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Important Information
This report is transmitted to
the stockholders of Eagle Point Income 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 Income 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.
Investors should
read the Company’s prospectus and SEC filings (which are publicly available on the EDGAR Database on the SEC website at http://www.sec.gov)
carefully and consider their investment goals, time horizons and risk tolerance before investing in the Company. Investors should consider
the Company’s investment objectives, risks, charges and expenses carefully before investing in securities of the Company. There
is no guarantee that any of the goals, targets or objectives described in this report will be achieved.
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 Income Company
Inc.
The Company is a publicly-traded,
closed-end management investment company. The Company’s primary investment objective is to generate high current income, with a
secondary objective to generate capital appreciation, by investing primarily in junior debt tranches of CLOs. In addition, the Company
may invest up to 35% of its total assets (at the time of investment) in CLO equity securities. The Company is externally managed and advised
by Eagle Point Income Management LLC.
The Company makes
certain unaudited portfolio information available each month on its website in addition to making certain other unaudited financial information
available on its website (www.eaglepointincome.com). This
information includes (1) an estimated range of the Company’s net investment income (“NII”) and realized capital
gains or losses per weighted average share of common stock for each calendar quarter end, generally made available within the first fifteen
days after the applicable calendar month end, (2) an estimated range of the Company’s net asset value (“NAV”) per
share of common stock for the prior month end and certain additional portfolio-level information,
generally made available within the
first fifteen days after the applicable calendar month end, and (3) during the latter part of each month, an updated estimate of
NAV, if applicable, and, with respect to each calendar quarter end, an updated estimate of the Company’s NII and realized capital
gains or losses for the applicable quarter, if available.
Forward-Looking Statements
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.
Financial Statements for the Nine Months Ended
September 30, 2022 (Unaudited)
Eagle Point Income Company Inc.
Statement of Assets and Liabilities
As of September 30, 2022
(expressed in U.S. dollars)
(Unaudited)
ASSETS | |
| | |
Investments, at fair value (cost $176,245,242) | |
$ | 143,505,246 | |
Interest receivable | |
| 3,907,338 | |
Prepaid expenses | |
| 333,104 | |
Cash and cash equivalents | |
| 74,029 | |
Receivable for shares of common stock issued pursuant to the Company's dividend reinvestment plan | |
| 9,039 | |
Total Assets | |
| 147,828,756 | |
| |
| | |
LIABILITIES | |
| | |
5.00% Series A Term Preferred Stock due 2026, at fair value under the fair value option (1,521,649 shares outstanding) (Note 6) | |
| 34,084,938 | |
Unamortized share issuance premium associated with 5.00% Series A Term Preferred Stock due 2026 | |
| 13,287 | |
5.00% Series A Term Preferred Stock due 2026, at fair value, plus associated unamortized share issuance premium | |
| 34,098,225 | |
| |
| | |
Borrowings under credit facility (Note 9) | |
| 21,325,000 | |
Management fees payable | |
| 476,874 | |
Professional fees payable | |
| 232,466 | |
Interest expense payable | |
| 155,424 | |
Administration fees payable | |
| 99,355 | |
Directors' fees payable | |
| 63,750 | |
Tax expense payable | |
| 9,843 | |
Other expenses payable | |
| 16,566 | |
Total Liabilities | |
| 56,477,503 | |
| |
| | |
COMMITMENTS AND CONTINGENCIES (Note 7) | |
| | |
| |
| | |
NET ASSETS applicable to 6,999,578 shares of $0.001 par value common stock outstanding | |
$ | 91,351,253 | |
| |
| | |
NET ASSETS consist of: | |
| | |
Paid-in capital (Note 5) | |
$ | 134,041,337 | |
Aggregate distributable earnings (losses) | |
| (46,048,602 | ) |
Accumulated other comprehensive income (loss) | |
| 3,358,518 | |
Total Net Assets | |
$ | 91,351,253 | |
Net asset value per share of common stock | |
$ | 13.05 | |
See
accompanying notes to the financials statements
Eagle
Point Income Company Inc.
Schedule of Investments
As of September 30, 2022
(expressed in U.S. dollars)
(Unaudited)
Issuer
(1) |
|
Investment
(2) (3) |
|
Maturity
Date |
|
Reference
Rate
and Spread |
|
Interest
Rate/Effective
Yield |
|
Acquisition
Date (4) |
|
Principal
Amount |
|
Cost |
|
Fair
Value (5) |
|
%
of Net
Assets |
Investments, at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CLO Debt (6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United
States |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ares XLV CLO Ltd. |
|
Secured Note - Class
E |
|
10/15/2030 |
|
3M L+6.10% |
|
8.61% |
|
05/30/2019 |
|
$ |
800,000 |
|
$ |
789,218 |
|
$ |
628,400 |
|
0.69% |
Barings CLO Ltd. 2018-IV |
|
Secured Note - Class
E |
|
10/15/2030 |
|
3M L+5.82% |
|
8.33% |
|
10/26/2018 |
|
|
840,000 |
|
|
835,998 |
|
|
702,156 |
|
0.77% |
Battalion CLO XII Ltd. |
|
Secured Note - Class
E |
|
05/17/2031 |
|
3M L+6.09% |
|
9.03% |
|
10/04/2018 |
|
|
4,633,000 |
|
|
4,553,289 |
|
|
3,781,455 |
|
4.14% |
Battalion CLO XXI Ltd. |
|
Secured Note - Class
E |
|
07/15/2034 |
|
3M L+6.46% |
|
8.97% |
|
06/08/2022 |
|
|
5,000,000 |
|
|
4,657,115 |
|
|
4,027,500 |
|
4.41% |
Black Diamond CLO 2016-1, Ltd. |
|
Secured Note - Class
D-R |
|
04/26/2031 |
|
3M L+5.60% |
|
8.37% |
|
10/04/2018 |
|
|
1,050,000 |
|
|
998,181 |
|
|
812,070 |
|
0.89% |
Black Diamond CLO 2017-1, Ltd. |
|
Secured Note - Class
D |
|
04/24/2029 |
|
3M L+6.60% |
|
9.38% |
|
10/04/2018 |
|
|
3,600,000 |
|
|
3,593,501 |
|
|
3,098,520 |
|
3.39% |
Carlyle US CLO 2017-1, Ltd. |
|
Secured Note - Class
D |
|
04/20/2031 |
|
3M L+6.00% |
|
8.71% |
|
09/15/2020 |
|
|
2,000,000 |
|
|
1,689,006 |
|
|
1,622,000 |
|
1.78% |
Carlyle US CLO 2018-1, Ltd. |
|
Secured Note - Class
D |
|
04/20/2031 |
|
3M L+5.75% |
|
8.46% |
|
10/04/2018 |
|
|
665,000 |
|
|
659,400 |
|
|
541,443 |
|
0.59% |
Carlyle US CLO 2018-2, Ltd. |
|
Secured Note - Class
D |
|
10/15/2031 |
|
3M L+5.25% |
|
7.76% |
|
10/04/2018 |
|
|
5,500,000 |
|
|
5,319,127 |
|
|
4,319,700 |
|
4.73% |
Carlyle US CLO 2019-1, Ltd. |
|
Secured Note - Class
D |
|
04/20/2031 |
|
3M L+6.70% |
|
9.41% |
|
08/19/2019 |
|
|
3,125,000 |
|
|
2,976,196 |
|
|
2,644,063 |
|
2.89% |
CIFC Funding 2015-I, Ltd. |
|
Secured
Note - Class E-RR |
01/22/2031 |
|
3M L+6.00% |
|
8.76% |
|
10/04/2018 |
|
|
2,600,000 |
|
|
2,566,927 |
|
|
2,076,880 |
|
2.27% |
CIFC Funding 2018-II, Ltd. |
|
Secured Note - Class
D |
|
04/20/2031 |
|
3M L+5.85% |
|
8.56% |
|
10/04/2018 |
|
|
1,225,000 |
|
|
1,192,730 |
|
|
1,048,478 |
|
1.15% |
CIFC Funding 2018-IV, Ltd. |
|
Secured Note - Class
E |
|
10/17/2031 |
|
3M L+7.70% |
|
10.44% |
|
05/22/2019 |
|
|
2,000,000 |
|
|
1,873,109 |
|
|
1,560,600 |
|
1.71% |
Cook Park CLO, Ltd. |
|
Secured Note - Class
E |
|
04/17/2030 |
|
3M L+5.40% |
|
8.14% |
|
10/04/2018 |
|
|
