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Form N-CSR Eagle Point Income Co For: Dec 31

February 22, 2024 7:37 AM EST
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM N-CSR

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

 

Investment Company Act File Number: 811-23384

 

Eagle Point Income Company Inc.

(Exact name of registrant as specified in charter)

 

600 Steamboat Road, Suite 202

Greenwich, CT 06830

(Address of principal executive offices) (Zip code)

 

Thomas P. Majewski

c/o Eagle Point Income Company Inc.

600 Steamboat Road, Suite 202

Greenwich, CT 06830

(Name and address of agent for service)

 

Copies to

 

Thomas J. Friedmann

Philip Hinkle
Dechert LLP
One International Place, 40th Floor

100 Oliver Street

Boston, MA 02110
(617) 728-7120

 

Registrant’s telephone number, including area code: (203) 340-8500

 

Date of fiscal year end: December 31

 

Date of reporting period: December 31, 2023

 

Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.

 

A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.

 

 

 

 

 

 

Item 1. Report to Stockholders

 

The Annual Report to stockholders of Eagle Point Income Company Inc. (the “Company”) for the year ended December 31, 2023 is filed herewith.

 

 

 

 

 

 

Eagle Point Income Company Inc.

Annual Report – December 31, 2023 

Table of Contents

 

Letter to Stockholders and Management Discussion of Company Performance 2
Important Information about this Report and Eagle Point Income Company Inc. 13
Performance Data 17
Summary of Certain Unaudited Portfolio Characteristics 18
Fees and Expenses (Unaudited) 21
Financial Statements for the Year Ended December 31, 2023 (Audited) 23
Price Range of Common Stock 56
Dividend Reinvestment Plan 57
Additional Information 59

 

1

 

 

 

LETTER TO STOCKHOLDERS AND MANAGEMENT DISCUSSION OF COMPANY PERFORMANCE

 

February 22, 2024

 

Dear Fellow Stockholders:

 

We are pleased to provide you with the enclosed report of Eagle Point Income Company Inc. (“we,” “us,” “our” or the “Company”) for the fiscal year ended December 31, 2023.

 

The primary investment objective of the Company is to generate high current income, with a secondary objective to generate capital appreciation. We seek to achieve these objectives by investing primarily in junior debt tranches of collateralized loan obligations (“CLOs”) rated BB – including those rated BB+, BB or BB- – or their equivalent. In addition, the Company may invest up to 35% of its total assets in CLO equity securities and other securities and instruments that are consistent with our investment objectives.

 

The Company benefits from the specialized investment experience of Eagle Point Income Management LLC (“Eagle Point” or the “Adviser”), which applies its proprietary, private markets-style investment process to CLO investing. This process seeks to maximize returns while mitigating risks. We believe the scale and experience of our Adviser and its affiliates in CLO investing provides the Company with meaningful advantages.

 

The Company had an excellent 2023. The rising interest rate environment during the year was materially positive for our portfolio of mostly floating-rate CLO junior debt securities. For the year ended December 31, 2023, the Company had an increase in net assets resulting from operations (inclusive of unrealized mark-to-market gains) of $29.3 million, or $3.21 per weighted average common share.1 This represents a GAAP ROE of 25.93% during the year.2 From December 31, 2022 through December 31, 2023, the Company’s net asset value (“NAV”) per common share increased by 11% to $14.39 from $12.91.

 

As a result of our strong 2023 performance, the Company increased its monthly common distribution from $0.14 per share at the end of 2022 to $0.18 per share at the end of 2023. Additionally, the Company was pleased to increase its monthly common distribution again to $0.20 per share beginning in January 2024.

 

During 2023, we:

 

Generated strong GAAP net investment income (“NII”) less realized capital losses of $1.90 per weighted average common share in 2023. Excluding non-recurring items related to securities offerings and incurring Federal excise tax on our spillover income, our income of $2.08 per weighted average common share would have been above the $1.98 per share in regular monthly common distributions paid during the year.

 

Increased our common distribution twice during the year to $0.18 per share. In addition, the Company declared an additional increase in our monthly common

 

 

Past performance is not indicative of, or a guarantee of, future performance.

 

Please see page 11 for endnotes.

2

 

 

 

  distribution to $0.20 per share beginning in January 2024. Our current monthly distribution rate is equal to 250% of what was paid during the first quarter of 2021.

 

Significantly increased recurring cash flows for the year to $29.0 million, or $3.17 per weighted average common share. This compares to recurring cash flows of $21.0 million, or $2.97 per weighted average common share, collected during 2022. Recurring cash flows received in 2023 exceeded our total expenses and regular common distributions by $0.17 per weighted average common share.

 

Strengthened our balance sheet by issuing $34.3 million of 7.75% Series B Term Preferred Stock due in 2028 (the “Series B Term Preferred Stock”), with proceeds deployed opportunistically into new CLO debt and equity investments, as well as raising $42.5 million of additional common equity through our at-the-market (“ATM”) program and committed equity finance arrangement at a premium to NAV.

 

While CLO junior debt remains a significant majority of the Company’s portfolio, the CLO equity exposure continued to help enhance the Company’s earnings ability. We believe CLOs, with their strong structural protections and self-correcting mechanisms, are well-positioned to weather periods of market volatility. In our view, the performance of our portfolio through volatility has demonstrated the resilience of the Company’s investment strategy.

 

Our portfolio’s strong performance in 2023 allowed the Company to pay cash distributions to shareholders of $1.98 per share, or 14.01% of our average stock price.

 

As of January 31, 2024, management’s unaudited estimate of the range of the Company’s NAV per common share was between $14.94 and $15.04. The midpoint of this range represents an increase of 4.2% compared to the NAV per common share as of December 31, 2023. As of February 15, 2024, we have $26.6 million in cash and available borrowing capacity on our balance sheet.

 

Company Overview

 

Common Stock

 

The Company’s common stock trades on the New York Stock Exchange (“NYSE”) under the symbol “EIC.” As of December 31, 2023, the NAV per share of the Company’s common stock was $14.39. The trading price of our common stock may, and often does, differ from NAV per share. The closing price per share of our common stock was $14.57 on December 29, 2023, representing a 1.25% premium to NAV per share as of year end.3

 

In connection with our at-the-market offering program and committed equity financing arrangement, the Company sold 3.1 million shares of common stock during the year for total net proceeds to the Company of approximately $42.5 million. The common stock issuance resulted in NAV accretion of $0.13 per share.

 

 

Past performance is not indicative of, or a guarantee of, future performance.

 

Please see page 11 for endnotes.

3

 

 

 

During 2023, through our usage of the ATM and committed equity financing programs, as well as the growth of our portfolio, we saw a significant enhancement in the liquidity of the Company’s common stock as the year progressed. This was evidenced by the increased average daily trading volume during the fourth quarter of 2023, which was nearly double the fourth quarter of 2022. With approximately 11 million outstanding common shares as of the end of 2023, the Company’s market cap as of December 31, 2023 of approximately $160 million was more than 40% greater than where it stood at the end of 2022.

 

The Company declared and paid nine monthly distributions of $0.16 per share of common stock from January 2023 through September 2023, and three monthly distributions of $0.18 per share of common stock from October 2023 through December 2023. The Company paid a total of $1.98 per common share of monthly distributions during 2023. Please note that the actual frequency, components and amount of such distributions are subject to variation over time.

 

At year-end, a shareholder who purchased common stock as part of our initial public offering (“IPO”) in July 2019 has received total cash distributions of $7.02 per share, over 35% of the IPO price. A portion of these distributions was comprised of a return of capital.4

 

As of January 31, 2024, the closing price per share of common stock was $15.42, reflecting a premium of 2.87% compared to the midpoint of management’s unaudited and estimated NAV range of $14.94 to $15.04 as of January month-end.

 

We also highlight the Company’s dividend reinvestment plan (“DRIP”) for common stockholders. This plan allows common stockholders to have their distributions automatically reinvested into new shares of common stock. If the prevailing market price of our common stock exceeds our NAV per share, such reinvestment is at a discount (up to 5%) to the prevailing market price. If the prevailing market price of our common stock is less than our NAV per share, such reinvestment is at the prevailing market price, subject to the terms in the DRIP. We encourage all common stockholders to carefully review the terms of the plan. See “Dividend Reinvestment Plan” in the enclosed report.

 

 

Past performance is not indicative of, or a guarantee of, future performance.

 

Please see page 11 for endnotes.

4

 

 

 

Financing Solutions

 

In addition to our common stock, the Company has two preferred equity securities which trade on the NYSE, summarized below:

 

Security NYSE
Symbol
Par Amount
Outstanding
Rate Payment
Frequency
Callable Maturity
5.00% Series A Term Preferred Stock due 2026 EICA $38.0 million 5.00% Monthly Callable October 2026
7.75% Series B Term Preferred Stock due 2028 EICB $34.3 million 7.75% Monthly July 2025 July 2028

 

The weighted average maturity on our preferred stock as of December 31, 2023 was approximately 3.7 years. In addition, all of our preferred stock financing is fixed rate, providing us with certainty in a dynamic rate environment.

 

As of December 31, 2023, we had $14.5 million in outstanding borrowings from the Company’s $25 million revolving credit facility. This, coupled with our preferred stock, represented leverage of 36% of total assets (less current liabilities). Over the long term, management expects the Company to operate under normal market conditions generally with leverage of between 25% and 35% of total assets (less current liabilities). Based on applicable market conditions at any given time, or should significant opportunities present themselves, the Company may incur leverage in excess of this amount, subject to applicable regulatory and contractual limits.

 

 

Past performance is not indicative of, or a guarantee of, future performance.

 

Please see page 11 for endnotes.

5

 

 

 

Portfolio Overview

 

2023 Portfolio Update

 

The secondary market was a key focus for our Adviser throughout 2023, as CLO secondary levels offered material discounts compared to most CLO primary opportunities. The Company benefited from an elevated rate environment as the base rates for floating rate CLO debt investments reached the highest levels observed in well over 15 years. As CLO prices appreciated throughout the year, the convexity in our CLO debt portfolio contributed significantly to the appreciation of the Company’s investments.

