Eagle Point Credit Co 5.375% Notes due 2029

ECCV

Market cap $86.5M

We continue our discussion on debt, this time focusing on corporate borrowing. CLOs and BDCs are two pillars of the credit markets, powering the U.S. economy. Securities from these asset classes tend to be volatile due to interest rates and credit health, but have safer preferreds/baby bonds.

Steven Bavaria, from Inside the Income Factory, discusses credit assets like high-yield bonds, senior loans, and BDCs for stable, high-yield income, favoring closed-end funds for their resilience and discounts. Expense ratios for BDC ETFs like PBDC appear high due to accounting rules, but actual fund expenses are low—professional management adds only about 0.4%.

With the month of July closing out, we are once again seeing the broader equity markets pushing to new all-time highs. As we enter into new all-time highs, we appear to be looking quite stretched on valuations, and CEF discounts have been narrowing.

Eagle Point Credit Co LLC (ECC) Q2 2025 Earnings Call Transcript

Monthly-paying income investments can be attractive for retirees, but also for those still accumulating wealth, when reinvested for compounding income over time. Fixed-income focused closed-end funds can provide those attractive monthly distribution yields that income-focused investors are looking for. Today, we are looking at two funds that provide a monthly payout plus are trading at attractive discounts.

April's market volatility, driven by tariffs and led by tech sector declines, created opportunities to deploy cash. However, it was an opportunity to reposition my portfolio as well, with 2 swap trades to de-risk my portfolio. There were 2 corporate actions in the last month that also saw two more positions removed from my CEF portfolio, but overall, I was a net buyer for the month.

The CLO Equity CEF sector has doubled in size over the past two years, driven by new entrants and favorable market conditions. Key catalysts include a benign default environment, tightening credit spreads, and the attractiveness of floating-rate assets amid a flat/inverted yield curve. CLO Equity funds benefit from embedded options like reinvestment and call options, which enhance returns during periods of market volatility.

We review the CEF market valuation and performance through the third week of April and highlight recent market action. Nearly all CEF sectors finished in the green this week, though month-to-date performance remains underwater. The median CEF sector discount has bounced off the trough, trading near the longer-term historical average, recovering close to half its April drawdown.

Fearful markets present opportunities for income investors. Embrace the Income Method to cut through market noise, focusing on reliable, growing income by investing higher up in the capital structure. We discuss our top picks that enjoy safety by being higher up in the capital structure; yields +9%.

Collateralized loan obligation CEFs offer high yields but come with significant leverage, volatility and higher risk, making them less appropriate for all income investors. Baby bonds and preferred offerings from CLO CEFs provide safer, more stable income, balancing risk-reward when it comes to seeking income. We have new offerings in the space since our last update, leading to greater diversification potential and increasing the viability of setting up a ladder of maturities.