1,250,000 |
|
|
1,197,124 |
|
|
999,375 |
|
1.09% |
Dryden 37 Senior Loan Fund, Ltd. |
|
Secured Note - Class
E-R |
|
01/15/2031 |
|
3M L+5.15% |
|
7.66% |
|
10/04/2018 |
|
|
500,000 |
|
|
486,097 |
|
|
393,250 |
|
0.43% |
First Eagle BSL CLO 2019-1 Ltd. |
|
Secured Note - Class
D |
|
01/20/2033 |
|
3M L+7.70% |
|
10.41% |
|
12/17/2019 |
|
|
5,000,000 |
|
|
4,811,263 |
|
|
4,168,500 |
|
4.56% |
Generate CLO-2 Ltd. |
|
Secured Note - Class
E-R |
|
01/22/2031 |
|
3M L+5.65% |
|
8.41% |
|
05/16/2019 |
|
|
1,605,000 |
|
|
1,531,793 |
|
|
1,335,681 |
|
1.46% |
KKR CLO 22 Ltd. |
|
Secured Note - Class
E |
|
07/20/2031 |
|
3M L+6.00% |
|
8.71% |
|
10/27/2021 |
|
|
3,000,000 |
|
|
2,956,098 |
|
|
2,510,100 |
|
2.75% |
KKR CLO 29 Ltd. |
|
Secured Note - Class
F |
|
01/15/2032 |
|
3M L+9.00% |
|
0.00% |
|
12/14/2021 |
|
|
589,812 |
|
|
- |
|
|
- |
|
0.00% |
LCM XVIII, L.P. |
|
Secured Note - Class
E-R |
|
04/20/2031 |
|
3M L+5.95% |
|
8.66% |
|
10/04/2018 |
|
|
600,000 |
|
|
598,647 |
|
|
435,720 |
|
0.48% |
Madison Park Funding XXVII, Ltd. |
|
Secured Note - Class
D |
|
04/20/2030 |
|
3M L+5.00% |
|
7.71% |
|
10/04/2018 |
|
|
3,050,000 |
|
|
2,862,189 |
|
|
2,468,365 |
|
2.70% |
Madison Park Funding XLII, Ltd. |
|
Secured Note - Class
E |
|
11/21/2030 |
|
3M L+6.05% |
|
8.83% |
|
08/15/2019 |
|
|
1,500,000 |
|
|
1,445,168 |
|
|
1,262,850 |
|
1.38% |
Madison Park Funding LI, Ltd. |
|
Secured Note - Class
E |
|
07/19/2034 |
|
3M L+6.27% |
|
9.01% |
|
10/28/2021 |
|
|
4,000,000 |
|
|
3,993,971 |
|
|
3,332,800 |
|
3.65% |
Marathon CLO IX, Ltd. |
|
Secured Note - Class
D |
|
04/15/2029 |
|
3M L+6.05% |
|
8.56% |
|
10/04/2018 |
|
|
4,050,000 |
|
|
4,009,689 |
|
|
2,933,820 |
|
3.21% |
Marathon CLO XIII, Ltd. |
|
Secured Note - Class
D |
|
04/15/2032 |
|
3M L+6.98% |
|
9.49% |
|
06/04/2019 |
|
|
3,500,000 |
|
|
3,361,794 |
|
|
2,513,350 |
|
2.75% |
Octagon Investment Partners 37, Ltd. |
|
Secured Note - Class
D |
|
07/25/2030 |
|
3M L+5.40% |
|
8.18% |
|
10/04/2018 |
|
|
2,200,000 |
|
|
2,084,977 |
|
|
1,798,280 |
|
1.97% |
Octagon Investment Partners 38, Ltd. |
|
Secured Note - Class
D |
|
07/20/2030 |
|
3M L+5.70% |
|
8.41% |
|
10/04/2018 |
|
|
3,725,000 |
|
|
3,656,829 |
|
|
3,005,330 |
|
3.29% |
Octagon Investment Partners 39, Ltd. |
|
Secured Note - Class
E |
|
10/20/2030 |
|
3M L+5.75% |
|
8.46% |
|
10/24/2018 |
|
|
1,550,000 |
|
|
1,499,660 |
|
|
1,294,405 |
|
1.42% |
Octagon Investment Partners 41, Ltd. |
|
Secured Note - Class
E-R |
|
10/15/2033 |
|
3M L+7.13% |
|
9.64% |
|
09/24/2021 |
|
|
2,500,000 |
|
|
2,488,654 |
|
|
2,116,500 |
|
2.32% |
OZLM XXI, Ltd. |
|
Secured Note - Class
D |
|
01/20/2031 |
|
3M L+5.54% |
|
8.25% |
|
10/04/2018 |
|
|
4,150,000 |
|
|
4,073,060 |
|
|
3,194,670 |
|
3.50% |
Palmer Square CLO 2018-1, Ltd. |
|
Secured Note - Class
D |
|
04/18/2031 |
|
3M L+5.15% |
|
7.89% |
|
05/30/2019 |
|
|
1,120,000 |
|
|
1,043,629 |
|
|
933,744 |
|
1.02% |
Pikes Peak CLO 1 |
|
Secured Note - Class
E |
|
07/24/2031 |
|
3M L+6.05% |
|
8.83% |
|
10/28/2021 |
|
|
3,000,000 |
|
|
2,942,027 |
|
|
2,326,500 |
|
2.55% |
Rockford Tower CLO 2018-1, Ltd. |
|
Secured Note - Class
E |
|
05/20/2031 |
|
3M L+5.85% |
|
8.83% |
|
09/30/2021 |
|
|
2,250,000 |
|
|
2,189,540 |
|
|
1,829,700 |
|
2.00% |
Rockford Tower CLO 2018-2, Ltd. |
|
Secured Note - Class
E |
|
10/20/2031 |
|
3M L+6.00% |
|
8.71% |
|
10/04/2018 |
|
|
4,275,000 |
|
|
4,188,948 |
|
|
3,483,698 |
|
3.81% |
Rockford Tower CLO 2019-2, Ltd. |
|
Secured Note - Class
E |
|
08/20/2032 |
|
3M L+6.05% |
|
9.03% |
|
01/13/2021 |
|
|
3,000,000 |
|
|
2,962,836 |
|
|
2,471,400 |
|
2.71% |
Rockford Tower CLO 2020-1, Ltd. |
|
Secured Note - Class
E |
|
01/20/2032 |
|
3M L+6.90% |
|
9.61% |
|
12/04/2020 |
|
|
1,600,000 |
|
|
1,572,556 |
|
|
1,374,720 |
|
1.50% |
RR 4 Ltd |
|
Secured Note - Class
D |
|
04/15/2030 |
|
3M L+5.85% |
|
8.36% |
|
10/28/2021 |
|
|
4,000,000 |
|
|
3,955,035 |
|
|
3,310,400 |
|
3.62% |
TCI-Symphony CLO 2016-1 Ltd. |
|
Secured
Note - Class E-R2 |
10/13/2032 |
|
3M L+6.75% |
|
9.21% |
|
01/13/2022 |
|
|
3,000,000 |
|
|
3,000,000 |
|
|
2,545,800 |
|
2.79% |
TICP CLO IX, Ltd. |
|
Secured Note - Class
E |
|
01/20/2031 |
|
3M L+5.60% |
|
8.31% |
|
08/22/2019 |
|
|
2,500,000 |
|
|
2,364,437 |
|
|
2,130,250 |
|
2.33% |
TICP CLO XI, Ltd. |
|
Secured Note - Class
E |
|
10/20/2031 |
|
3M L+6.00% |
|
8.71% |
|
10/29/2021 |
|
|
5,050,000 |
|
|
5,015,700 |
|
|
4,308,155 |
|
4.72% |
Venture 36 CLO, Limited |
|
Secured Note - Class
E |
|
04/20/2032 |
|
3M L+6.92% |
|
9.63% |
|
01/21/2021 |
|
|
4,800,000 |
|
|
4,488,802 |
|
|
3,336,960 |
|
3.65% |
Venture 43 CLO, Limited |
|
Secured Note - Class
E |
|
04/15/2034 |
|
3M L+7.15% |
|
9.66% |
|
11/02/2021 |
|
|
2,500,000 |
|
|
2,440,104 |
|
|
1,991,750 |
|
2.18% |
Vibrant CLO VI, Ltd. |
|
Secured Note - Class
E |
|
06/20/2029 |
|
3M L+5.75% |
|
9.28% |
|
10/04/2018 |
|
|
1,400,000 |
|
|
1,383,419 |
|
|
1,116,080 |
|
1.22% |
Vibrant CLO VIII, Ltd. |
|
Secured Note - Class
D |
|
01/20/2031 |
|
3M L+5.75% |
|
8.46% |
|
10/04/2018 |
|
|
1,750,000 |
|
|
1,709,058 |
|
|
1,244,950 |
|
1.36% |
Wellfleet CLO 2018-1, Ltd. |
|
Secured Note - Class
E |
|
07/17/2031 |
|
3M L+5.50% |
|
8.24% |
|
10/27/2021 |
|
|
4,025,000 |
|
|
3,871,095 |
|
|
3,084,358 |
|
3.38% |
Wind River 2014-1 CLO Ltd. |
|
Secured Note - Class
E-R |
|
07/18/2031 |
|
3M L+6.30% |
|
9.04% |
|
08/16/2021 |
|
|
2,550,000 |
|
|
2,376,518 |
|
|
1,830,900 |
|
2.00% |
Wind River 2021-3 CLO Ltd. |
|
Secured Note - Class
E |
|
07/20/2033 |
|
3M L+6.60% |
|
9.31% |
|
10/28/2021 |
|
|
3,000,000 |
|
|
2,974,611 |
|
|
2,470,500 |
|
2.70% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
121,239,125
|
|
|
100,416,126
|
|
109.91% |
CLO Equity (7) (8) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ares XLIV CLO Ltd. |
|
Subordinated Note
|
|
04/15/2034 |
|
N/A |
|
14.45% |
|
06/08/2021 |
|
|
8,000,000 |
|
|
3,376,646 |
|
|
2,702,498 |
|
2.96% |
Ares LVIII CLO Ltd. |
|
Subordinated Note
|
|
01/15/2035 |
|
N/A |
|
20.07% |
|
06/17/2021 |
|
|
4,000,000 |
|
|
2,666,623 |
|
|
2,474,166 |
|
2.71% |
Bardin Hill CLO 2021-2 Ltd. |
|
Subordinated Note
(9) |
|
10/25/2034 |
|
N/A |
|
21.54% |
|
09/24/2021 |
|
|
4,000,000 |
|
|
2,853,508 |
|
|
2,385,752 |
|
2.61% |
Barings CLO Ltd. 2021-I |
|
Subordinated Note
|
|
04/25/2034 |
|
N/A |
|
16.46% |
|
11/03/2021 |
|
|
4,000,000 |
|
|
3,349,697 |
|
|
2,824,995 |
|
3.09% |
Barings CLO Ltd. 2021-III |
|
Subordinated Note
|
|
01/18/2035 |
|
N/A |
|
18.47% |
|
11/17/2021 |
|
|
5,000,000 |
|
|
3,974,791 |
|
|
3,361,031 |
|
3.68% |
Carlyle US CLO 2021-2, Ltd. |
|
Subordinated Note
|
|
04/20/2034 |
|
N/A |
|
15.36% |
|
10/28/2021 |
|
|
3,000,000 |
|
|
2,631,571 |
|
|
2,174,770 |
|
2.38% |
Carlyle US CLO 2021-5, Ltd. |
|
Subordinated Note
|
|
07/20/2034 |
|
N/A |
|
15.85% |
|
11/02/2021 |
|
|
5,000,000 |
|
|
4,189,299 |
|
|
3,476,663 |
|
3.81% |
CIFC Funding 2019-VI, Ltd. |
|
Subordinated Note
|
|
01/16/2033 |
|
N/A |
|
17.63% |
|
12/02/2019 |
|
|
6,000,000 |
|
|
4,428,597 |
|
|
3,507,720 |
|
3.84% |
KKR CLO 29 Ltd. |
|
Subordinated Note
|
|
01/15/2032 |
|
N/A |
|
18.07% |
|
12/14/2021 |
|
|
5,500,000 |
|
|
4,457,607 |
|
|
3,416,003 |
|
3.74% |
Madison Park Funding XXXVII, Ltd. |
|
Subordinated Note
|
|
07/15/2049 |
|
N/A |
|
31.49% |