 

For the year ended December 31, 2023, the Company deployed $83.5 million in gross capital into CLO debt, CLO equity and other investments. The CLO debt had a weighted average expected yield (to maturity) of 12.47% at the time of purchase, while the CLO equity had a weighted average expected yield of 23.83% at the time of purchase.5 With essentially all of our CLO debt purchased at discounts, and due to the callable nature of most CLO debt tranches, there is potential for higher returns than the yield to maturity for most of those investments.

 

As of December 31, 2023, we had 91 CLO investments in our portfolio, the large majority of which are BB-rated (or the equivalent) CLO junior debt. At year-end, the weighted average effective yield on the aggregate portfolio of CLO debt and equity investments was 13.29%, based on amortized cost. This compares to 12.82% as of December 31, 2022.

 

During 2023, the Company received recurring cash flows of $29.0 million, or $3.17 per weighted average common share. This was a significant increase compared to our 2022 recurring cash flows, which totaled $21.0 million, or $2.97 per weighted average common share. Recurring cash flows received in 2023 exceeded total expenses and our regular common distribution by $0.17 per weighted average common share.

 

Included within the enclosed report, you will find detailed portfolio information, including certain look-through information related to the underlying collateral characteristics of the CLO investments that we held as of December 31, 2023.

 

 

Past performance is not indicative of, or a guarantee of, future performance.

 

Please see page 11 for endnotes.

6

 

 

 

Market Overview6

 

Loan Market

 

Despite a few periods of considerable volatility in 2023, the broadly syndicated loans (“BSL”) market capped off its strongest year since 2009. The Credit Suisse Leverage Loan Index7 (“CSLLI”) recorded a total return of 13.04% in 2023. Firming BSL prices, higher floating rate coupons, and below average loan default levels drove performance through most of the year, as demand from investors seeking yields amidst the higher-for-longer environment overshadowed intermittent risk-off periods during the year. From November into year-end, economic data pointed investors towards a “soft landing” – or even “no landing” – scenario, igniting a broad rally across debt markets, including broadly syndicated loans and CLOs.

 

Average BSL prices finished 2023 at 95.32. This is an increase from 91.89 at the beginning of the year, but still below pre-Ukraine war levels. As such, with a significant share of high-quality issuers still trading at discounted prices, we believe this represents a path to further upside. Additionally, markets like these allow CLO collateral managers to improve underlying loan portfolios through relative value swaps.

 

The trailing 12-month average default rate ended 2023 at 1.53%. This compares to 0.72% for 2022 but remains comfortably below the long-term average of 2.70%.8 The Fund’s underlying portfolio has a materially lower default exposure at only 0.55%. According to JP Morgan, default activity for December 2023 was the lowest since October 2022, highlighting that while higher costs are impacting many BSL issuers, their fundamentals are holding up well. Indeed, third quarter earnings show continued growth in issuers’ revenue and EBITDA, helping to offset the effects of rising rates.

 

Refinancing activity by BSL issuers increased on a year-over-year basis, accounting for over 58% of 2023’s new supply volume, compared to 26% in 2022. The 12-month trailing loan repayment rate increased to nearly 17.6% in December, its highest monthly level for the year. With only 7% of the outstanding loan market at year-end set to mature prior to 2026, the often-feared maturity wall has been pushed out: debt coming due in 2025 was cut down by 58% in 2023 to $83.1 billion, and 2026 maturities were reduced by 26% to $175 billion. Only 7.7% of the loan portfolios underlying our CLO equity positions mature prior to 2026.

 

For 2023, mutual funds and ETFs investing in U.S. leveraged loans experienced net outflows of $17 billion, compared to net outflows of $13 billion in 2022.9 The high-yield mutual fund/ETF market, by comparison, recorded $7 billion of net outflows in 2023 after recording $49 billion of net outflows in 2022. While these are significant sums of money, they represent a small fraction of the overall $1.4 trillion BSL market.

 

A notable dynamic that picked up steam during the second half of the year was the trend of stressed BSLs being prepaid and refinanced into new facilities from private credit funds and business development companies (“BDCs”). Due to the sheer amount of capital raised for private credit, we even saw CCC-rated loans getting paid off at par as companies refinanced their BSL debt in the private credit market. The prepayment of CCC-rated loans allows reinvesting CLOs

 

 

Past performance is not indicative of, or a guarantee of, future performance.

 

Please see page 11 for endnotes.

7

 

 

 

to redeploy capital into higher quality discounted loan issues. This has been a good trend for CLOs and if it continues into 2024, as we expect, the potential reduction of tail risk is net positive for CLOs. Overall, private credit managers refinanced around $16 billion of BSLs in 2023, according to LCD Pitchbook.

 

CLO Market

 

The CLO market saw $116 billion of new CLO issuance in 2023, according to LCD Pitchbook. Wide liability spreads and a generally unattractive CLO equity arbitrage did little to deter the less economically sensitive captive CLO funds from issuing CLOs. We believe due to the misalignment of incentive, many CLO issuers with captive CLO funds are willing to accept suboptimal CLO equity returns in order to generate new fee streams for themselves. Of the 208 new BSL CLOs issued during the year, we estimate over 80% were supported by captive CLO funds, while economically sensitive investors like our Adviser focused on the attractive opportunities in the secondary market.

 

CLO refinancing and reset volumes declined in 2023. Of the $24.6 billion in refinancings and resets across 57 transactions in 2023, $14.7 billion occurred in the last three months of the year, per LCD Pitchbook data, as CLO debt spreads tightened with the year-end rally.

 

By the end of 2023, CLO BB discount margins averaged approximately 783 basis points over the secured overnight financing rate (“SOFR”), a tightening of 148 basis points since the end of 2022. With average CLO BB prices at 92.5 points, we believe there continues to be further upside to the Company’s portfolio.

 

Additional Information

 

In addition to the Company’s regulatory requirement to file certain quarterly and annual portfolio information as described further in the enclosed report, 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 NII and realized capital gains or losses per 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 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 the Company’s NAV per share of common stock, if applicable, and, with respect to each calendar quarter end, an updated estimate of the Company’s NII and realized capital gains or losses per share for the applicable quarter, if available.

 

Subsequent Developments

 

Management’s unaudited estimate of the range of the Company’s NAV per share of common stock was between $14.94 and $15.04 as of January 31, 2024. The midpoint of this range

 

 

Past performance is not indicative of, or a guarantee of, future performance.

 

Please see page 11 for endnotes.

8

 

 

 

represents an increase of 4.2% compared to the NAV per common share as of December 31, 2023.

 

On January 31, 2024, the Company paid a monthly distribution of $0.20 per common share to stockholders of record on January 11, 2024. Additionally, and as previously announced, the Company declared distributions of $0.20 per share of common stock payable on each of February 29, 2024 and March 28, 2024 to holders of record on February 9, 2024 and March 8, 2024, respectively. Additionally, on February 13, 2024, the Company declared three separate distributions of $0.20 per share on its common stock. The distributions are payable on each of April 30, 2024, May 31, 2024 and June 28, 2024 to holders of record as of April 10, 2024, May 13, 2024 and June 10, 2024, respectively.

 

On January 31, 2024, the Company paid a monthly distribution of $0.104167 per share of the Company’s 5.00% Series A Term Preferred Stock due 2026 (the “Series A Term Preferred Stock”) to holders of record on January 11, 2024. Additionally, and as previously announced, the Company declared distributions of $0.104167 per share on Series A Term Preferred Stock, payable on each of February 29, 2024 and March 28, 2024 to holders of record on February 9, 2024 and March 8, 2024, respectively. Additionally, on February 13, 2024, the Company declared three separate distributions of $0.104167 per share on its Series A Preferred Stock. The distributions are payable on each of April 30, 2024, May 31, 2024 and June 28, 2024 to holders of record as of April 10, 2024, May 13, 2024 and June 10, 2024, respectively.

 

On January 31, 2024, the Company paid a monthly distribution of $0.161459 per share of the Company’s Series B Term Preferred Stock to holders of record on January 11, 2024. Additionally, and as previously announced, the Company declared distributions of $0.161459 per share on Series B Term Preferred Stock, payable on each of February 29, 2024 and March 28, 2024 to holders of record on February 9, 2024 and March 8, 2024, respectively. Additionally, on February 13, 2024, the Company declared three separate distributions of $0.161459 per share on its Series B Preferred Stock. The distributions are payable on each of April 30, 2024, May 31, 2024 and June 28, 2024 to holders of record as of April 10, 2024, May 13, 2024 and June 10, 2024, respectively.

 

In the period from January 1, 2024 through February 15, 2024, the Company received cash distributions on its investment portfolio of $10.3 million. During that same period, the Company made net new investments totaling $8.9 million. As of February 15, 2024, the Company had $26.6 million of cash available for investment, inclusive of undrawn amounts on our revolving credit facility.

 

* * * * *

 

Management remains keenly focused on continuing to create value for our stockholders. We appreciate the trust and confidence our fellow stockholders have placed in the Company.

 

 

Past performance is not indicative of, or a guarantee of, future performance.

 

Please see page 11 for endnotes.

9

 

 

 

Thomas Majewski

Chairman and Chief Executive Officer

 

This letter is intended to assist stockholders in understanding the Company’s performance during the twelve months ended December 31, 2023. The views and opinions in this letter were current as of February 15, 2024. Statements other than those of historical facts included herein 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. The Company undertakes no duty to update any forward-looking statement made herein. Information contained on our website is not incorporated by reference into this stockholder letter and you should not consider information contained on our website to be part of this stockholder letter or any other report we file with the Securities and Exchange Commission.

 

 

Past performance is not indicative of, or a guarantee of, future performance.

 

Please see page 11 for endnotes.

10

 

 

 

ABOUT OUR ADVISER

 

Eagle Point Income Management LLC is a specialist asset manager focused exclusively on investing in CLO securities and related investments. As of December 31, 2023, our Adviser has approximately $9.1 billion of assets under management (inclusive of undrawn capital commitments).10

 

Notes

 

1Weighted average common share” is calculated based on the average daily number of shares of common stock outstanding during the period and “per common share” refers to per share of the Company’s common stock.

2Return on our common equity reflects the Company’s cumulative monthly performance net of applicable expenses and fees measured against beginning capital adjusted for any common equity issued during the period.

3An investment company trades at a premium when the market price at which its common shares trade is more than its net asset value per common share. Alternatively, an investment company trades at a discount when the market price at which its common shares trade is less than its net asset value per common share.

