. The Company’s maximum exposure under these agreements cannot be known; however, the Company
expects any risk of loss to be remote.
On October 31,
2022, the Company paid a monthly distribution of $0.14 per share on its common stock to holders of record as of October 11, 2022.
Additionally, on November 10, 2022, the Company declared three separate distributions of $0.14 per share on its common stock. The
distributions are payable on each of January 31, 2023, February 28, 2023 and March 31, 2023 to holders of record as of
January 11, 2023, February 8, 2023 and March 13, 2023, respectively.
On October 31,
2022, the Company paid a special distribution of $0.25 per share on its common stock to holders of record as of October 11, 2022.
On October 31,
2022, the Company paid a monthly distribution of $0.135417 per share on its Series C Term Preferred Stock to holders of record as
of October 11, 2022. Additionally, on November 10, 2022, the Company declared three separate distributions of $0.135417 per
share of its Series C Term Preferred Stock. The distributions are payable on each of January 31, 2023, February 28, 2023
and March 31, 2023 to holders of record as of January 11, 2023, February 8, 2023 and March 13, 2023, respectively.
On October 31,
2022, the Company paid a monthly distribution of $0.140625 per share on its Series D Preferred Stock to holders of record as of
October 11, 2022. Additionally, on November 10, 2022, the Company declared three separate distributions of $0.140625 per share
of its Series D Preferred Stock. The distributions are payable on each of January 31, 2023, February 28, 2023 and March 31,
2023 to holders of record as of January 11, 2023, February 8, 2023 and March 13, 2023, respectively.
For the period from
October 1, 2022 to November 11, 2022, the Company sold 2,003,785 shares of its common stock, 0 shares of its Series C
Term Preferred Stock and 0 shares of its Series D Preferred Stock, pursuant to the ATM offering, for total net proceeds to the Company
of approximately $21.2 million. In connection with such sales, the Company paid a total of $0.3 million in sales agent commissions.
Eagle Point Credit Company Inc. &
Subsidiaries
Notes to Consolidated Financial
Statements
September 30, 2022
(Unaudited)
On November 14, 2022, the Company declared a special distribution of $0.50 per share on its common stock payable on January 24, 2023 to
holders of record as of December 23, 2022.
Management’s unaudited estimate of
the range of the Company’s NAV per common share as of October 31, 2022 was $9.66 to $9.76.
Management of the Company
has evaluated the need for disclosures and/or adjustments resulting from subsequent events through the date of release of this report.
Management has determined there are no events in addition to those described above which would require adjustment to or disclosure in
the consolidated financial statements and related notes through the date of release of this report.
Eagle Point Credit Company Inc. &
Subsidiaries
Consolidated Financial Highlights
(Unaudited)
| |
For the
nine months | | |
For the | | |
For the | | |
For the | | |
For the | |
| |
ended | | |
year ended | | |
year ended | | |
year ended | | |
year ended | |
Per Share Data | |
September 30, 2022 | | |
December 31, 2021 | | |
December 31, 2020 | | |
December 31, 2019 | | |
December 31, 2018 | |
Net asset value at beginning of period | |
$ | 13.39 | | |
$ | 11.18 | | |
$ | 10.59 | | |
$ | 12.40 | | |
$ | 16.77 | |
Net investment income (1) (2) | |
| 1.16 | | |
| 1.31 | | |
| 1.15 | | |
| 1.34 | | |
| 1.59 | |
6.75% Series D Preferred Stock distributions (2) | |
| (0.03 | ) | |