|
03/11/2020 |
|
|
4,000,000 |
|
|
2,466,933 |
|
|
2,693,324 |
|
2.95% |
Marathon CLO XIII, Ltd. |
|
Subordinated Note
|
|
04/15/2032 |
|
N/A |
|
12.33% |
|
06/04/2019 |
|
|
5,300,000 |
|
|
3,805,458 |
|
|
2,343,473 |
|
2.57% |
Octagon Investment Partners 37, Ltd. |
|
Subordinated Note
|
|
07/25/2030 |
|
N/A |
|
13.68% |
|
01/31/2020 |
|
|
6,000,000 |
|
|
3,804,794 |
|
|
2,429,568 |
|
2.66% |
Octagon Investment Partners 43, Ltd. |
|
Income Note |
|
10/25/2032 |
|
N/A |
|
12.88% |
|
08/02/2019 |
|
|
5,750,000 |
|
|
4,447,702 |
|
|
2,889,970 |
|
3.16% |
Point Au Roche Park CLO, Ltd. |
|
Subordinated Note
|
|
07/20/2034 |
|
N/A |
|
17.27% |
|
02/15/2022 |
|
|
5,945,000 |
|
|
4,792,598 |
|
|
4,068,000 |
|
4.45% |
Venture 37 CLO, Limited |
|
Subordinated Note
|
|
07/15/2032 |
|
N/A |
|
13.64% |
|
05/21/2019 |
|
|
5,200,000 |
|
|
3,760,293 |
|
|
2,341,187 |
|
2.56% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55,006,117
|
|
|
43,089,120
|
|
47.17% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
investments at fair value as of September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
176,245,242
|
|
$ |
143,505,246
|
|
157.08% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities, at fair value (10) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.00% Series A Term Preferred Stock due
2026 |
|
Preferred Stock |
|
|
|
|
|
|
|
|
|
$ |
(38,041,225 |
) |
$ |
(38,027,938 |
) |
$ |
(34,084,938 |
) |
-37.31% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets above (below)
fair value of investments and liabilites at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(18,069,055 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
assets as of September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
91,351,253
|
|
|
(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 we owned 25% or more of its voting securities. |
(2)
|
All
securities are exempt from registration under the securities act of 1933, are deemed to be "restricted" securities and
are categorized as structured finance securities. |
(3)
|
Pursuant
to the terms of the credit facility agreement, a security interest in favor of the lender has been granted with respect to all investments.
See Note 9 "Revolving Credit Facility" for further discussion. |
(4)
|
Acquisition
date represents the initial purchase date or the date when the investment was contributed to the Company. See Note 1 "Organization"
for further discussion. |
(5)
|
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. |
(6)
|
CLO
debt positions reflect the coupon rates as of September 30, 2022. |
(7)
|
The
fair value of CLO equity investments were determined using significant, unobservable inputs. See Note 3 "Investments" for
further discussion. |
(8)
|
CLO
income and subordinated 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 CLO 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 16.83%. |
(9)
|
Fair
value includes the Company's interest in fee rebates on CLO subordinated notes. |
(10) |
The
Company has accounted for its 5.00% Series A Term Preferred Stock utilizing the fair value option election under ASC Topic 825. Accordingly,
the Series A Term Preferred Stock is carried at its fair value. See Note 2 "Summary of Significant Accounting Policies"
for further discussion. |
See
accompanying notes to the financials statements
Eagle Point Income Company Inc.
Statement of Operations
For the nine months ended September 30, 2022
(expressed in U.S. dollars)
(Unaudited)
INVESTMENT INCOME | |
| |
Interest income | |
$ | 13,446,613 | |
Other income | |
| 40,531 | |
Total Investment Income | |
| 13,487,144 | |
| |
| | |
EXPENSES | |
| | |
Interest expense | |
| 1,825,627 | |
Management fees | |
| 1,508,915 | |
Commitment fees | |
| 500,000 | |
Professional fees | |
| 459,887 | |
Administration fees | |
| 413,459 | |
Directors' fees | |
| 191,250 | |
Amortization of deferred financing costs | |
| 85,374 | |
Tax expense | |
| 62,905 | |
Commission expense | |
| 61,255 | |
Other expenses | |
| 369,203 | |
Total Expenses | |
| 5,477,875 | |
| |
| | |
NET INVESTMENT INCOME | |
| 8,009,269 | |
| |
| | |
REALIZED AND UNREALIZED GAIN (LOSS) | |
| | |
Net realized gain (loss) on investments | |
| 38,548 | |
Net change in unrealized appreciation (depreciation) on investments | |
| (30,988,903 | ) |
Net change in unrealized (appreciation) depreciation on liabilities at fair value under the fair value option | |
| 597,770 | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | |
| (30,352,585 | ) |
| |
| | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | |
$ | (22,343,316 | ) |
See
accompanying notes to the financials statements
Eagle Point Income Company Inc.
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 | |
$ | (22,343,316 | ) |
| |
| | |
OTHER COMPREHENSIVE INCOME (LOSS) (1) | |
| | |
Change in unrealized (appreciation) depreciation on liabilities at fair value under the fair value option | |
| 4,184,518 | |
Total Other Comprehensive Income (Loss) | |
| 4,184,518 | |
| |
| | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM COMPREHENSIVE INCOME | |
$ | (18,158,798 | ) |
(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 financials statements
Eagle Point Income Company Inc.
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 | |
$ | 4,981,936 | | |
$ | 8,464,677 | | |
$ | 13,446,613 | |
Other income | |
| 13,160 | | |
| 27,371 | | |
| 40,531 | |
Total Investment Income | |
| 4,995,096 | | |
| 8,492,048 | | |
| 13,487,144 | |
| |
| | | |
| | | |
| | |
EXPENSES | |
| | | |
| | | |
| | |
Interest expense | |
| 675,035 | | |
| 1,150,592 | | |
| 1,825,627 | |
Management fees | |
| 476,875 | | |
| 1,032,040 | | |
| 1,508,915 | |
Commitment fees | |
| 500,000 | | |
| - | | |
| 500,000 | |
Professional fees | |
| 164,372 | | |
| 295,515 | | |
| 459,887 | |
Administration fees | |
| 126,355 | | |
| 287,104 | | |
| 413,459 | |
Directors' fees | |
| 63,750 | | |
| 127,500 | | |
| 191,250 | |
Amortization of deferred financing costs | |
| 26,720 | | |
| 58,654 | | |
| 85,374 | |
Tax expense | |
| 3,247 | | |
| 59,658 | | |
| 62,905 | |
Commission expense | |
| - | | |
| 61,255 | | |
| 61,255 | |
Other expenses | |
| 146,226 | | |
| 222,977 | | |
| 369,203 | |
Total Expenses | |
| 2,182,580 | | |
| 3,295,295 | | |
| 5,477,875 | |
| |
| | | |
| | | |
| | |
NET INVESTMENT INCOME | |
| 2,812,516 | | |
| 5,196,753 | | |
| 8,009,269 | |
| |
| | | |
| | | |
| | |
REALIZED AND UNREALIZED GAIN (LOSS) | |
| | | |
| | | |
| | |
Net realized gain (loss) on investments | |
| - | | |
| 38,548 | | |
| 38,548 | |
Net change in unrealized appreciation (depreciation) on investments | |
| (6,335,931 | ) | |
| (24,652,972 | ) | |
| (30,988,903 | ) |
Net change in unrealized (appreciation) depreciation on liabilities at fair value under the fair value option | |
| (72,932 | ) | |
| 670,702 | | |
| 597,770 | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | |
| (6,408,863 | ) | |
| (23,943,722 | ) | |
| (30,352,585 | ) |
| |
| | | |
| | | |
| | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | |
$ | (3,596,347 | ) | |
$ | (18,746,969 | ) | |
$ | (22,343,316 | ) |
Note: The above 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 financial statements.