4To date, a portion of common stock distributions has been estimated to be a return of capital as noted under the Tax Information section on the Company’s website. The actual components of the Company's distributions for U.S. tax reporting purposes can only be finally determined as of the end of each fiscal year of the Company and are thereafter reported on Form 1099-DIV. A distribution comprised in whole or in part by a return of capital does not necessarily reflect the Company’s investment performance and should not be confused with “yield” or “income”. Future distributions may consist of a return of capital. Not a guarantee of future distributions or yield.

5Weighted average effective yield is based on an investment’s amortized cost and expected future cash flows whereas weighted average expected yield is based on an investment’s fair market value and expected future cash flows as of the applicable period end as disclosed in the Company’s financial statements, which is subject to change from period to period.

6JPMorgan Chase & Co.; S&P Capital IQ; Pitchbook LCD; Credit Suisse

7The CSLLI tracks the investable universe of the US dollar-denominated leveraged loan market. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index.

8“Par-weighted default rate” represents the rate of obligors who fail to remain current on their loans based on the par amount.

9JPMorgan Chase & Co. North American Credit Research – JPM High Yield and Leveraged Loan Research (cumulative 2023 reports).

10Calculated in the aggregate with its affiliate Eagle Point Credit Management LLC and certain other affiliated advisers.

 

 

Past performance is not indicative of, or a guarantee of, future performance.

11

 

Page Intentionally Left Blank

 

12

 

Important Information about this Report and Eagle Point Income Company Inc.

 

This report is transmitted to the stockholders of Eagle Point Income Company Inc. (“we”, “us”, “our” or the “Company”) and is furnished pursuant to certain regulatory requirements. 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 December 31, 2023. 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.

 

Eagle Point Income Company Inc.

 

The following information in this annual report is a summary of certain changes during the fiscal year ended December 31, 2023. This information may not reflect all of the changes that have occurred since you purchased shares of our common stock.

 

During the applicable period, there have been: (i) no material changes to the Company’s investment objectives and policies that have not been approved by shareholders, (ii) no material changes to the Company’s principal risks, (iii) no changes to the persons primarily responsible for day-to-day management of the Company; and (iv) no changes to the Company’s charter or bylaws that would delay or prevent a change of control of the Company.

 

Investment Objectives and Strategies

 

We are an externally managed, diversified closed-end management investment company that has registered as an investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). We have elected to be treated, and intend to qualify annually, as a regulated investment company, or “RIC,” under Subchapter M of the Internal Revenue Code of 1986, as amended, or the “Code,” beginning with our tax year ended December 31, 2018. We were formed on September 28, 2018

 

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as EP Income Company LLC, a Delaware limited liability company, and converted into a Delaware corporation on October 16, 2018.

 

Our primary investment objective is to generate high current income, with a secondary objective to generate capital appreciation. We seek to achieve our investment objectives by investing primarily in junior debt tranches of 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. We focus 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. We may also invest in other junior debt tranches of CLOs, loan accumulation facilities, senior debt tranches of CLOs and other related securities and instruments, including synthetic investments, such as significant risk transfer securities and credit risk transfer securities issued by banks or other financial institutions. In addition, we may invest up to 35% of our total assets (at the time of investment) in CLO equity securities. We expect our investments in CLO equity securities to primarily reflect minority ownership positions. We may also invest in other securities and instruments that the Adviser believes are consistent with our investment objectives such as securities issued by other securitization vehicles, such as collateralized bond obligations or “CBOs”. The amount that we will invest in other securities and instruments, which may include investments in debt and other securities issued by CLOs collateralized by non-U.S. loans or securities of other collective investment vehicles, will vary from time to time and, as such, may constitute a material part of our portfolio on any given date, all as based on the Adviser’s assessment of prevailing market conditions. The CLO securities in which we primarily seek to invest are rated below investment grade or, in the case of CLO equity securities, are unrated and are considered speculative with respect to timely payment of interest and repayment of principal. Below investment grade and unrated securities are also sometimes referred to as “junk” securities.

 

These investment objectives are not fundamental policies of ours and may be changed by our board of directors without prior approval of our stockholders.

 

Investment Restrictions

 

Our investment objectives and our investment policies and strategies, except for the eight investment restrictions designated as fundamental policies under this caption, are not fundamental and may be changed by the board of directors without stockholder approval.

 

The following eight investment restrictions are designated as fundamental policies and, as such, cannot be changed without the approval of the holders of a majority of our outstanding voting securities:

 

1.We may not borrow money, except as permitted by (i) the 1940 Act, or interpretations or modifications by the SEC, SEC staff or other authority with appropriate jurisdiction, or (ii) exemptive or other relief or permission from the SEC, SEC staff or other authority with appropriate jurisdiction;

2.We may not engage in the business of underwriting securities issued by others, except to the extent that we may be deemed to be an underwriter in connection with the disposition of portfolio securities;

3.​We may not purchase or sell physical commodities or contracts for the purchase or sale of physical commodities. Physical commodities do not include futures contracts with respect to securities, securities indices, currency or other financial instruments;

4.​We may not purchase or sell real estate, which term does not include securities of companies which deal in real estate or mortgages or investments secured by real estate or interests therein, except that we reserve freedom of action to hold and to sell real estate acquired as a result of our ownership of securities;

5.​We may not make loans, except to the extent permitted by (i) the 1940 Act, or interpretations or modifications by the SEC, SEC staff or other authority with appropriate jurisdiction, or (ii) exemptive or other relief or permission from the SEC, SEC staff or other authority with appropriate jurisdiction. For purposes of this investment restriction, the purchase of debt obligations (including acquisitions of loans, loan participations or other forms of debt instruments) shall not constitute loans by us;

6.​We may not issue senior securities, except to the extent permitted by (i) the 1940 Act, or interpretations or modifications by the SEC, the SEC staff or other authority with appropriate jurisdiction, or (ii) exemptive or other relief or permission from the SEC, SEC staff or other authority with appropriate jurisdiction;

7.​We may not invest in any security if as a result of such investment, 25% or more of the value of our total assets, taken at market value at the time of each investment, are in the securities of issuers in any particular industry or group of

 

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  industries except (a) securities issued or guaranteed by the U.S. government and its agencies and instrumentalities or tax-exempt securities of state and municipal governments or their political subdivisions (however, not including private purpose industrial development bonds issued on behalf of non-government issuers), or (b) as otherwise provided by the 1940 Act, as amended from time to time, and as modified or supplemented from time to time by (i) the rules and regulations promulgated by the SEC under the 1940 Act, as amended from time to time, and (ii) any exemption or other relief applicable to us from the provisions of the 1940 Act, as amended from time to time. For purposes of this restriction, in the case of investments in loan participations between us and a bank or other lending institution participating out the loan, we will treat both the lending bank or other lending institution and the borrower as “issuers.” For purposes of this restriction, an investment in a CLO, collateralized bond obligation, collateralized debt obligation or a swap or other derivative will be considered to be an investment in the industry or group of industries (if any) of the underlying or reference security, instrument or asset; and

8.​We may not engage in short sales, purchases on margin, or the writing of put or call options, except as permitted by (i) the 1940 Act, or interpretations or modifications by the SEC, SEC staff or other authority with appropriate jurisdiction or (ii) exemptive or other relief or permission from the SEC, SEC staff or other authority with appropriate jurisdiction.

 

The latter part of certain of our fundamental investment restrictions (i.e., the references to “except to the extent permitted by (i) the 1940 Act, or interpretations or modifications by the SEC, the SEC staff or other authority with appropriate jurisdiction, or (ii) exemptive or other relief or permission from the SEC, SEC staff or other authority with appropriate jurisdiction”) provides us with flexibility to change our limitations in connection with changes in applicable law, rules, regulations or exemptive relief. The language used in these restrictions provides the necessary flexibility to allow our board of directors to respond efficiently to these kinds of developments without the delay and expense of a stockholder meeting.

 

Whenever an investment policy or investment restriction set forth in this report or in our prospectus states a maximum percentage of assets that may be invested in any security or other asset, or describes a policy regarding quality standards, such percentage limitation or standard shall be determined immediately after and as a result of our acquisition of such security or asset. Accordingly, any later increase or decrease resulting from a change in values, assets or other circumstances or any subsequent rating change made by a rating agency (or as determined by the Adviser if the security is not rated by a rating agency) will not compel us to dispose of such security or other asset. Notwithstanding the foregoing, we must always be in compliance with the borrowing policies set forth above.

 

Use of Leverage and Leverage Risks

 

The use of leverage, whether directly through borrowing under a revolving credit facility with BNP Paribas (the “Credit Facility”) or the issuance of the Series A Term Preferred Stock and Series B Term Preferred Stock, or indirectly through investments such as CLO junior debt and equity securities that inherently involve leverage, may magnify our risk of loss. CLO junior debt and equity securities are very highly leveraged (with CLO equity securities typically being leveraged ten times), and therefore the CLO securities in which we invest are subject to a higher degree of loss since the use of leverage magnifies losses.

 

We have incurred leverage by issuing preferred stock and incurring indebtedness for borrowed money. We may incur additional leverage, directly or indirectly, through one or more special purpose vehicles, indebtedness for borrowed money, as well as leverage in the form of derivative transactions, additional shares of preferred stock, debt securities and other structures and instruments, in significant amounts and on terms that the Adviser and our board of directors deem appropriate, subject to applicable limitations under the 1940 Act. Such leverage may be used for the acquisition and financing of our investments, to pay fees and expenses and for other purposes. Such leverage may be secured and/or unsecured. The more leverage we employ, the more likely a substantial change will occur in our NAV. Accordingly, any event that adversely affects the value of an investment would be magnified to the extent leverage is utilized. The cumulative effect of the use of leverage with respect to any investments in a market that moves adversely to such investments could result in a substantial loss that would be greater than if our investments were not leveraged.

 

The following table is intended to illustrate the effect of the use of direct leverage on returns from an investment in our common stock assuming various annual returns, net of expenses. The calculations in the table below are hypothetical and actual returns may be higher or lower than those appearing in the table below.