| - | | |
| - | | |
| - | | |
| - | |
Net realized gain (loss) and change in unrealized appreciation (depreciation) on investments, foreign currency and cash equivalents (2) (3) | |
| (3.88 | ) | |
| 2.65 | | |
| 0.49 | | |
| (1.29 | ) | |
| (3.92 | ) |
Net change in unrealized (appreciation) depreciation on liabilities at fair value under the fair value option (2) | |
| 0.15 | | |
| (0.02 | ) | |
| 0.01 | | |
| (0.08 | ) | |
| 0.06 | |
Net income (loss) and net increase (decrease) in net assets resulting from operations (2) | |
| (2.60 | ) | |
| 3.94 | | |
| 1.65 | | |
| (0.03 | ) | |
| (2.27 | ) |
Common stock distributions from net investment income (4) | |
| (1.20 | ) | |
| (1.64 | ) | |
| (0.26 | ) | |
| (1.40 | ) | |
| (1.51 | ) |
Common stock distributions from net realized gains on investments (4) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Common stock distributions from tax return of capital (4) | |
| - | | |
| - | | |
| (1.06 | ) | |
| (1.00 | ) | |
| (0.89 | ) |
Total common stock distributions declared to stockholders (4) | |
| (1.20 | ) | |
| (1.64 | ) | |
| (1.32 | ) | |
| (2.40 | ) | |
| (2.40 | ) |
Common stock distributions based on weighted average shares impact (5) | |
| - | | |
| (0.04 | ) | |
| 0.02 | | |
| - | | |
| 0.01 | |
Total common stock distributions | |
| (1.20 | ) | |
| (1.68 | ) | |
| (1.30 | ) | |
| (2.40 | ) | |
| (2.39 | ) |
Effect of other comprehensive income (2) (6) | |
| 0.51 | | |
| (0.08 | ) | |
| 0.05 | | |
| (0.10 | ) | |
| 0.06 | |
Effect of paid-in capital contribution (2) | |
| - | | |
| - | | |
| - | | |
| - | | |
| 0.06 | |
Effect of shares issued (7) | |
| 0.18 | | |
| 0.06 | | |
| 0.20 | | |
| 0.77 | | |
| 0.29 | |
Effect of underwriting discounts, commissions and offering expenses associated with shares issued (7) | |
| (0.05 | ) | |
| (0.03 | ) | |
| (0.02 | ) | |
| (0.07 | ) | |
| (0.12 | ) |
Effect of shares issued in accordance with the Company's dividend reinvestment plan | |
| - | | |
| - | | |
| 0.01 | | |
| 0.02 | | |
| - | |
Net effect of shares issued | |
| 0.13 | | |
| 0.03 | | |
| 0.19 | | |
| 0.72 | | |
| 0.17 | |
Net asset value at end of period | |
$ | 10.23 | | |
$ | 13.39 | | |
$ | 11.18 | | |
$ | 10.59 | | |
$ | 12.40 | |
Per share market value at beginning of period | |
$ | 14.00 | | |
$ | 10.09 | | |
$ | 14.61 | | |
$ | 14.21 | | |
$ | 18.81 | |
Per share market value at end of period | |
$ | 11.00 | | |
$ | 14.00 | | |
$ | 10.09 | | |
$ | 14.61 | | |
$ | 14.21 | |
Total return (8) | |
| -9.94% | | |
| 51.60% | | |
| -19.76% | | |
| 20.15% | | |
| -13.33% | |
Shares of common stock outstanding at end of period | |
| 48,025,043 | | |
| 37,526,810 | | |
| 32,354,890 | | |
| 28,632,119 | | |
| 23,153,319 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Ratios and Supplemental Data: | |
| | | |
| | | |
| | | |
| | | |
| | |
Net asset value at end of period | |
$ | 491,388,589 | | |
$ | 502,304,335 | | |
$ | 361,660,688 | | |
$ | 303,272,860 | | |
$ | 287,127,842 | |
Ratio of expenses to average net assets (9) (10) | |
| 9.40% | | |
| 9.71% | | |
| 10.56% | | |
| 10.00% | | |
| 9.85% | |
Ratio of net investment income to average net assets (9) (10) | |
| 13.47% | | |
| 9.90% | | |
| 13.44% | | |
| 10.64% | | |
| 9.76% | |
Portfolio turnover rate (11) | |
| 28.03% | | |
| 51.56% | | |
| 52.80% | | |
| 34.83% | | |
| 40.91% | |
Asset coverage of preferred stock | |
| 285% | | |
| 313% | | |
| 354% | | |
| 279% | | |
| 246% | |
Asset coverage of debt securities | |
| 421% | | |
| 534% | | |
| 534% | | |
| 476% | | |
| 477% | |
See accompanying footnotes to the
financial highlights on the following page.