See
accompanying notes to the financials statements
Eagle Point Income Company Inc.
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 | |
$ | 13,446,613 | | |
$ | 8,190,743 | |
Other income | |
| 40,531 | | |
| - | |
Total Investment Income | |
| 13,487,144 | | |
| 8,190,743 | |
| |
| | | |
| | |
EXPENSES | |
| | | |
| | |
Interest expense | |
| 1,825,627 | | |
| - | |
Management fees | |
| 1,508,915 | | |
| 1,204,393 | |
Commitment fees | |
| 500,000 | | |
| - | |
Professional fees | |
| 459,887 | | |
| 345,911 | |
Administration fees | |
| 413,459 | | |
| 349,784 | |
Directors' fees | |
| 191,250 | | |
| 191,250 | |
Amortization of deferred financing costs | |
| 85,374 | | |
| 43,812 | |
Tax expense | |
| 62,905 | | |
| 39,050 | |
Commission expense | |
| 61,255 | | |
| - | |
Other expenses | |
| 369,203 | | |
| 309,996 | |
Total Expenses | |
| 5,477,875 | | |
| 2,484,196 | |
| |
| | | |
| | |
NET INVESTMENT INCOME | |
| 8,009,269 | | |
| 5,706,547 | |
| |
| | | |
| | |
REALIZED AND UNREALIZED GAIN (LOSS) | |
| | | |
| | |
Net realized gain (loss) on investments | |
| 38,548 | | |
| 197,004 | |
Net change in unrealized appreciation (depreciation) on investments | |
| (30,988,903 | ) | |
| 4,053,663 | |
Net change in unrealized (appreciation) depreciation on liabilities at fair value under the fair value option | |
| 597,770 | | |
| - | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | |
| (30,352,585 | ) | |
| 4,250,667 | |
| |
| | | |
| | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | |
$ | (22,343,316 | ) | |
$ | 9,957,214 | |
See
accompanying notes to the financials statements
Eagle Point Income Company Inc.
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 | |
$ | 8,009,269 | | |
$ | 6,100,347 | |
Net realized gain (loss) on investments | |
| 38,548 | | |
| 423,464 | |
Net change in unrealized appreciation (depreciation) on investments | |
| (30,988,903 | ) | |
| 1,523,590 | |
Net change in unrealized
(appreciation) depreciation on liabilities at fair value under the fair value option | |
| 597,770 | | |
| (39,626 | ) |
Total net increase (decrease) in net assets resulting from operations | |
| (22,343,316 | ) | |
| 8,007,775 | |
| |
| | | |
| | |
Other comprehensive income (loss): | |
| | | |
| | |
Net change in unrealized
(appreciation) depreciation on liabilities at fair value under the fair value option | |
| 4,184,518 | | |
| (786,374 | ) |
Total other comprehensive income (loss) | |
| 4,184,518 | | |
| (786,374 | ) |
| |
| | | |
| | |
Common stock distributions: | |
| | | |
| | |
Common stock distributions from net investment income | |
| (7,736,164 | ) | |
| (8,414,218 | ) |
Common stock distributions from tax return of capital | |
| - | | |
| - | |
Total common stock distributions | |
| (7,736,164 | ) | |
| (8,414,218 | ) |
| |
| | | |
| | |
Capital share transactions: | |
| | | |
| | |
Issuance of shares of common stock upon the
Company's follow-on offering, net of underwriting discounts, commissions and offering expenses | |
| - | | |
| 11,247,376 | |
Issuance of shares of common stock pursuant to the
Company's "at the market" program, net of commissions and offering expenses | |
| 1,803,138 | | |
| 2,115,159 | |
Issuance of shares of common stock pursuant to the Company's dividend reinvestment plan | |
| 93,910 | | |
| 59,313 | |
Total capital share transactions | |
| 1,897,048 | | |
| 13,421,848 | |
| |
| | | |
| | |
Total increase (decrease) in net assets | |
| (23,997,914 | ) | |
| 12,229,031 | |
Net assets at beginning of period | |
| 115,349,167 | | |
| 103,120,136 | |
Net assets at end of period | |
$ | 91,351,253 | | |
$ | 115,349,167 | |
| |
| | | |
| | |
Capital share activity: | |
| | | |
| | |
Shares of common stock issued pursuant to overnight offering | |
| - | | |
| 648,000 | |
Shares of common stock issued pursuant to the Company's "at the market" program | |
| 111,622 | | |
| 124,007 | |
Shares of common stock issued pursuant to the Company's dividend reinvestment plan | |
| 5,992 | | |
| 3,499 | |
Total increase (decrease) in capital share activity | |
| 117,614 | | |
| 775,506 | |
See
accompanying notes to the financials statements
Eagle Point Income Company Inc.
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 | |
$ | (22,343,316 | ) |
| |
| | |
Adjustments to reconcile net increase (decrease) in
net assets resulting from operations to net cash provided by (used in) operating activities: | |
| | |
Purchases of investments | |
| (14,061,078 | ) |
Proceeds from sales of investments and repayments of principal (1) | |
| 9,635,009 | |
Net realized (gain) loss on investments | |
| (38,548 | ) |
Net change in unrealized (appreciation) depreciation on investments | |
| 30,988,903 | |
Net change in unrealized appreciation (depreciation) on liabilities at fair value under the fair value option | |
| (597,770 | ) |
Amortization (accretion) of premium or discount on 5.00% Series A Term Preferred stock due 2026 | |
| (8,214 | ) |
Net amortization (accretion) of premiums or discounts on CLO debt securities | |
| (255,348 | ) |
Amortization of deferred financing costs | |
| 85,374 | |
Changes in assets and liabilities: | |
| | |
Interest receivable | |
| (976,711 | ) |
Prepaid expenses | |
| (76,476 | ) |
Management fees payable | |
| (26,830 | ) |
Professional fees payable | |
| 34,660 | |
Administration fees payable | |
| 3,998 | |
Directors' fees payable | |
| (63,750 | ) |
Interest expense payable | |
| 101,467 | |
Tax expense payable | |
| (84,539 | ) |
Other expenses payable | |
| (83,851 | ) |
Net cash provided by (used in) operating activities | |
| 2,232,981 | |
| |
| | |
CASH FLOWS FROM FINANCING ACTIVITIES | |
| | |
Borrowings under credit facility | |
| 15,725,000 | |
Repayments under credit facility | |
| (13,950,000 | ) |
Common stock distributions paid to stockholders, net of change in common stock distribution payable | |
| (9,105,109 | ) |
Issuance of shares of common stock pursuant to the
Company's "at the market" program, net of commissions and offering expenses | |
| 1,803,138 | |
Issuance of shares of common stock pursuant to the Company's dividend reinvestment plan | |
| 93,537 | |
Issuance of shares of 5.00% Series A Term Preferred Stock due 2026 pursuant to the Company's "at the market" program | |
| 3,041,225 | |
Share issuance premium associated with 5.00% Series A Term Preferred Stock due 2026 | |
| 21,500 | |
Net cash provided by (used in) financing activities | |
| (2,370,709 | ) |
| |
| | |
NET INCREASE (DECREASE) IN CASH | |
| (137,729 | ) |
| |
| | |
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | |
| 211,758 | |
| |
| | |
CASH AND CASH EQUIVALENTS, END OF PERIOD | |
$ | 74,029 | |
| |
| | |
Supplemental disclosures: | |
| | |
Cash paid for franchise taxes | |
$ | 52,530 | |
Cash paid for excise taxes | |
$ | 105,000 | |
Cash paid for interest expense on 5.00% Series A Term Preferred Stock Due 2026 | |
$ | 1,413,879 | |
Cash paid for interest expense on credit facility | |
$ | 318,494 | |
(1)
Proceeds from sales or maturity of investments includes $3,637,443 of return of capital on portfolio investments from recurring cash
flows.
See
accompanying notes to the financials statements
Eagle Point Income Company Inc.
Notes to the Financial Statements
September 30, 2022
(Unaudited)
Eagle Point Income
Company Inc. (the “Company”) is an externally managed, 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 junior debt tranches of collateralized loan obligations, or “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 focuses on CLO debt tranches rated “BB” (e.g., BB+, BB or BB-, or their equivalent)
by Moody’s Investors Service, Inc., or “Moody’s,” Standard & Poor’s, or “S&P,”
or Fitch Ratings, Inc., or “Fitch,” and/or other applicable nationally recognized statistical rating organizations.