 

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Assumed Return on Our Portfolio (Net of Expenses) -10% -5% 0% 5% 10%
Corresponding return to common stockholder(1) -19.24% -11.49% -3.74% 4.01% 11.76%

 

 

(1)Assumes (i) $269.6 million in pro forma total assets as of December 31, 2023 (adjusted to reflect (i) the issuance in the Company’s “at-the-market” offering of 1.1 million shares of our common stock and 45,322 shares of our Series B Preferred Stock from January 1, 2024 through February 15, 2024, yielding net proceeds to the Company of approximately $16.9 million; (ii) the hypothetical borrowings of the full $25,000,000 available under the BNP Credit Facility) (ii) $174.0 million in pro forma net assets as of December 31, 2023 (adjusted to reflect the issuances and borrowings described above); and (iii) an annualized average interest rate on our indebtedness and preferred equity, as of December 31, 2023 (adjusted to reflect the issuances and borrowings described above), of 6.60%.

 

Based on our assumed leverage described above, our investment portfolio would have been required to experience an annual return of at least 2.41% to cover annual interest payments on our outstanding indebtedness and preferred equity.

 

Principal Risk Factors

 

For a description of the principal risk factors associated with an investment in the Company, please refer to Note 3 to the Financial Statements, “Investments – Investment Risk Factors”).

 

​​Additional Information

 

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 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.

 

Information contained on our website is not incorporated by reference into this Annual Report and you should not consider information contained on our website to be part of this Annual Report or any other report we file with the SEC.

 

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.

 

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Performance Data1,2

 

The following graph shows the market price performance of a $10,000 investment in the Company’s common shares for the period from October 16, 2018 (inception) through December 31, 2023. The performance calculation assumes the purchase of Company shares at net asset value for the beginning of the period (prior to the Company’s public listing) and the sale of Company shares at the market price at the end of the period. Ending value for each year are as of December 31 of the applicable year. As the Company’s IPO occurred in July 2019, the value used for the Company’s performance as of December 31, 2018 reflects the Company’s then-current net asset value per share. For comparative purposes, the performance of a relevant third-party securities market index, the S&P BDC Index, is shown. Distributions are assumed, for purposes of this calculation, to be reinvested at prices obtained under the Company’s dividend reinvestment plan. The performance does not reflect brokerage commissions in connection with the purchase or sale of Company shares, which if included would lower the performance shown. Returns do not reflect the deduction of taxes that a shareholder would pay on Company distributions or the sale of Company shares.

 

Past performance is not indicative of, or a guarantee of, future performance. Future results may vary and may be higher or lower than the data shown.

 

Value of $10,000 Invested

 

 

  Average Annualized Total Return Cumulative Returns
   1 year 5 year Since Inception Since Inception
EIC 21.37% 5.09% 3.09% 17.16%
S&P BDC Index 27.58% 13.16% 10.31% 66.63%

 

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Summary of Certain Unaudited Portfolio Characteristics

 

The information presented below is on a look–through basis to the collateralized loan obligation, or “CLO”, investments held by the Company as of December 31, 2023 (except as otherwise noted) and reflects the aggregate underlying exposure of the Company based on the portfolios of those investments. The data is estimated and unaudited and is derived from CLO trustee reports received by the Company relating to December 2023 and from custody statements and/or other information received from CLO collateral managers, or other third party sources.

 

Summary of Portfolio Investments (as of 12/31/2023)3
 
 

 

Cash and Borrowing Capacity: $11.4 million3

 
Summary of Underlying Portfolio Characteristics (as of 12/31/2023)4
Number of Unique Underlying Loan Obligors 1,419
Largest Exposure to an Individual Obligor 0.73%
Average Individual Loan Obligor Exposure 0.07%
Top 10 Loan Obligors Exposure 5.57%
Currency: USD Exposure 100.00%
Indirect Exposure to Senior Secured Loans5 97.59%
Weighted Average OC Cushion Senior to the Security6 4.34%
Weighted Average Market Value of Loan Collateral 96.25%
Weighted Average Stated Loan Spread 3.76%
Weighted Average Loan Rating7 B+/B
Weighted Average Loan Maturity 4.2 years
Weighted Average Remaining CLO Reinvestment Period 1.2 years

 

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Top 10 Underlying Obligors4

 

Obligor  % of Total
Asurion 0.7%
Numericable 0.6%
Cablevision 0.6%
Ineos 0.6%
Medline Industries 0.6%
Virgin Media 0.5%
Athenahealth 0.5%
Centurylink 0.5%
Transdigm 0.5%
Ultimate Software Group 0.5%
Total 5.6%
Top 10 Industries of Underlying Obligors4,8,9

 

Industry % of Total
Technology: Software & Services 11.1%
Media 6.5%
Health Care Providers & Services 5.6%
Hotels, Restaurants & Leisure 4.3%
Diversified Telecommunications Services 4.0%
Commercial Services & Supplies 3.9%
Diversified Financial Services 3.8%
Insurance 3.4%
Chemicals 3.2%
Technology: Hardware & Equipment 3.0%
Total 48.8%

 

 

 

 

 

Rating Distribution of Underlying Obligors4,7
 
Maturity Distribution of Underlying Obligors4
 

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Notes

 

1Based on the market price. Prices for October 16, 2018 (inception date) and December 31, 2018 represent the Net Asset Value (“NAV”) per share.

2The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index. The indices shown herein have not been selected to represent a benchmark for a strategy’s performance, but are instead disclosed to allow for comparison of the Company’s returns to that of known, recognized and/or similar indices. The S&P BDC Index is intended to measure the performance of all Business Development Companies (BDCs) that are listed on the NYSE or NASDAQ and satisfy market capitalization and other eligibility requirements. Although EIC is not a BDC, BDCs generally invest in high yielding credit investments, as does EIC. In addition, similar to EIC, BDCs generally elect to be classified as a regulated investment company under the U.S. Internal Revenue Code of 1986, as amended, which generally requires an investment company to distribute its taxable income to shareholders.

3The summary of portfolio investments shown is based on the estimated fair value of the underlying positions as of December 31, 2023. Cash and borrowing capacity represents cash net of pending trade settlements and includes available capacity on the Company’s credit facility as of December 31, 2023. Borrowings under the credit facility are subject to applicable regulatory and contractual limits.

4The information presented herein is on a look-through basis to the collateralized loan obligation, or “CLO,” and other related investments held by the Company as of December 31, 2023 (except as otherwise noted) and reflects the aggregate underlying exposure of the Company based on the portfolios of those investments. The data is estimated and unaudited and is derived from CLO trustee reports received by the Company relating to December 2023 and from custody statements and/or other information received from CLO collateral managers and other third-party sources. Information relating to the market price of underlying collateral is as of month end; however, with respect to other information shown, depending on when such information was received, the data may reflect a lag in the information reported. As such, while this information was obtained from third party data sources, December 2023 trustee reports and similar reports, other than market price, it does not reflect actual underlying portfolio characteristics as of December 31, 2023 and this data may not be representative of current or future holdings. The Weighted Average Remaining Reinvestment Period information is based on the fair value of CLO equity and debt investments held by the Company at the end of the reporting period.

5Data represents aggregate indirect exposure. We obtain exposure in underlying senior secured loans indirectly through our CLO and related investments.

6The weighted average OC cushion senior to the security is calculated using the BBB OC cushion for all BB-rated CLO debt securities in the portfolio and the BB OC cushion for all other securities in the portfolio, in each case as held on December 31, 2023.

7Credit ratings shown are based on those assigned by Standard & Poor’s Rating Group, or “S&P,” or, for comparison and informational purposes, if S&P does not assign a rating to a particular obligor, the weighted average rating shown reflects the S&P equivalent rating of a rating agency that rated the obligor provided that such other rating is available with respect to a CLO or related investment held by us. In the event multiple ratings are available, the lowest S&P rating, or if there is no S&P rating, the lowest equivalent rating, is used. The ratings of specific borrowings by an obligor may differ from the rating assigned to the obligor and may differ among rating agencies. For certain obligors, no rating is available in the reports received by the Company. Such obligors are not shown in the graphs and, accordingly, the sum of the percentages in the graphs may not equal 100%. Ratings below BBB- are below investment grade. Further information regarding S&P’s rating methodology and definitions may be found on its website (www.standardandpoors.com).

8Industry categories are based on the S&P industry categorization of each obligor as reported in CLO trustee reports to the extent so reported. Certain CLO trustee reports do not report the industry category of all of the underlying obligors and where such information is not reported, it is not included in the summary look-through industry information shown. As such, the Company’s exposure to a particular industry may be higher than that shown if industry categories were available for all underlying obligors. In addition, certain underlying obligors may be re-classified from time to time based on developments in their respective businesses and/or market practices. Accordingly, certain underlying borrowers that are currently, or were previously, summarized as a single borrower in a particular industry may in current or future periods be reflected as multiple borrowers or in a different industry, as applicable.

9Certain CLO trustee reports do not provide the industry classification for certain underlying obligors. These obligors are not summarized in the look-through industry data shown; if they were reflected, they would represent 7.2%.

 

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Fees and Expenses (unaudited)

 

The following table is intended to assist you in understanding the costs and expenses that an investor in shares of the Company’s common stock will bear directly or indirectly. The expenses shown in the table under “Annual Expenses” are estimated based on historical fees and expenses incurred by the Company, as appropriate. In addition, such amounts are based on the Company’s pro forma assets as of December 31, 2023, which have been adjusted to reflect (i) the issuance in the Company’s “at-the-market” offering of 1.1 million shares of our common stock and 45,322 shares of our Series B Preferred Stock from January 1, 2024 through February 15, 2024, yielding net proceeds to the Company of approximately $16.9 million; (ii) the hypothetical borrowings of the full $25,000,000 available under the BNP Credit Facility, which would mean that the Company’s adjusted total assets are assumed to equal approximately $269.6 million. As of December 31, 2023, and pro forma for the issuances and assumed borrowings described above (excluding any regular monthly distributions paid after December 31, 2023), the Company’s leverage represented approximately 36.7% of the Company’s total assets (less current liabilities). Such expenses, and actual leverage incurred by the Company, may vary in the future. Whenever this report (or other Company disclosures, including the Company’s prospectus) contain a reference to fees or expenses paid by the Company, the Company’s common stockholders will indirectly bear such fees or expenses.