Eagle Point Credit Company Inc. &
Subsidiaries
Consolidated Financial Highlights
(Unaudited)
Footnotes to the Financial
Highlights:
| (1) | Per
share distributions paid to Series B Term Preferred Stock and Series C Term Preferred
Stock stockholders, and the aggregate amount of amortized deferred issuance costs and share
issuance premiums associated with the Series B Term Preferred Stock and Series C
Term Preferred Stock are reflected in net investment income, and totaled ($0.07) and ($0.00)
per share of common stock, respectively, for the nine months ended September 30, 2022,
($0.16) and ($0.01) per share of common stock, respectively,
for the year ended December 31, 2021, ($0.12) and ($0.01) per share of common stock,
respectively, for the year ended December 31, 2020, ($0.25) and ($0.02) per share of
common stock, respectively, for the year ended December 31, 2019, and ($0.33) and ($0.02)
per share of common stock, respectively, for the year ended December 31, 2018. |
| (2) | Per
share amounts are based on weighted average of shares of common stock outstanding for the
period. |
| (3) | Net
realized gain (loss) and change in unrealized appreciation (depreciation) on investments,
foreign currency and cash equivalents includes a balancing figure to reconcile to the change
in net asset value (“NAV”) per share at the end of each period. The amount
per share may not agree with the change in the aggregate net realized gain (loss) and change
in unrealized appreciation (depreciation) on investments, foreign currency and cash equivalents
for the period because of the timing of issuance of the Company’s common stock in relation
to fluctuating market values for the portfolio. |
| (4) | The
information provided is based on estimates available at each respective period. The Company’s
final taxable income and the actual amount required to be distributed will be finally determined
when the Company files its final tax returns and may vary from these estimates. The year
ended December 31, 2021 includes a special distribution of $0.50 per share of common
stock paid on January 24, 2022 to stockholders of record on December 23, 2021. |
| (5) | Represents
the difference between the per share amount distributed to common stockholders of record
and the per share amount distributed based on the weighted average of shares of common stock
outstanding for the period. |
| (6) | Effect of other comprehensive income is related
to income/(loss) deemed attributable to instrument specific credit risk derived from changes
in fair value associated with liabilities valued under the fair value option (ASC 825.) |
| (7) | Represents
the effect per share of the Company’s ATM offerings as well as the Company’s
follow-on offerings. Effect of shares issued reflect the excess of offering price over management’s
estimated NAV per share at the time of each respective offering. |
| (8) | Total
return based on market value is calculated assuming shares of the Company’s common
stock were purchased at the market price as of the beginning of the period, and distributions
paid to common stockholders during the period were reinvested at prices obtained by the Company’s
dividend reinvestment plan, and the total number of shares were sold at the closing market
price per share on the last day of the period. Total return does not reflect any sales load.
Total return for the nine months ended September 30, 2022 is not annualized. |
| (9) | Ratios for the nine months ended September 30,
2022 are annualized. Ratios include distributions paid to the Series B Term Preferred
and the Series C Term Preferred Stock stockholders. Ratios for the nine months ended
September 30, 2022 and for the years ended December 31, 2021, December 31,
2020, December 31, 2019 and December 31, 2018 reflect the portion of incentive
fee voluntarily waived by the Adviser of 0.06%, 0.03%, 0.06%, 0.03% and 0.09% of average
net assets, respectively. Ratios for the year ended December 31, 2021 include excise
tax of 0.49% of average net assets. |
| (10) | Ratios
for the nine months ended September 30, 2022 and for years ended December 31, 2021,
December 31, 2020, December 31, 2019, December 31 2018, include interest expense
on the Series B Term Preferred Stock, Series C Term Preferred Stock, and the Unsecured
Notes of 3.21%, 3.24%, 3.97%, 4.18%, and 4.16% of average net assets, respectively. Ratios
do not include distributions to the Series D Preferred Stock stockholders for the nine
months ended September 30, 2022 and for the year ended December 31, 2021 of 0.36%
and 0.03%, respectively, of average net assets. |
| (11) | The portfolio turnover rate is calculated
as the lesser of total investment purchases executed during the period or the total investment
sales executed during the period and repayments of principal, divided by the average fair
value of investments for the same period. The portfolio turnover rate for the nine months
ended September 30, 2022 is not annualized. |
Eagle Point Credit Company Inc. &
Subsidiaries
Supplemental Information
(Unaudited)
Senior Securities Table
Information about the Company’s
senior securities shown in the following table has been derived from the Company’s consolidated financial statements as of and
for the dates noted.