The Company may invest up to 35% of its total assets (at the time of investment) in unrated CLO equity securities and related securities
and instruments. The Company may also invest in other junior debt tranches of CLOs, senior debt tranches of CLOs, loan accumulation facilities
(“LAF”) and other related securities and instruments. The Company’s common stock is listed on the New York Stock Exchange
(“NYSE”) under the symbol “EIC”.
As of September 30,
2022, the Company had one wholly-owned subsidiary: Eagle Point Income Company Sub II (Cayman) Ltd. (the “Subsidiary”), a
Cayman Islands exempted company. As of September 30, 2022, the Subsidiary does not represent any portion of the Company’s
net assets.
The Company was initially
formed on September 28, 2018 as EP Income Company LLC, a Delaware limited liability company. The Company commenced operations on
October 4, 2018, the date Eagle Point Income Management LLC (the “Adviser”) contributed $100,000 in exchange for 100
units of the Company and Cavello Bay Reinsurance Limited (“Cavello Bay” and collectively with the Adviser, the “Members”)
contributed to the Company, at fair value, the entire portfolio of BB-rated CLO debt it held in a separately managed account managed
by an affiliate of the Adviser, totaling $75,051,650, inclusive of accrued interest of $1,371,697, in exchange for 75,051.65 units of
the Company. Cavello Bay is a subsidiary of Enstar Group Limited, or “Enstar.”
On October 16,
2018, the Company converted from a Delaware limited liability company into a Delaware corporation (the “Conversion”). At
the time of the Conversion, the Members became stockholders of Eagle Point Income Company Inc. In connection with the Conversion, the
Members converted 75,151.65 units of the Delaware limited liability company into shares of common stock in the Delaware corporation at
$20 per share, resulting in 3,769,596 shares and an effective conversion rate of approximately 50.15985069 per unit.
On July 23, 2019,
the Company priced its initial public offering (the “IPO”) and sold an additional 1,200,000 shares of its common stock at
a public offering price of $19.89 per share. On July 24, 2019, the Company’s shares began trading on the NYSE. On August 2,
2019, the Company sold an additional 162,114 shares pursuant to the exercise by the underwriters of the over-allotment option granted
to them in connection with the IPO at a public offering price of $19.89 per share.
Computershare Trust
Company, N.A. serves at 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 Income Company Inc.
Notes to the Financial Statements
September 30, 2022
(Unaudited)
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES |
Basis of Accounting
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 financial statements are measured and presented in United States dollars.
Use of Estimates
The preparation of
financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions which affect the reported amounts
included in the 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 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 the its 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 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. |
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
Eagle Point Income Company Inc.
Notes to the Financial Statements
September 30, 2022
(Unaudited)
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 and CLO equity, 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.
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 are recognized in
earnings as incurred and are not deferred.
The Company elected
to account for its 5.00% Series A Term Preferred Stock due 2026 (the “Series A 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
Eagle Point Income Company Inc.
Notes to the Financial Statements
September 30, 2022
(Unaudited)
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.
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 Series A Term Preferred Stock and amounts due under the credit facility agreements
in relation to the outstanding borrowings and unused commitment fees. Interest expense is recorded as an expense on the Statement of
Operations. The Company’s Series A Preferred Stock had no interest payable as of September 30, 2022. Please refer to
Note 6 “Mandatory Redeemable Preferred Stock” for further discussion relating to the Series A Term Preferred Stock issuances.
Please refer to Note 9 “Revolving Credit Facility” for further discussion on the interest expense due under the credit facility
agreements.
Interest expense also
includes the Company’s amortization of original issue premiums associated with its Series A Term Preferred Stock.
The following table
summarizes the components of interest expense for the nine months ended September 30, 2022:
| |
Series
A Term
Perferred Stock | | |
Credit
Facility | | |
Total | |
Distributions declared and paid | |
$ | 1,413,879 | | |
$ |
| | |
$ | 1,413,879 | |
| |
| | | |
| | | |
| | |
Interest expense on credit facility | |
| | | |
| 419,962 | | |
| 419,962 | |
| |
| | | |
| | | |
| | |
Amortization of issuance premium | |
| (8,214 | ) | |
| | | |
| (8,214 | ) |
| |
$ | 1,405,665 | | |
$ | 419,962 | | |
$ | 1,825,627 | |
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 A Term Preferred Stock as part of the Company’s at-the-market (“ATM”) program. The original issue
premiums are capitalized at the time of issuance and amortized using the effective interest method over the respective terms of the
Series A Term Preferred Stock. Amortization of original issue premium is reflected as a contra expense under interest expense
in the 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.
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 a bank account which, at times, may exceed federal insured limits. The Adviser monitors
the performance of the financial institution where the account is held in order to manage any risk associated with such account.
As of September 30,
2022, the Company held cash in a Computershare Corporate Trust interest earning cash deposit account with a balance of approximately
$0.1 million. This account is classified as Level I in the fair value hierarchy.
Eagle Point Income Company Inc.
Notes to the Financial Statements
September 30, 2022
(Unaudited)
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, ATM program expenses and the Committed Equity Financing expenses
(refer to Note 5 “Common Stock”). Insurance premiums are amortized over the term of the current policy. Prepaid shelf registration
expenses, ATM program expenses and Committed Equity Financing expenses represent fees and expenses incurred in connection with the initial
registration of the Company’s current shelf registration, ATM program and the Committed Equity Financing. 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, ATM program and the Committed Equity Financing. Any subsequent costs incurred to maintain
the Company’s ATM program and the Committed Equity Financing are expensed as incurred.
Any unallocated prepaid
expense balance associated with the shelf registration, ATM program and the Committed Equity Financing 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.
Deferred Financing
Costs
Deferred financing
costs consist of fees and expenses incurred in connection with the BNP Credit Facility (refer to Note 9 “Revolving Credit Facility”).
Deferred financing costs are capitalized and amortized over the term of the BNP Credit Facility, and are reflected in borrowings under
the credit facility on the Statement of Asset and Liabilities (if any). Amortization of deferred financing costs is recorded as an expense
on the Statement of Operations on a straight-line basis, which approximates the effective interest method. As of September 30, 2022,
the deferred financing costs associated with the BNP Credit Facility have been fully amortized.
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 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 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 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:
Eagle Point Income Company Inc.
Notes to the Financial Statements
September 30, 2022
(Unaudited)
Cost for federal income tax purposes | |
$ | 174,187,758 | |
| |
| | |
Gross unrealized appreciation | |
$ | 752,653 | |
Gross unrealized depreciation | |
| (31,435,165 | ) |
Net unrealized depreciation | |
$ | (30,682,512 | ) |
For the nine months ended September 30,
2022, the Company incurred $43,333 in Delaware franchise tax expense related to the 2022 tax year and $19,572 of excise tax related to
the 2021 tax year end, which are reported on the Statement of Operations.
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 and are comprised of net investment income,
realized gains or losses 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 approximately $7.7 million or approximately
$1.11 per share. In addition, on January 24, 2022 the Company paid a special distribution on common stock of approximately $1.4
million or $0.20 per share, 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 A Term Preferred Stock of approximately $1.4
million or approximately $0.94 per share.
The characterization
of distributions paid to common stockholders, as set forth in the 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 table
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:
Eagle Point Income Company Inc.
Notes to the Financial Statements
September 30, 2022
(Unaudited)
Fair Value Measurement (in millions) | |
| | |
| | |
| | |
| |
| |
Level
I | | |
Level
II | | |
Level
III | | |
Total | |
Assets | |
| | | |
| | | |
| | | |
| | |
Cash and Cash Equivalents | |
$ | 0.07 | | |
$ | - | | |
$ | - | | |
$ | 0.07 | |
CLO Debt | |
| - | | |
| 100.42 | | |
| - | | |
| 100.42 | |
CLO Equity | |
| - | | |
| - | | |
| 43.09 | | |
| 43.09 | |
| |
| | | |
| | | |
| | | |
| | |
Total Assets at Fair Value | |
$ | 0.07 | | |
$ | 100.42 | | |
$ | 43.09 | | |
$ | 143.58 | |
| |
| | | |
| | | |
| | | |
| | |
Liabilites at Fair Value
Under FVO | |
| | | |
| | | |
| | | |
| | |
Series A Term Preferred Stock | |
$ | 34.08 | | |
$ | - | | |
$ | - | | |
$ | 34.08 | |
| |
| | | |
| | | |
| | | |
| | |
Total Liabilites at Fair Value Under FVO | |
$ | 34.08 | | |
$ | - | | |
$ | - | | |
$ | 34.08 | |
| |
| | | |
| | | |
| | | |
| | |
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 | |
Balance as of January 1, 2022 | |
$ | 53.27 | |
| |
| | |
Purchases of investments | |
| 5.12 | |
Proceeds from sales or maturity of investments (1) | |
| (3.64 | ) |
Net realized gains (losses) and net change in unrealized appreciation
(depreciation) | |
| (11.66 | ) |
| |
| | |
Balance as of September 30, 2022 (2) | |
$ | 43.09 | |
| |
| | |
Change in unrealized appreciation (depreciation) on investments
still held as of September 30, 2022 | |
$ | (11.66 | ) |
(1) Proceeds from sales or
maturity of investments represent the return of capital on portfolio investments from recurring cash flows. |
(2) There were no transfers in or out of
Level III during the period. |
The net realized gains
(losses) recorded for Level III investments, if any, are reported in the net realized gain (loss) on investments balance in the Statement
of Operations. Net changes in unrealized appreciation (depreciation) are reported in the net change in unrealized appreciation (depreciation)
on investments balance in the Statement of Operations.