 

Stockholder Transaction Expenses (as a percentage of the offering price):  
Sales load   %(1)
Offering expenses borne by the Company   %(2)
Dividend reinvestment plan expenses                              Up to $15(3)
Total stockholder transaction expenses   —%

 

Annual Expenses (as a percentage of net assets attributable to common stock):  
Management fee   1.94%(4)
Interest payments on borrowed funds   3.74%(5)
Other expenses   1.49%(6)
Total annual expenses   7.17%

 

(1)In the event that the Company sells its securities publicly through underwriters or agents, the related prospectus supplement will disclose the applicable sales load.

(2)In the event that the Company sells its securities publicly through underwriters or agents, the related prospectus supplement will disclose the estimated amount of total offering expenses (which may include offering expenses borne by third parties on the Company’s behalf), the offering price and the offering expenses borne by the Company as a percentage of the offering price.

(3)The expenses associated with the dividend reinvestment plan are included in “Other expenses.” If a participant elects by written notice to the plan administrator prior to termination of his or her account to have the plan administrator sell part or all of the shares held by the plan administrator in the participant’s account and remit the proceeds to the participant, the plan administrator is authorized to deduct a $15.00 transaction fee plus a $0.07 per share brokerage commission from the proceeds. See the section “Dividend Reinvestment Plan,” below.
(4)The Company has agreed to pay the Adviser as compensation under the Investment Advisory Agreement a management fee at an annual rate of 1.25% which is calculated monthly based the Company’s Managed Assets at the end of each calendar month and payable quarterly in arrears. “Managed Assets” means the Company’s total assets (including assets attributable to the use of leverage) minus the sum of accrued liabilities (other than liabilities incurred for the purpose of creating leverage). Because Managed Assets include the Company’s use of leverage, they will typically be greater than the Company’s net assets. The management fee referenced in the table above is based on Managed Assets as of December 31, 2023 and assumes the pro forma effect of (i) the issuance in the Company’s “at-the-market” offering of 1.1 million shares of our common stock and 45,322 shares of our Series B Preferred Stock from January 1, 2024 through February 15, 2024, yielding net proceeds to the Company of approximately $16.9 million; (ii) the hypothetical borrowings of the full $25,000,000 available under the BNP Credit Facility, which would mean that the Company’s adjusted total assets are assumed to equal approximately $269.6 million. These management fees are indirectly borne by holders of the Company’s common stock and are not borne by the holders of preferred stock, if any, or the holders of any other securities that the Company may issue. See “The Adviser and the Administrator — Investment Advisory Agreement — Management” in the Company’s prospectus for additional information regarding the calculation of the management fee.

(5)“Interest payments on borrowed funds” represents the Company’s annualized interest expense and includes dividends payable on the Series A Term Preferred Stock and Series B Term Preferred Stock, outstanding on December 31, 2023, and includes the pro forma effect of the Series B Preferred Stock issuance and assumed borrowings under the BNP Credit Facility described above, which, in the aggregate, have a weighted average interest rate of 6.60% per annum. The Company may issue additional shares of preferred stock. In the event that the Company were to issue additional shares of preferred stock, the Company’s borrowing costs, and correspondingly its total annual expenses, including,
(5)“Interest payments on borrowed funds” represents the Company’s annualized interest expense and includes dividends payable on the Series A Term Preferred Stock and Series B Term Preferred Stock, outstanding on December 31, 2023, and includes the pro forma effect of the Series B Preferred Stock issuance and assumed borrowings under the BNP Credit Facility described above, which, in the aggregate, have a weighted average interest rate of 6.60% per annum. The Company may issue additional shares of preferred stock. In the event that the Company were to issue additional shares of preferred stock, the Company’s borrowing costs, and correspondingly its total annual expenses, including, in the case of such preferred stock, the base management fee as a percentage of the Company’s managed assets attributable to common stock, would increase.
(6)“Other expenses” includes the Company’s overhead expenses, including payments under the Administration Agreement based on the Company’s allocable portion of overhead and other expenses incurred by Eagle Point Administration LLC (“Eagle Point Administration”), the administrator to the Company and an affiliate of the Adviser, and payment of fees in connection with outsourced administrative functions, and are based on the actual amounts for the 2023 fiscal year. See “Related Party Transactions — Administrator” in the Notes to the Financial Statements. “Other expenses” also includes the ongoing administrative expenses to the independent accountants and legal counsel of the Company, compensation of independent directors, and cost and expenses relating to rating agencies.

 

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in the case of such preferred stock, the base management fee as a percentage of the Company’s managed assets attributable to common stock, would increase.
(6)“Other expenses” includes the Company’s overhead expenses, including payments under the Administration Agreement based on the Company’s allocable portion of overhead and other expenses incurred by Eagle Point Administration LLC (“Eagle Point Administration”), the administrator to the Company and an affiliate of the Adviser, and payment of fees in connection with outsourced administrative functions, and are based on the actual amounts for the 2023 fiscal year. See “Related Party Transactions — Administrator” in the Notes to the Financial Statements. “Other expenses” also includes the ongoing administrative expenses to the independent accountants and legal counsel of the Company, compensation of independent directors, and cost and expenses relating to rating agencies.

  

Example

 

The following example is furnished in response to the requirements of the SEC and illustrates the various costs and expenses that you would pay, directly or indirectly, on a $1,000 investment in shares of the Company’s common stock for the time periods indicated, assuming (1) total annual expenses of 7.17% of net assets attributable to the Company’s common stock and (2) a 5% annual return*:

 

1 year 3 years 5 years 10 years
You would pay the following expenses on a $1,000 investment, assuming a 5% annual return $72 $210 $343 $651

 

* The example should not be considered a representation of future returns or expenses, and actual returns and expenses may be greater or less than those shown. The example assumes that the estimated “other expenses” set forth in the Annual Expenses table are accurate, and that all dividends and distributions are reinvested at NAV. The Company’s actual rate of return may be greater or less than the hypothetical 5% return shown in the example.

 

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Consolidated Financial Statements for the Year Ended
December 31, 2023 (Audited)

 

Consolidated Statement of Assets and Liabilities 24
Consolidated Schedule of Investments 25
Consolidated Statement of Operations 27
Consolidated Statement of Comprehensive Income 28
Consolidated Statements of Changes in Net Assets 29
Consolidated Statement of Cash Flows 30
Notes to Consolidated Financial Statements 31
Consolidated Financial Highlights 50
Supplemental Information 53
Report of Independent Registered Public Accounting Firm 54

 

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Eagle Point Income Company Inc. and Subsidiaries

Consolidated Statement of Assets and Liabilities

As of December 31, 2023

(expressed in U.S. dollars)

 

ASSETS    
Investments, at fair value (cost $254,810,654)  $234,917,292 
Cash and cash equivalents   944,060 
Interest receivable   6,895,878 
Receivable for shares of common stock issued pursuant to the Company's dividend reinvestment plan   144,528 
Excise tax refund receivable   55,413 
Prepaid expenses   770,872 
Total Assets   243,728,043 
      
      
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)   35,241,087 
      
7.75% Series B Term Preferred Stock due 2028, at fair value under the fair value option (1,372,482 shares outstanding) (Note 6)   34,243,289 
Unamortized share issuance premium associated with 7.75% Series B Term Preferred Stock due 2028   2,932 
7.75% Series B Term Preferred Stock due 2028, at fair value, plus associated unamortized share issuance premium   34,246,221 
      
Borrowings under credit facility (less unamortized deferred financing costs of $33,333 (Note 9))   14,486,667 
Management fees payable   706,349 
Tax expense payable   228,480 
Professional fees payable   149,039 
Interest expense payable   143,803 
Directors' fees payable   127,500 
Administration fees payable   127,072 
Due to affiliates   28,072 
Payable for securities purchased   28,000 
Other expenses payable   8,333 
Total Liabilities   85,520,623 
      
COMMITMENTS AND CONTINGENCIES (Note 7)     
      
NET ASSETS applicable to 10,997,398 shares of $0.001 par value common stock outstanding  $158,207,420 
      
NET ASSETS consist of:     
Paid-in capital (Note 5)  $191,377,889 
Aggregate distributable earnings (losses)   (33,604,689)
Accumulated other comprehensive income (loss)   434,220 
Total Net Assets  $158,207,420 
Net asset value per share of common stock  $14.39 

 

See accompanying notes to the consolidated financial statements

24

 

 

Eagle Point Income Company Inc. and Subsidiaries

Consolidated Schedule of Investments

As of December 31, 2023

(expressed in U.S. dollars)

 