Class | |
Total
Amount Outstanding Exclusive of Treasury Securities | | |
Asset
Coverage Per Unit (1) | | |
Involuntary
Liquidating Preference Per Unit (2) | | |
Average
Market Value Per Unit (3) | |
For the nine months ended September 30, 2022 |
|
|
|
| |
| | |
| | |
| |
Preferred Stock | |
$ | 81,587,250 | | |
$ | 71.24 | | |
$ | 25 | | |
$ | 24.11 | |
Unsecured Notes | |
$ | 170,523,800 | | |
$ | 4,213.04 | | |
| N/A | | |
$ | 24.24 | |
| |
| | | |
| | | |
| | | |
| | |
For the year ended December 31,
2021 | |
| | | |
| | | |
| | | |
| | |
Preferred Stock | |
$ | 98,130,500 | | |
$ | 78.16 | | |
$ | 25 | | |
$ | 25.48 | |
Unsecured Notes | |
$ | 138,584,775 | | |
$ | 5,339.86 | | |
| N/A | | |
$ | 25.58 | |
| |
| | | |
| | | |
| | | |
| | |
For the year ended December 31,
2020 | |
| | | |
| | | |
| | | |
| | |
Preferred Stock | |
$ | 47,862,425 | | |
$ | 88.39 | | |
$ | 25 | | |
$ | 24.25 | |
Unsecured Notes | |
$ | 93,734,775 | | |
$ | 5,340.98 | | |
| N/A | | |
$ | 23.93 | |
| |
| | | |
| | | |
| | | |
| | |
For the year ended December 31,
2019 | |
| | | |
| | | |
| | | |
| | |
Preferred Stock | |
$ | 69,843,150 | | |
$ | 69.71 | | |
$ | 25 | | |
$ | 26.04 | |
Unsecured Notes | |
$ | 98,902,675 | | |
$ | 4,757.42 | | |
| N/A | | |
$ | 25.47 | |
| |
| | | |
| | | |
| | | |
| | |
For the year ended December 31,
2018 | |
| | | |
| | | |
| | | |
| | |
Preferred Stock | |
$ | 92,568,150 | | |
$ | 61.55 | | |
$ | 25 | | |
$ | 25.78 | |
Unsecured Notes | |
$ | 98,902,675 | | |
$ | 4,766.23 | | |
| N/A | | |
$ | 25.08 | |
| |
| | | |
| | | |
| | | |
| | |
For the year ended December 31,
2017 | |
| | | |
| | | |
| | | |
| | |
Preferred Stock | |
$ | 92,139,600 | | |
$ | 66.97 | | |
$ | 25 | | |
$ | 25.75 | |
Unsecured Notes | |
$ | 91,623,750 | | |
$ | 5,372.28 | | |
| N/A | | |
$ | 25.96 | |
| |
| | | |
| | | |
| | | |
| | |
For the year ended December 31,
2016 | |
| | | |
| | | |
| | | |
| | |
Preferred Stock | |
$ | 91,450,000 | | |
$ | 71.53 | | |
$ | 25 | | |
$ | 25.41 | |
Series 2020 Notes | |
$ | 59,998,750 | | |
$ | 7,221.89 | | |
| N/A | | |
$ | 25.29 | |
| |
| | | |
| | | |
| | | |
| | |
For the year ended December 31,
2015 | |
| | | |
| | | |
| | | |
| | |
Series A Term Preferred Stock | |
$ | 45,450,000 | | |
$ | 91.16 | | |
$ | 25 | | |
$ | 25.43 | |
Series 2020 Notes | |
$ | 25,000,000 | | |
$ | 10,275.46 | | |
| N/A | | |
$ | 24.52 | |
(1)
|
The
asset coverage per unit figure is the ratio of the Company's total consolidated assets, less all liabilities and indebtedness not
represented by senior securities, to the aggregate dollar amount of outstanding applicable senior securities, as calculated separately
for each of the Preferred Stock and the Unsecured Notes in accordance with section 18(h) of the 1940 Act. With respect to the
Preferred Stock, the asset coverage per unit figure is expressed in terms of dollar amounts per share of outstanding preferred stock
(based on a per share liquidation preference of $25.) With respect to the Unsecured Notes, the asset coverage per unit
figure is expressed in terms of dollar amounts per $1,000 principal amount of such notes. |
(2)
|
The
involuntary liquidating preference per unit is the amount to which a share of Preferred Stock would be entitled in preference to
any security junior to it upon our involuntary liquidation. |
(3)
|
The
average market value per unit is calculated by taking the average of the closing price of each of (a) a share of the Preferred Stock
(NYSE: ECCA, ECCB, ECCC, ECC PRD) and(b) $25 principal amount of the Unsecured Notes (NYSE: ECCV, ECCW, ECCX, ECCY, ECCZ) for each
day during the years for which each applicable security was listed on the NYSE. |
|
|
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