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
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.
Eagle Point Income Company Inc.
Notes to the Financial Statements
September 30, 2022
(Unaudited)
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.
| |
|
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 | |
$ |
43.09 | |
|
Discounted Cash Flows | |
Annual Default Rate (2) | |
0.00% - 4.45% |
| |
|
| |
|
| |
Annual Prepayment Rate (2) (3) | |
20% - 25% |
| |
|
| |
|
| |
Reinvestment Spread | |
3.51% - 3.81% / 3.61% |
| |
|
| |
|
| |
Reinvestment Price | |
95.00% - 99.50% |
| |
|
| |
|
| |
Recovery Rate | |
69.07% - 69.90% / 69.59% |
| |
|
| |
|
| |
Expected Yield | |
22.37% - 48.88% / 27.92% |
(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.
Valuation of
Series A Term Preferred Stock
The Series A
Term Preferred Stock is considered a Level I security and is valued at the official closing price, taken from the NYSE.
Investment Risk
Factors
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.
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
Eagle Point Income Company Inc.
Notes to the Financial Statements
September 30, 2022
(Unaudited)
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.
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 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 junior debt and equity tranches will likely be subordinate in 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.
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 junior debt and equity 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
Eagle Point Income Company Inc.
Notes to the Financial Statements
September 30, 2022
(Unaudited)
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
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 financial statements, senior secured loans in which
CLOs invest, and CLO debt 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.
Eagle Point Income Company Inc.
Notes to the Financial Statements
September 30, 2022
(Unaudited)
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 credit facilities, 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 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 junior debt and equity investments in CLOs, which involve a number of significant risks. CLO junior debt and equity
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 junior debt and equity investors. CLO
equity tranches are the most likely tranche to suffer a loss of all of their value in those circumstances. Heightened inflationary pressures
could increase the risk of default by the Company’s underlying obligors.
Eagle Point Income Company Inc.
Notes to the Financial Statements
September 30, 2022
(Unaudited)
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 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 the Company’s
common shares or preferred stock.
| 4. | RELATED PARTY TRANSACTIONS |
Investment Adviser
On October 5,
2018, the Company entered into an investment advisory agreement with the Adviser (the “Advisory Agreement”). Pursuant to
the terms of the Advisory Agreement, the Company pays the Adviser, for its services, a management fee equal to an annual rate of 1.25%
of the Company’s “Managed Assets”. Managed Assets are defined as the Company’s total assets (including assets
attributable to the Company’s use of leverage) minus the sum of the Company’s accrued liabilities (other than liabilities
incurred for the purpose of creating leverage). The management fee is calculated monthly and payable quarterly in arrears based on the
Company’s Managed Assets at the end of each calendar month. For the nine months ended September 30, 2022, the Company was
charged a management fee of approximately $1.5 million, of which $0.5 million was payable as of September 30, 2022.
Administrator
Effective October 5,
2018, 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 NAV, 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 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.
Eagle Point Income Company Inc.
Notes to the Financial Statements
September 30, 2022
(Unaudited)
For the nine months
ended September 30, 2022, the Company was charged a total of approximately $0.4 million in administration fees consisting of approximately
$0.3 million and $0.1 million, relating to services provided by the Administrator and SS&C, respectively, which are included in the
Statement of Operations, and of which approximately $0.1 million was payable as of September 30, 2022 and reflected on the Statement
of Assets and Liabilities.
Affiliated Ownership
As of September 30,
2022, the Adviser and its affiliates and senior investment team held an aggregate of 0.8% of the Company’s common stock. Additionally,
the senior investment team held an aggregate of 0.1% of the Series A Term Preferred Stock as of September 30, 2022. An affiliate
of Enstar holds an indirect non-controlling ownership interest in the Adviser. As of September 30, 2022, subsidiaries of Enstar,
including Cavello Bay, held an aggregate of 53.8% of the Company’s common stock.
As of September 30,
2022, there were 150,000,000 shares of common stock authorized, of which 6,999,578 shares were issued and outstanding.
On May 29, 2020,
the Company filed a new shelf registration statement with 150,000,000 shares of common stock authorized.
On December 20,
2021, the Company launched a new ATM offering to sell up to $2,600,000 aggregate amount of its common stock, pursuant to a prospectus
supplement filed with the SEC on May 29, 2020 and additional supplements thereafter. Costs incurred to maintain the ATM program
are expensed as incurred and are included in the Statement of Operations.
On August 16,
2022, the Company entered into an agreement (the “Purchase Agreement”) with B. Riley Principal Capital II, LLC (“BRPC
II”) in which BRPC II has committed to purchase from the Company, at the Company’s discretion, up to $20,000,000 of the Company’s
common stock, subject to terms and conditions specified in the Purchase Agreement (referred to as the “Committed Equity Financing”).
The Company filed a preliminary registration statement on August 16, 2022 in relation to the Committed Equity Financing, which is
subject to review by the SEC. In connection with the Committed Equity Financing, the Company incurred a $500,000 upfront commitment fee
which was expensed as incurred and included in the Statement of Operations.
For the nine months
ended September 30, 2022, the Company sold 111,622 shares of its common stock, pursuant to the ATM offerings for total net proceeds
to the Company of approximately $1.8 million. In connection with such sales, the Company paid a total of $18,343 in sales agent commissions.
For the nine months
ended September 30, 2022, 5,992 shares of common stock were issued in connection with the DRIP for total net proceeds to the Company
of approximately $0.1 million.
| 6. | MANDATORY REDEEMABLE PREFERRED STOCK |
As of September 30,
2022, there were 20,000,000 shares of preferred stock authorized, par value $0.001 per share, of which 1,521,649 shares of Series A
Term Preferred Stock were issued and outstanding.
The Company is required
to redeem all outstanding shares of the Series A Term Preferred Stock on October 30, 2026, at a redemption price of $25 per
share (the “Series A Liquidation Preference”), plus accumulated but unpaid dividends, if any. At any time on or after
October 31, 2023, the Company may, at its sole option, redeem the outstanding shares of the Series A Term Preferred Stock.
The Company has accounted
for its Series A Term Preferred Stock utilizing the FVO under ASC 825. Accordingly, the Series A Term Preferred Stock is measured
at fair value. The Company incurred additional issuance costs in the aggregate amount of approximately $0.1 million, which consisted
of approximately eighty thousand of professional
Eagle Point Income Company Inc.
Notes to the Financial Statements
September 30, 2022
(Unaudited)
fees and ten thousand
of other expenses, which were expensed as incurred in the nine months ended September 30, 2022.
The estimated change
in fair value of the Series A Term Preferred Stock attributable to market risk for the nine months ended September 30, 2022
is approximately $0.6 million, which is recorded as unrealized (appreciation) depreciation on liabilities at fair value under the FVO
on the Statement of Operations.
The estimated change
in fair value of the Series A Term Preferred Stock attributable to instrument-specific credit risk for the nine months ended September 30,
2022 is approximately $4.2 million, which is recorded as unrealized (appreciation) depreciation on liabilities at fair value under the
FVO on the 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 the 5-Year Markit CDX North America Investment Grade Index.
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.
On December 20,
2021, the Company launched a new ATM offering to sell up to 140,000 shares of Series A Term Preferred Stock with an aggregate liquidation
preference of $3,500,000, pursuant to a prospectus supplement filed with the SEC on May 29, 2020 and additional supplements thereafter.
For the nine months
ended September 30, 2022, the Company sold 121,649 shares of its Series A Term Preferred Stock, pursuant to the ATM offerings
for total net proceeds to the Company of approximately $3.0 million. In connection with such sales, the Company paid a total of $61,255
in sales agent commissions.
See Note 10 “Asset
Coverage” for further discussion on the Company’s calculation of asset coverage with respect to its Preferred Stock.
| 7. | 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.
As of September 30,
2022, the Company had no unfunded commitments.
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.
Eagle Point Income Company Inc.
Notes to the Financial Statements
September 30, 2022
(Unaudited)
| 9. | REVOLVING CREDIT FACILITY |
The Company may utilize
leverage to the extent permitted by the 1940 Act. The Company may obtain leverage using any form of financial leverage instruments, including
funds borrowed from banks or other financial institutions, margin facilities, notes or preferred stock and leverage attributable to repurchase
agreements or similar transactions. Instruments that create leverage are generally considered to be senior securities under the 1940
Act. The use of leverage creates an opportunity for increased net income and capital appreciation, but also creates additional risks
and expenses which will be borne entirely by common stock holders. The Company’s leverage strategy may not ultimately be successful.