Issuer ⁽¹⁾  Investment Description ⁽²⁾ ⁽³⁾  Acquisition Date ⁽⁴⁾    Principal Amount  Cost   Fair Value ⁽⁵⁾   % of Net Assets 
Investments, at fair value                       
CLO Debt ⁽⁶⁾                          
Structured Finance                          
AGL CLO 12 Ltd.  Secured Note - Class E, 11.83%, (3M SOFR + 6.41%, due 07/20/2034)  08/18/2023  $ 1,500,000  $1,430,634   $1,444,800    0.91%
AMMC CLO 24, Limitted  Secured Note - Class E, 12.25%, (3M SOFR + 6.83%, due 01/20/2035)  07/26/2023    5,000,000   4,664,684    4,788,000    3.03%
AMMC CLO 25, Limitted  Secured Note - Class E, 12.98%, (3M SOFR + 7.59%, due 04/15/2035)  08/08/2023    5,000,000   4,735,950    4,885,500    3.09%
Ares XXXIV CLO Ltd.  Secured Note - Class E-R, 12.51%, (3M SOFR + 7.11%, due 04/17/2033)  08/08/2023    1,517,600   1,370,691    1,411,368    0.89%
Ares XLV CLO Ltd.  Secured Note - Class E, 11.76%, (3M SOFR + 6.36%, due 10/15/2030)  05/30/2019    800,000   790,180    752,960    0.48%
Barings CLO Ltd. 2018-IV  Secured Note - Class E, 11.48%, (3M SOFR + 6.08%, due 10/15/2030)  10/26/2018    840,000   836,476    772,296    0.49%
Battalion CLO XII Ltd.  Secured Note - Class E, 11.72%, (3M SOFR + 6.35%, due 05/17/2031)  10/04/2018    5,060,000   4,921,180    4,460,896    2.82%
Battalion CLO XXI Ltd.  Secured Note - Class E, 12.12%, (3M SOFR + 6.72%, due 07/15/2034)  06/08/2022    5,000,000   4,680,842    4,247,000    2.68%
Black Diamond CLO 2016-1, Ltd.  Secured Note - Class D-R, 11.24%, (3M SOFR + 5.86%, due 04/26/2031)  10/04/2018    1,050,000   1,002,793    900,165    0.57%
Black Diamond CLO 2017-1, Ltd.  Secured Note - Class D, 12.26%, (3M SOFR + 6.86%, due 04/24/2029)  10/04/2018    3,600,000   3,593,415    3,495,960    2.21%
Carlyle US CLO 2017-1, Ltd.  Secured Note - Class D, 11.68%, (3M SOFR + 6.26%, due 04/20/2031)  09/15/2020    2,000,000   1,720,927    1,744,200    1.10%
Carlyle US CLO 2018-1, Ltd.  Secured Note - Class D, 11.43%, (3M SOFR + 6.01%, due 04/20/2031)  10/04/2018    665,000   660,021    602,091    0.38%
Carlyle US CLO 2018-2, Ltd.  Secured Note - Class D, 10.91%, (3M SOFR + 5.51%, due 10/15/2031)  10/04/2018    5,500,000   5,337,175    4,985,750    3.15%
Carlyle US CLO 2019-1, Ltd.  Secured Note - Class D, 12.38%, (3M SOFR + 6.96%, due 04/20/2031)  08/19/2019    3,125,000   2,984,784    2,944,375    1.86%
CIFC Funding 2015-I, Ltd.  Secured Note - Class E-RR, 11.67%, (3M SOFR + 6.26%, due 01/22/2031)  10/04/2018    5,000,000   4,769,385    4,754,000    3.00%
CIFC Funding 2018-II, Ltd.  Secured Note - Class D, 11.53%, (3M SOFR + 6.11%, due 04/20/2031)  10/04/2018    1,225,000   1,196,576    1,181,880    0.75%
CIFC Funding 2018-III, Ltd.  Secured Note - Class E, 11.16%, (3M SOFR + 5.76%, due 07/18/2031)  08/16/2023    4,750,000   4,418,098    4,539,100    2.87%
CIFC Funding 2018-IV, Ltd.  Secured Note - Class E, 13.36%, (3M SOFR + 7.96%, due 10/17/2031)  05/22/2019    2,000,000   1,885,116    1,662,600    1.05%
CIFC Funding 2019-II, Ltd.  Secured Note - Class E-R, 12.25%, (3M SOFR + 6.85%, due 04/17/2034)  08/03/2023    2,650,000   2,603,625    2,650,000    1.68%
CIFC Funding 2019-V, Ltd.  Secured Note - Class D-R, 12.44%, (3M SOFR + 7.04%, due 01/15/2035)  08/03/2023    950,000   933,817    942,020    0.60%
CIFC Funding 2021-III, Ltd.  Secured Note - Class E-1, 12.06%, (3M SOFR + 6.66%, due 07/15/2036)  08/18/2023    3,750,000   3,651,563    3,704,250    2.34%
Cook Park CLO, Ltd.  Secured Note - Class E, 11.06%, (3M SOFR + 5.66%, due 04/17/2030)  10/04/2018    1,250,000   1,203,574    1,068,125    0.68%
Dryden 37 Senior Loan Fund, Ltd.  Secured Note - Class E-R, 10.81%, (3M SOFR + 5.41%, due 01/15/2031)  10/04/2018    500,000   486,553    408,100    0.26%
Eaton Vance CLO 2018-1, Ltd.  Secured Note - Class E, 11.66%, (3M SOFR + 6.26%, due 10/15/2030)  07/26/2023    750,000   661,506    684,525    0.43%
First Eagle BSL CLO 2019-1 Ltd.  Secured Note - Class D, 13.38%, (3M SOFR + 7.96%, due 01/20/2033)  12/17/2019    5,000,000   4,821,748    4,453,000    2.81%
Gilbert Park CLO, Ltd.  Secured Note - Class E, 12.06%, (3M SOFR + 6.66%, due 10/15/2030)  12/19/2023    5,327,000   5,109,772    5,115,518    3.23%
Harbor Park CLO, Ltd.  Secured Note - Class E, 11.28%, (3M SOFR + 5.86%, due 01/20/2031)  08/08/2023    2,250,000   2,125,238    2,167,875    1.37%
KKR CLO 14 Ltd.  Secured Note - Class E-R, 11.81%, (3M SOFR + 6.41%, due 07/15/2031)  12/20/2023    2,700,000   2,575,641    2,575,530    1.63%
KKR CLO 22 Ltd.  Secured Note - Class E, 11.68%, (3M SOFR + 6.26%, due 07/20/2031)  10/27/2021    3,950,000   3,799,266    3,814,120    2.41%
KKR CLO 26 Ltd.  Secured Note - Class E-R, 12.81%, (3M SOFR + 7.41%, due 10/15/2034)  08/08/2023    750,000   714,404    740,925    0.47%
KKR CLO 29 Ltd.  Secured Note - Class F, NM, (3M SOFR + 9.26%, due 01/15/2032)  12/14/2021    589,812           0.00%
LCM XVIII, L.P.  Secured Note - Class E-R, 11.63%, (3M SOFR + 6.21%, due 04/20/2031)  10/04/2018    600,000   598,753    452,700    0.29%
Madison Park Funding XX, Ltd.  Secured Note - Class E-R, 10.95%, (3M SOFR + 5.56%, due 07/27/2030)  10/20/2023    1,250,000   1,121,821    1,193,750    0.75%
Madison Park Funding XXVII, Ltd.  Secured Note - Class D, 10.68%, (3M SOFR + 5.26%, due 04/20/2030)  10/04/2018    3,050,000   2,883,163    2,857,850    1.81%
Madison Park Funding XLII, Ltd.  Secured Note - Class E, 11.72%, (3M SOFR + 6.31%, due 11/21/2030)  08/15/2019    1,875,000   1,773,839    1,816,313    1.15%
Madison Park Funding LI, Ltd.  Secured Note - Class E, 11.93%, (3M SOFR + 6.53%, due 07/19/2034)  10/28/2021    4,250,000   4,235,377    4,224,075    2.67%
Marathon CLO IX, Ltd.  Secured Note - Class D, 11.71%, (3M SOFR + 6.31%, due 04/15/2029)  10/04/2018    4,050,000   4,013,788    3,200,310    2.02%
Marathon CLO XIII, Ltd.  Secured Note - Class D, 12.64%, (3M SOFR + 7.24%, due 04/15/2032)  06/04/2019    3,500,000   3,370,696    2,850,050    1.80%
Neuberger Berman Loan Advisers CLO 33, Ltd.  Secured Note - Class E-R, 11.91%, (3M SOFR + 6.51%, due 10/16/2033)  07/24/2023    5,000,000   4,683,412    4,790,000    3.03%
OZLM XXI, Ltd.  Secured Note - Class D, 11.22%, (3M SOFR + 5.80%, due 01/20/2031)  10/04/2018    4,150,000   4,079,041    3,708,855    2.34%
Octagon Investment Partners 37, Ltd.  Secured Note - Class D, 11.04%, (3M SOFR + 5.66%, due 07/25/2030)  10/04/2018    2,575,000   2,407,733    2,230,980    1.41%
Octagon Investment Partners 38, Ltd.  Secured Note - Class D, 11.38%, (3M SOFR + 5.96%, due 07/20/2030)  10/04/2018    3,725,000   3,664,389    3,342,070    2.11%
Octagon Investment Partners 39, Ltd.  Secured Note - Class E, 11.43%, (3M SOFR + 6.01%, due 10/20/2030)  10/24/2018    1,550,000   1,500,932    1,434,835    0.91%
Octagon Investment Partners 41, Ltd.  Secured Note - Class E-R, 12.79%, (3M SOFR + 7.39%, due 10/15/2033)  09/24/2021    5,000,000   4,814,028    4,667,500    2.95%
Palmer Square CLO 2018-1, Ltd.  Secured Note - Class D, 10.81%, (3M SOFR + 5.41%, due 04/18/2031)  05/30/2019    1,120,000   1,054,020    1,078,896    0.68%
Pikes Peak CLO 1  Secured Note - Class E, 11.71%, (3M SOFR + 6.31%, due 07/24/2031)  10/28/2021    3,500,000   3,415,309    3,256,750    2.06%
RR 4 Ltd.  Secured Note - Class D, 11.51%, (3M SOFR + 6.11%, due 04/15/2030)  10/28/2021    5,000,000   4,821,740    4,682,500    2.96%
RR 7 Ltd.  Secured Note - Class D-1B, 11.89%, (3M SOFR + 6.50%, due 01/15/2037)  08/10/2023    2,000,000   1,920,000    1,932,600    1.22%
Rockford Tower CLO 2018-1, Ltd.  Secured Note - Class E, 11.48%, (3M SOFR + 6.11%, due 05/20/2031)  09/30/2021    2,250,000   2,197,274    2,027,475    1.28%
Rockford Tower CLO 2018-2, Ltd.  Secured Note - Class E, 11.68%, (3M SOFR + 6.26%, due 10/20/2031)  10/04/2018    5,000,000   4,857,535    4,523,500    2.86%
Rockford Tower CLO 2019-2, Ltd.  Secured Note - Class E, 11.68%, (3M SOFR + 6.31%, due 08/20/2032)  01/13/2021    3,000,000   2,965,466    2,683,200    1.70%
Rockford Tower CLO 2020-1, Ltd.  Secured Note - Class E, 12.58%, (3M SOFR + 7.16%, due 01/20/2032)  12/04/2020    1,600,000   1,575,200    1,544,640    0.98%
Rockford Tower CLO 2021-3, Ltd.  Secured Note - Class E, 12.40%, (3M SOFR + 6.98%, due 10/20/2034)  10/17/2023    900,000   771,075    794,070    0.50%
TCI-Symphony CLO 2016-1 Ltd.  Secured Note - Class E-R2, 12.41%, (3M SOFR + 7.01%, due 10/13/2032)  01/13/2022    3,000,000   3,000,000    2,681,700    1.70%
TICP CLO VIII, Ltd.  Secured Note - Class D-R, 12.38%, (3M SOFR + 6.96%, due 10/20/2034)  07/27/2023    1,000,000   936,667    970,100    0.61%
TICP CLO IX, Ltd.  Secured Note - Class E, 11.28%, (3M SOFR + 5.86%, due 01/20/2031)  08/22/2019    2,500,000   2,379,219    2,464,750    1.56%
TICP CLO XI, Ltd.  Secured Note - Class E, 11.68%, (3M SOFR + 6.26%, due 10/20/2031)  10/29/2021    5,050,000   5,020,338    4,984,350    3.15%
Venture 36 CLO, Limited  Secured Note - Class E, 12.60%, (3M SOFR + 7.18%, due 04/20/2032)  01/21/2021    5,607,455   5,069,880    3,693,631    2.33%
Venture 43 CLO, Limited  Secured Note - Class E, 12.81%, (3M SOFR + 7.41%, due 04/15/2034)  11/02/2021    2,500,000   2,444,228    2,130,250    1.35%
Vibrant CLO VI, Ltd.  Secured Note - Class E, 11.38%, (3M SOFR + 6.01%, due 06/20/2029)  10/04/2018    4,350,000   3,843,656    3,876,720    2.45%
Vibrant CLO VIII, Ltd.  Secured Note - Class D, 11.43%, (3M SOFR + 6.01%, due 01/20/2031)  10/04/2018    1,750,000   1,712,774    1,377,250    0.87%
Wellfleet CLO 2018-1, Ltd.  Secured Note - Class E, 11.16%, (3M SOFR + 5.76%, due 07/17/2031)  10/27/2021    4,025,000   3,889,666    3,240,125    2.05%
Wind River 2014-1 CLO Ltd.  Secured Note - Class E-R, 11.96%, (3M SOFR + 6.56%, due 07/18/2031)  08/16/2021    2,550,000   2,396,744    1,645,515    1.04%
Wind River 2021-3 CLO Ltd.  Secured Note - Class E, 12.28%, (3M SOFR + 6.86%, due 07/20/2033)  10/28/2021    4,500,000   4,328,769    4,056,750    2.56%
York CLO-2 Ltd.  Secured Note - Class E-R, 11.32%, (3M SOFR + 5.91%, due 01/22/2031)  05/16/2019    2,855,000   2,534,215    2,781,627    1.76%
               179,966,381    171,092,616    108.15%
CLO Equity ⁽⁷⁾ ⁽⁸⁾                          
Structured Finance                          
Ares XLIV CLO Ltd.  Subordinated Note (effective yield 12.84%, maturity 04/15/2034)  06/08/2021    8,000,000   3,092,978    2,320,191    1.47%
Ares LVIII CLO Ltd.  Subordinated Note (effective yield 16.82%, maturity 01/15/2035)  06/17/2021    4,000,000   2,666,623    2,360,035    1.49%
Bain Capital Credit CLO 2021-2, Limited  Subordinated Note (effective yield 29.67%, maturity 07/16/2034)  08/09/2023    3,250,000   1,726,153    1,821,535    1.15%
Bain Capital Credit CLO 2021-7, Limited  Subordinated Note (effective yield 28.28%, maturity 01/22/2035)  09/05/2023    4,000,000   2,407,456    2,522,224    1.59%
Bardin Hill CLO 2021-2 Ltd.  Subordinated Note (effective yield 27.0%, maturity 10/25/2034) ⁽⁹⁾  09/24/2021    5,000,000   3,317,212    3,089,013    1.95%
Barings CLO Ltd. 2021-I  Subordinated Note (effective yield 16.72%, maturity 04/25/2034)  11/03/2021    4,000,000   3,126,732    2,590,010    1.64%
Barings CLO Ltd. 2021-III  Subordinated Note (effective yield 16.58%, maturity 01/18/2035)  11/17/2021    5,000,000   3,749,041    2,881,547    1.82%
Boyce Park CLO, Ltd.  Subordinated Note (effective yield 22.80%, maturity 04/21/2035)  09/27/2023    3,000,000   2,154,956    2,162,491    1.37%
Boyce Park CLO, Ltd.  Class M-2 Notes (effective yield 22.80%, maturity 04/21/2035)  09/27/2023    3,214,286   67,051    65,134    0.04%
Carlyle US CLO 2021-2, Ltd.  Subordinated Note (effective yield 14.27%, maturity 04/20/2034)  10/28/2021    3,000,000   2,431,397    1,945,175    1.23%
Carlyle US CLO 2021-5, Ltd.  Subordinated Note (effective yield 14.31%, maturity 07/20/2034)  11/02/2021    5,000,000   3,952,294    3,144,341    1.99%
Carlyle US CLO 2022-2, Ltd.  Subordinated Note (effective yield 21.94%, maturity 04/20/2035)  08/15/2023    5,004,700   3,622,418    3,544,767    2.24%
CIFC Funding 2019-VI, Ltd.  Subordinated Note (effective yield 19.84%, maturity 01/16/2033)  12/02/2019    6,000,000   4,295,701    3,735,027    2.36%
CIFC Funding 2022-IV, Ltd.  Subordinated Note (effective yield 20.19%, maturity 07/16/2035)  10/23/2023    1,100,000   913,000    914,659    0.58%
Clover CLO 2021-2, Ltd.  Subordinated Note (effective yield 21.42%, maturity 07/20/2034)  08/09/2023    2,350,000   1,598,418    1,653,107    1.04%
Elmwood CLO 21 Ltd.  Subordinated Note (effective yield 18.35%, maturity 10/20/2036)  10/26/2023    5,000,000   3,417,500    3,400,776    2.15%
Kings Park CLO, Ltd.  Subordinated Note (effective yield 28.47%, maturity 01/21/2035)  04/27/2023    1,000,000   593,794    650,350    0.41%
KKR CLO 29 Ltd.  Subordinated Note (effective yield 18.49%, maturity 01/15/2032)  12/14/2021    5,500,000   4,124,223    3,589,738    2.27%
Madison Park Funding XXXVII, Ltd.  Subordinated Note (effective yield 34.55%, maturity 07/15/2049)  03/11/2020    4,000,000   2,344,416    2,528,547    1.60%

 

See accompanying notes to the consolidated financial statements

25

 

 

Eagle Point Income Company Inc. and Subsidiaries

Consolidated Schedule of Investments

As of December 31, 2023

(expressed in U.S. dollars)

 

Issuer ⁽¹⁾  Investment Description ⁽²⁾ ⁽³⁾  Acquisition Date ⁽⁴⁾    Principal Amount  Cost   Fair Value ⁽⁵⁾   % of Net Assets 
CLO Equity ⁽⁷⁾ ⁽⁸⁾ (continued)                          
Structured Finance                          
Marathon CLO XIII, Ltd.  Subordinated Note (effective yield 13.02%, maturity 04/15/2032)  06/04/2019    5,300,000   3,208,228    1,506,058    0.95%
Octagon Investment Partners 37, Ltd.  Subordinated Note (effective yield 4.80%, maturity 07/25/2030)  01/31/2020    6,000,000   3,054,254    1,893,737    1.20%
Octagon Investment Partners 43, Ltd.  Income Note (effective yield 10.80%, maturity 10/25/2032)  08/02/2019    5,750,000   4,050,799    2,510,526    1.59%
Point Au Roche Park CLO, Ltd.  Subordinated Note (effective yield 15.82%, maturity 07/20/2034)  02/02/2022    5,945,000   4,667,753    4,024,287    2.54%
RR 23 LTD  Subordinated Note (effective yield 19.59%, maturity 10/15/2035)  10/12/2023    5,000,000   3,062,500    3,133,790    1.98%
Venture 37 CLO, Limited  Subordinated Note (effective yield 3.94%, maturity 07/15/2032)  05/21/2019    5,200,000   3,199,684    1,741,821    1.10%
Wind River 2022-1 CLO Ltd.  Subordinated Note (effective yield 30.35%, maturity 07/20/2035)  08/15/2023    5,490,000   3,547,441    3,605,735    2.28%
               74,392,022    63,334,621    40.03%
CFO Debt ⁽⁷⁾                          
Structured Finance                          
Glendower Capital Secondaries CFO, LLC  Class B Loan, Delayed Draw, 11.50% (due 07/12/2038) ⁽¹¹⁾ ⁽¹²⁾  07/13/2023    183,622   178,736    185,477    0.12%
Glendower Capital Secondaries CFO, LLC  Class C Loan, Delayed Draw, 14.50% (due 07/12/2038) ⁽¹¹⁾ ⁽¹²⁾  07/13/2023    84,080   81,843    85,005    0.05%
               260,579    270,482    0.17%
CFO Equity ⁽⁷⁾ ⁽⁸⁾                          
Structured Finance                          
Glendower Capital Secondaries CFO, LLC  Subordinated Loan, Delayed Draw (effective yield 44.85%, maturity 07/12/2038) ⁽¹¹⁾  07/13/2023    191,672   191,672    219,573    0.14%
                           
Total investments at fair value as of
December 31, 2023
          $254,810,654   $234,917,292    148.49%
                           
Liabilities, at fair value ⁽¹⁰⁾                          
5.00% Series A Term Preferred Stock due 2026  Preferred Stock     $ (38,041,225) $(38,041,225)  $(35,241,087)   -22.28%
7.75% Series B Term Preferred Stock due 2028  Preferred Stock       (34,312,050)  (34,309,118)   (34,243,289)   -21.64%
Total liabilities at fair value as of December 31, 2023             $(72,350,343)  $(69,484,376)   -43.92%
                           
Net assets above (below) fair value of investments and liabilities at fair value                (7,225,496)     
                           
Net assets as of December 31, 2023                  $158,207,420      

  

⁽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, as amended, are deemed to be "restricted" securities, are categorized as structured finance securities and the country of risk is the United States.
⁽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⁾Variable rate investment.  Interest rate shown reflects the rate in effect at the reporting date.  Investment description includes the reference rate and spread.
⁽⁷⁾Classified as Level III investment.  See Note 3 "Investments" for further discussion.
⁽⁸⁾CLO equity and CFO equity are entitled to recurring distributions which are generally equal to the remaining cash flow of payments made by underlying assets less contractual payments to debt holders and fund expenses. The effective yield is estimated based on the current projection of the amount and timing of these recurring distributions in addition to the estimated amount of terminal principal payment. The effective yield and investment cost may ultimately not be realized. As of December 21, 2023, the Company's weighted average effective yield on its aggregate CLO equity positions, based on current amortized cost, was 18.26%.
⁽⁹⁾Fair value includes the Company's interest in fee rebates on CLO equity.
⁽¹⁰⁾The Company has accounted for its 5.00% Series A Term Preferred Stock due 2026 and 7.75% Series B Term Preferred Stock due 2028 utilizing the fair value option election under ASC Topic 825. Accordingly, the Series A Term Preferred Stock and Series B Term Preferred Stock are carried at fair value. See Note 2 "Summary of Significant Accounting Policies" for further discussion.
⁽¹¹⁾This investment has an unfunded commitment as of December 31, 2023. See Note 7 "Commitments and Contingencies" for further discussion.
⁽¹²⁾Fixed rate investment.