On September 24,
2021 the Company entered into a credit agreement, which was amended on September 6, 2022, with BNP Paribas, as lender, that established
a revolving credit facility (the “BNP Credit Facility”). Pursuant to the terms of the BNP Credit Facility, the Company can
borrow up to an aggregate principal balance of $25,000,000 (the “Commitment Amount”). Such borrowings under the BNP Credit
Facility bore interest at 1 month LIBOR plus a spread under the original credit agreement, and will bear interest at Term SOFR plus a
spread under the amended credit agreement. The Company is required to pay a commitment fee on the unused amount.
The BNP Credit Facility
will mature on the earlier of (i) the termination of the Commitment, as defined by the terms of the BNP Credit Facility or (ii) the
scheduled maturity date of September 23, 2023. The Company has the option to extend the maturity from time to time in accordance
with the BNP Credit Facility agreement.
For the nine months
ended September 30, 2022, the Company had an average outstanding borrowing and average interest rate of approximately $19.0 million
and 2.83%, respectively. The interest expense for the nine months ended September 30, 2022 on the BNP Credit Facility was approximately
$0.4 million, inclusive of the commitment fee, and is recorded on the Statement of Operations. As of September 30, 2022, the current
outstanding borrowing amount was approximately $21.3 million, which is presented on the Statement of Assets and Liabilities.
See Note 10 “Asset
Coverage” for further discussion on the Company’s calculation of asset coverage with respect to the BNP Credit Facility.
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 Series A Term Preferred Stock, the Company is required to have asset coverage of at least
200%, as measured at the time of the issuance of any such senior securities that are stocks and calculated as the ratio of the Company’s
total 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 BNP Credit Facility 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 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
BNP Credit Facility require the Company to cure any breach of the applicable asset coverage if the Company fails to maintain the applicable
asset coverage, and the terms of the Preferred Stock require the Company to redeem shares of the Preferred Stock, if such failure to
maintain the applicable asset coverage is not cured by a certain date.
Eagle Point Income Company Inc.
Notes to the Financial Statements
September 30, 2022
(Unaudited)
The following table
summarizes the Company’s asset coverage with respect to its Series A Term Preferred Stock and credit facilities as of September 30,
2022, and as of December 31, 2021:
| |
As of | | |
As of | |
| |
September
30, 2022 | | |
December
31, 2021 | |
Total Assets | |
$ | 147,828,756 | | |
$ | 173,181,861 | |
Less liabilities and debts not represented by
senior securities | |
| (1,054,278 | ) | |
| (2,456,694 | ) |
Net total assets and liabilities | |
$ | 146,774,478 | | |
$ | 170,725,167 | |
| |
| | | |
| | |
Preferred Stock | |
$ | 38,041,225 | | |
$ | 35,000,000 | |
Credit Facilities | |
| 21,325,000 | | |
| 19,550,000 | |
| |
$ | 59,366,225 | | |
$ | 54,550,000 | |
| |
| | | |
| | |
Asset coverage for preferred stock (1) | |
| 247% | | |
| 313% | |
Asset coverage for debt securities (2) | |
| 688% | | |
| 873% | |
(1) Asset
coverage of the preferred stock is calculated in accordance with Section 18(h) of the 1940 act, as generally described above. |
(2)
Asset coverage of the debt securities is calculated in accordance with Section 18(h)
of the 1940 act, as generally described above. |
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 7, 2022, the Company declared three separate distributions of $0.16 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 10, 2023 and March 10, 2023, respectively.
On July 29, 2022,
the Company paid a monthly distribution of $0.104167 per share on its Series A Preferred Stock to holders of record as of July 11,
2022. Additionally, on November 7, 2022, the Company declared three separate distributions of $0.104167 per share on its Series A
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 10, 2023 and March 10, 2023, respectively.
On November 10,
2022, the Company filed a prospectus supplement to update the aggregate offering price of common stock sold through the existing ATM
offering from $2,600,000 to $11,300,000, exclusive of any shares of common stock previously sold through the ATM offering. The Company
is not currently selling shares of Series A Term Preferred Stock through the ATM offering.
As of November 15,
2022, the aggregate outstanding principal amount borrowed by the Company from the BNP Credit Facility was approximately $18.7 million.
Management’s
unaudited estimate of the range of the Company’s NAV per common share as of October 31, 2022 was $12.81 to $12.91.
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, and has determined there are no events in addition to those described above which would require adjustment to or disclosure in
the financial statements and related notes through the date of release of this report.
Eagle Point Income Company Inc.
Financial Highlights
(Unaudited)
| |
For the | | |
| | |
| | |
| | |
For the period from | |
| |
nine months ended | | |
For the year ended | | |
For the year ended | | |
For the year ended | | |
October 16, 2018 | |
Per
Share Data | |
September
30, 2022 | | |
December
31, 2021 | | |
December
31, 2020 | | |
December
31, 2019 | | |
to
December 31, 2018 | |
Net asset value, beginning
of period | |
$ | 16.76 | | |
$ | 16.89 | | |
$ | 19.34 | | |
$ | 18.28 | | |
$ | 20.00 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net investment income,
before fee waivers and expenses reimbursed (1) (2) | |
| 1.15 | | |
| 0.98 | | |
| 1.27 | | |
| 1.15 | | |
| 0.10 | |
Management fee voluntarily
waived by the Adviser (1) | |
| - | | |
| - | | |
| - | | |
| 0.08 | | |
| 0.05 | |
Expenses reimbursed by
the Adviser (1) | |
| - | | |
| - | | |
| - | | |
| 0.06 | | |
| 0.20 | |
Administration
fee voluntarily waived by the Administrator (1) | |
| - | | |
| - | | |
| - | | |
| 0.03 | | |
| - | |
Net
investment income | |
| 1.15 | | |
| 0.98 | | |
| 1.27 | | |
| 1.32 | | |
| 0.35 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net realized gain (loss)
and change in unrealized appreciation (depreciation) on investments (1) (3) | |
| (4.44 | ) | |
| 0.38 | | |
| (2.21 | ) | |
| 0.70 | | |
| (1.72 | ) |
Net change in unrealized
(appreciation) depreciation on liabilities at fair value under the fair value option | |
| 0.09 | | |
| (0.01 | ) | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net
income (loss) and net increase (decrease) in net assets resulting from operations | |
| (3.20 | ) | |
| 1.35 | | |
| (0.94 | ) | |
| 2.02 | | |
| (1.37 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Common stock distributions
from net investment income (4) | |
| (1.11 | ) | |
| (1.33 | ) | |
| (1.32 | ) | |
| (0.69 | ) | |
| (0.35 | ) |
Common stock distributions
from net realized gains on investments (4) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Common
stock distributions from tax return of capital (4) | |
| - | | |
| - | | |
| (0.18 | ) | |
| - | | |
| - | |
Total
common stock distributions declared to stockholders (4) | |
| (1.11 | ) | |
| (1.33 | ) | |
| (1.50 | ) | |
| (0.69 | ) | |
| (0.35 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Common
stock distributions based on weighted average shares impact (5) | |
| - | | |
| (0.02 | ) | |
| - | | |
| (0.15 | ) | |
| - | |
Total
common stock distributions | |
| (1.11 | ) | |
| (1.35 | ) | |
| (1.50 | ) | |
| (0.84 | ) | |
| (0.35 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Effect of other comprehensive
income | |
| 0.60 | | |
| (0.13 | ) | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Effect of shares issued (6) | |
| - | | |
| 0.10 | | |
| - | | |
| (0.19 | ) | |
| | |
Effect of underwriting discounts,
commissions and offering expenses associated with shares issued (6) | |
| - | | |
| (0.10 | ) | |
| (0.01 | ) | |
| | | |
| | |
Effect of offering expenses
associated with shares issued (7) | |
| - | | |
| - | | |
| - | | |
| (0.12 | ) | |
| | |
Effect of shares issued
in accordance with the Company's dividend reinvestment plan | |
| - | | |
| - | | |
| - | | |
| - | | |
| | |
Effect
of paid-in capital contribution (8) | |
| - | | |
| - | | |
| - | | |
| 0.19 | | |
| | |
Net effect of shares
issued | |
| - | | |
| - | | |
| (0.01 | ) | |
| (0.12 | ) | |
| - | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net asset value
at end of period | |
$ | 13.05 | | |
$ | 16.76 | | |
$ | 16.89 | | |
$ | 19.34 | | |
$ | 18.28 | |
Per share market
value at beginning of period (9) | |
$ | 17.03 | | |
$ | 14.41 | | |
$ | 18.76 | | |
$ | 19.89 | | |
| N/A | |
Per share market value at end of period | |
$ | 14.19 | | |
$ | 17.03 | | |
$ | 14.41 | | |
$ | 18.76 | | |
| N/A
| |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total return, based on market value (10) | |
| (9.47% | ) | |
| 26.55% | | |
| (14.07% | ) | |
| (2.27% | ) | |
| N/A
| |
Total
return, based on net asset value (11) | |
| (15.51% | ) | |
| 7.22% | | |
| (4.91% | ) | |
| 9.56% | | |
| (6.85% | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Shares of common stock outstanding at end
of period | |
| 6,999,578 | | |
| 6,881,964 | | |
| 6,106,458 | | |
| 6,018,273 | | |
| 3,769,596 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Ratios and Supplemental Data: | |
| | | |
| | | |
| | | |
| | | |
| | |
Net asset value at end of period | |
$ | 91,351,253 | | |
$ | 115,349,167 | | |
$ | 103,120,136 | | |
$ | 116,408,383 | | |
$ | 68,923,362 | |
Ratio of net investment
income to average net assets (12) (14) | |
| 10.35% | | |
| 5.66% | | |
| 8.65% | | |
| 6.67% | | |
| 8.54% | |
Ratio of expenses, before
fee waivers and expenses reimbursed, to average net assets (12) (13) (14) | |
| 6.71% | | |
| 5.36% | | |
| 3.99% | | |
| 2.75% | | |
| 3.12% | |
Ratio of expenses, after
fee waivers and expenses reimbursed, to average net assets (12) (13) (14) | |
| N/A | | |
| N/A | | |
| N/A | | |
| 1.89% | | |
| 0.00% | |
Portfolio turnover rate (15) | |
| 6.02% | | |
| 27.98% | | |
| 29.14% | | |
| 11.42% | | |
| 2.35% | |
Asset coverage of preferred stock | |
| 247% | | |
| 313% | | |
| 313% | | |
| | | |
| | |
Asset coverage of debt securities | |
| 688% | | |
| 873% | | |
| 873% | | |
| 947% | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Credit Facility: | |
| | | |
| | | |
| | | |
| | | |
| | |
Principal amount outstanding
at end of period | |
$ | 21,325,000 | | |
$ | 19,550,000 | | |
$ | 14,815,000 | | |
$ | 13,743,000 | | |
$ | - | |
Asset coverage per $1,000 at end of period
(16) | |
$ | 6,882.74 | | |
$ | 8,732.75 | | |
$ | 7,960.52 | | |
$ | 9,470.38 | | |
$ | - | |
Eagle Point Income Company Inc.
Financial Highlights
(Unaudited)
Footnotes to the Financial
Highlights:
(1) | Per share amounts are based
on the weighted average of shares of common stock outstanding for the period. |
(2) | Per share distributions paid to preferred stockholders are reflected
in net investment income, and totaled ($0.20) per share of common stock for the nine months ended September 30,
2022. |
(3) | Net realized gain (loss) and change in unrealized appreciation (depreciation)
on investments may include a balancing figure to reconcile to the change in NAV per share at the end
of each period. The amount shown for a share outstanding throughout the period may not agree with the
change in the aggregate net realized gain (loss) and change in unrealized appreciation (depreciation)
on investments for the period because of the timing of sales 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. |
(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) | Represents the effect per share of the Company’s issuance of shares
of common stock pursuant to a private placement in May 2019 and the Company’s ATM and follow
on offerings. Effect of shares issued reflect the impact of the offering price when compared to management’s
estimated NAV per share at the time of each respective offering. |
(7) | Represents the effect per share of offering expenses incurred prior to
or in connection with the Company’s IPO. |
(8) | Represents the effect of the paid-in capital contribution made by an
affiliate of the Adviser pursuant to a private placement in May 2019. |
(9) | Represents the IPO price as of July 23, 2019 for the year ended
December 31, 2019. |
(10) | 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. For the year ended December 31, 2019 the
total return on market value is calculated as the change in market value per share for the period commencing
July 23, 2019, the date of the Company’s IPO, through December 31, 2019. The beginning
market value per share is based on the initial public offering price of $19.89 per share. Total return
does not reflect any sales load. |
(11) | Total return based on net asset value is calculated as the change in
net asset value per share during the period plus declared and paid dividends per share, divided by the
beginning net asset value per share. |
(12) | Ratios for the period from October 16, 2018 to December 31,
2018 and for the nine months ended September 30, 2022 are annualized. Ratios include the impact
of the fee waivers and expenses reimbursed by the Adviser, where applicable. |
(13) | Expenses of the Company for the period from October 16, 2018 to
December 31, 2018 and for the period from January 1, 2019 to May 31, 2019 were reimbursed
by the Adviser. In addition, the Adviser has voluntarily waived the management fee and the Administrator
has voluntarily waived the administration fee for the same periods from October 16, 2018 to December 31,
2018 and from January 1, 2019 to May 31, 2019. |
(14) | Ratios for the nine months ended September 30, 2022 and the years
ended December 31, 2021, December 31, 2020 and December 31, 2019 include interest expense
on the credit facility of 0.53%, 0.40%, 0.60% and 0.04% of average net assets, respectively. Ratios
for the nine months ended September 30, 2022 and the year ended December 31, 2021 include
interest expense on the Series A Term Preferred Stock of 1.79% and 0.31% of average net assets,
respectively. Ratios for the nine months ended September 30, 2022 and the years ended December 31,
2021 and December 31, 2019 include excise tax expense of 0.02%, 0.06% and 0.10% of average net
assets, respectively. |
(15) | The portfolio turnover rate is calculated as the lesser of total investment
purchases executed during the period or the total of investment sales and repayments of principal executed
during the period, divided by the average fair value of the investments for the same period. |
(16) | The asset coverage per unit figure is the ratio of the Company’s
total assets, less liabilities and indebtedness not represented by the credit facility, to the aggregate
dollar amount of outstanding borrowings of the credit facility, in accordance with section 18(h) of
the 1940 Act. The asset coverage per unit figure is expressed in terms of dollar amounts per $1,000
principal amount. |
Eagle Point Income Company Inc.
Financial Highlights
(Unaudited)
Financial highlights for the
period from October 4, 2018 (Commencement of Operations) to October 15, 2018 for the Members are as follows:
| |
For the
period from | |
| |
October
4, 2018 | |
| |
(Commencement
of Operations) | |
Per
Unit Data | |
to
October 15, 2018 | |
Net asset
value at beginning of period | |
$ | 1,000.00 | |
| |
| | |
Net investment income | |
| 2.69 | |
Net
change in unrealized appreciation (depreciation) on investments | |
| 0.51 | |
Net
income (loss) and net increase (decrease) in net assets resulting from operations | |
| 3.20 | |
| |
| | |
Net asset value
at end of period | |
$ | 1,003.20 | |
| |
| | |
Total
return (1) | |
| 0.32% | |
Ratios
and Supplemental Data: | |
| | |
Net asset value at end of period | |
$ | 75,391,911 | |
Ratio
of net investment income to average net assets (1) | |
| 0.27% | |
Ratio
of expenses to average net assets (2) | |
| 0.00% | |
Portfolio
turnover rate (3) | |
| 0.00% | |
| (1) | Total return and ratio of net investment income to average net assets
for the period from October 4, 2018 (Commencement of Operations) to October 15,
2018 are not annualized. |
| (2) | No expenses were borne by the Company from
October 4, 2018 (Commencement of Operations) to October 15, 2018. |
| (3) | The Company did not enter transactions to
purchase or sell securities from October 4, 2018 (Commencement of Operations) to October 15,
2018. As such, the portfolio turnover rate is 0.00%. |
Note: The above Financial
Highlights for the period from October 4, 2018 (Commencement of Operations) to October 15, 2018 for Members represents the
period when the Company was initially organized as a Delaware limited liability company.
Eagle Point Income Company Inc.
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 financial statements as of and for the dates
noted.
Class | |
Total
Amount Outstanding
Exclusive of Treasury Securities
(in millions) | | |
Asset
Coverage Per
Unit (1) | | |
Involuntary
Liquidating
Preference Per Unit (2) | | |
Average
Market Value
Per Unit (3) | |
For the nine months ended Septmber 30, 2022 | |
| | |
| | |
| | |
| |
Preferred Stock | |
$ | 38,041,225 | | |
$ | 61.81 | | |
$ | 25 | | |
$ | 23.98 | |
Credit Facility (BNP Paribas) | |
$ | 21,325,000 | | |
$ | 6,882.74 | | |
| N/A | | |
| N/A | |
| |
| | | |
| | | |
| | | |
| | |
For the year ended December 31, 2021 | |
| | | |
| | | |
| | | |
| | |
Preferred Stock | |
$ | 35,000,000 | | |
$ | 78.24 | | |
$ | 25 | | |
$ | 25.32 | |
Credit Facility (BNP Paribas) | |
$ | 19,550,000 | | |
$ | 8,732.75 | | |
| N/A | | |
| N/A | |
| |
| | | |
| | | |
| | | |
| | |
For the year ended December 31, 2020 | |
| | | |
| | | |
| | | |
| | |
Credit Facility (Société Générale) | |
$ | 14,815,000 | | |
$ | 7,960.52 | | |
| N/A | | |
| N/A | |
| |
| | | |
| | | |
| | | |
| | |
For the year ended December 31, 2019 | |
| | | |
| | | |
| | | |
| | |
Credit Facility (Société Générale) | |
$ | 13,743,000 | | |
$ | 9,470.38 | | |
| N/A | | |
| N/A | |
| |
| | | |
| | | |
| | | |
| | |
| (1) | The asset coverage per unit figure
is the ratio of the Company’s total assets, less all liabilities and indebtedness not
represented by senior securities, to the aggregate dollar amount of senior securities, as
calculated separately for each of the Series A Term Preferred Stock and Credit Facilities
in accordance with section 18(h) of the 1940 Act. With respect to the Series A
Term 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 Credit Facilities, the asset coverage per unit figure is expressed
in terms of dollar amounts per $1,000 of indebtedness. |
| (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 the Series A Term Preferred
Stock (NYSE: EICA). |
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