 

See accompanying notes to the consolidated financial statements

26

 

Eagle Point Income Company Inc. and Subsidiaries

Consolidated Statement of Operations

For the year ended December 31, 2023

(expressed in U.S. dollars)

 

INVESTMENT INCOME    
Interest income  $26,689,756 
Other income   61,065 
Total Investment Income   26,750,821 
      
EXPENSES     
Interest expense   3,249,279 
Management fees   2,268,058 
Professional fees   1,230,215 
Commission expense   1,051,958 
Administration fees   558,546 
Directors’ fees   255,000 
Tax expense ⁽¹⁾   223,867 
Amortization of deferred financing costs   21,730 
Other expenses   499,503 
Total Expenses   9,358,156 
      
NET INVESTMENT INCOME   17,392,665 
      
NET REALIZED AND UNREALIZED GAIN (LOSS)     
Net realized gain (loss) on investments   (12,614)
Net change in unrealized appreciation (depreciation) on investments   13,153,774 
Net change in unrealized (appreciation) depreciation on liabilities at fair value under the fair value option   (1,246,996)
NET REALIZED AND UNREALIZED GAIN (LOSS)   11,894,164 
      
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS  $29,286,829 

 

⁽¹⁾Tax expense consists of $79,280 of estimated Delaware franchise tax and $200,000 of estimated excise tax, offset by $55,413 of excise tax refund related to the 2022 tax year.

 

See accompanying notes to the consolidated financial statements

27 

 

Eagle Point Income Company Inc. and Subsidiaries

Consolidated Statement of Comprehensive Income
For the year ended December 31, 2023
(expressed in U.S. dollars)

 

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS  $29,286,829 
      
OTHER COMPREHENSIVE INCOME (LOSS) (1)     
Change in unrealized (appreciation) depreciation on liabilities at fair value under the fair value option   2,259,484 
      
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM COMPREHENSIVE INCOME  $31,546,313 

 

(1)See Note 2 “Summary of Significant Accounting Policies - Other Financial Assets and Financial Liabilities at Fair Value” for further discussion relating to other comprehensive income.

         

See accompanying notes to the consolidated financial statements

28 

 

Eagle Point Income Company Inc. and Subsidiaries 

Consolidated Statements of Changes in Net Assets

(expressed in U.S. dollars, except share amounts)

 

   For the
year ended
December 31, 2023
   For the
year ended
December 31, 2022
 
Net increase (decrease) in net assets resulting from operations:          
Net investment income  $17,392,665   $11,590,146 
Net realized gain (loss) on investments   (12,614)   38,548 
Net change in unrealized appreciation (depreciation) on investments   13,153,774    (31,296,039)
Net change in unrealized (appreciation) depreciation on liabilities at fair value under the fair value option   (1,246,996)   3,721,302 
Total net increase (decrease) in net assets resulting from operations   29,286,829    (15,946,043)
           
Other comprehensive income (loss):          
Net change in unrealized (appreciation) depreciation on liabilities at fair value under the fair value option   2,259,484    (1,038,890)
Total other comprehensive income (loss)   2,259,484    (1,038,890)
           
Common stock distributions:          
Common stock distributions from net investment income   (18,077,406)   (10,788,143)
Common stock distributions from tax return of capital        
Total common stock distributions   (18,077,406)   (10,788,143)
           
Capital share transactions:          
Issuance of shares of common stock pursuant to the Company’s “at the market” program and the Committed Equity Financing (Note 5), net of commissions and offering expenses   42,319,019    14,243,028 
Issuance of shares of common stock pursuant to the Company’s dividend reinvestment plan   475,654    124,721 
Total capital share transactions   42,794,673    14,367,749 
           
Total increase (decrease) in net assets   56,263,580    (13,405,327)
Net assets at beginning of period   101,943,840    115,349,167 
Net assets at end of period  $158,207,420   $101,943,840 
           
Capital share activity:          
Shares of common stock issued pursuant to the Company’s “at the market” program and the Committed Equity Financing   3,065,862    1,006,487 
Shares of common stock issued pursuant to the Company’s dividend reinvestment plan   34,779    8,306 
Total increase (decrease) in capital share activity   3,100,641    1,014,793 

 

See accompanying notes to the consolidated financial statements

 

29 

 

Eagle Point Income Company Inc. and Subsidiaries 

Consolidated Statement of Cash Flows

For the year ended December 31, 2023

(expressed in U.S. dollars)

 

CASH FLOWS FROM OPERATING ACTIVITIES    
Net increase (decrease) in net assets resulting from operations  $29,286,829 
      
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:     
Purchases of investments   (83,535,538)
Proceeds from sales of investments and repayments of principal ⁽¹⁾   5,590,430 
Net realized (gain) loss on investments   12,614 
Net change in unrealized (appreciation) depreciation on investments   (13,153,774)
Net change in unrealized appreciation (depreciation) on liabilities at fair value under the fair value option   1,246,996 
Amortization (accretion) included in interest expense   (10,858)
Amortization (accretion) of premiums or discounts on debt securities   (422,249)
Amortization of deferred financing costs   21,730 
Changes in assets and liabilities:     
Interest receivable   (2,330,747)
Prepaid expenses   (190,197)
Excise tax refund receivable   (55,413)
Management fees payable   249,904 
Professional fees payable   (131,163)
Administration fees payable   (10,311)
Interest expense payable   417 
Tax expense payable   (34,164)
Due to affiliates   28,072 
Other expenses payable   6,250 
Net cash provided by (used in) operating activities   (63,431,172)
      
CASH FLOWS FROM FINANCING ACTIVITIES     
Borrowings under credit facility   32,745,000 
Repayments under credit facility   (27,255,000)
Payment for deferred financing costs   (50,000)
Common stock distributions paid to stockholders   (18,077,406)
Proceeds from issuance of shares of common stock pursuant to the Company’s “at the market” program, net of commissions and offering expenses, and the Committed Equity Financing (Note 5)   42,319,019 
Proceeds from issuance of shares of common stock pursuant to the Company’s dividend reinvestment plan   341,578 
Proceeds from issuance of 7.75% Series B Term Preferred Stock due 2028   32,501,875 
Proceeds from issuance of shares of 7.75% Series B Term Preferred Stock due 2028 pursuant to the Company’s “at the market” program   1,813,107 
Net cash provided by (used in) financing activities   64,338,173 
      
NET INCREASE (DECREASE) IN CASH   907,001 
      
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD   37,059 
      
CASH AND CASH EQUIVALENTS, END OF PERIOD  $944,060 
      
Supplemental disclosures:     
Cash paid for interest expense  $2,997,537 
Cash paid for excise taxes  $244,914 
Cash paid for interest expense on credit facility  $262,183 
Cash paid for franchise taxes  $68,530 

 

⁽¹⁾Proceeds from sales or maturity of investments includes $4,401,367 of return of capital on CLO Equity investments from recurring cash flows.

 

 

See accompanying notes to the consolidated financial statements

 

30 

 

Eagle Point Income Company Inc. and Subsidiaries 

Notes to Consolidated Financial Statements 

December 31, 2023

 

1.ORGANIZATION

 

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 was initially formed on September 28, 2018 and commenced operations on October 4, 2018. On July 23, 2019, the Company priced its initial public offering (the “IPO”) and on July 24, 2019, the Company’s shares began trading on the New York Stock Exchange (“NYSE”) under the symbol “EIC”.

 

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.

 

Eagle Point Income Management LLC (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”).

 

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries- Eagle Point Income Company Sub II (Cayman) Ltd. (the “Cayman Subsidiary”), a Cayman Islands exempted company, and Eagle Point Income Company Sub (US) LLC (the “US Subsidiary), a Delaware limited liability company (together the “Subsidiaries”). All intercompany accounts have been eliminated upon consolidation. As of December 31, 2023, the US Subsidiary and the Cayman Subsidiary represented 0.2% and 0.0% of the Company’s net assets, respectively.

 

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Accounting 

The consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”). The Company is an investment company and follows the accounting and reporting guidance applicable to investment companies in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946 Financial Services – Investment Companies. Items included in the consolidated financial statements are measured and presented in United States dollars.

 

Use of Estimates 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions which affect the reported amounts included in the consolidated financial statements and accompanying notes as of the reporting date. Actual results may differ from those estimates.

 

Valuation of Investments 

The most significant estimate inherent in the preparation of the consolidated financial statements is the valuation of investments.

 

The Company accounts for its investments in accordance with U.S. GAAP, and fair values its investment portfolio in

 

31

 

  

Eagle Point Income Company Inc. and Subsidiaries 

Notes to Consolidated Financial Statements 

December 31, 2023

 

accordance with the provisions of the FASB ASC Topic 820, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value and requires enhanced disclosures about fair value measurements. Investments are reflected in the consolidated financial statements at fair value. Fair value is the estimated amount that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date (i.e., the exit price).

 

Pursuant to Rule 2a-5 under the 1940 Act adopted by the SEC in December 2020 (“Rule 2a-5”), the Board has elected to designate the Adviser as “valuation designee” to perform fair value determinations, subject to Board oversight and certain other conditions. In the absence of readily available market quotations, as defined by Rule 2a-5, the Adviser determines the fair value of the Company’s investments in accordance with its written valuation policy approved by the Board. 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. 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.

 

The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in an orderly transaction at the measurement date. When considering market participant assumptions in fair value measurements, the following fair value hierarchy prioritizes and ranks the level of market price observability used in measuring investments:

 

Level I – Unadjusted quoted prices in active markets for identical assets or liabilities that the Company is able to access as of the reporting date.

Level II – Inputs, other than quoted prices included in Level I, that are observable either directly or indirectly as of the reporting date. These inputs may include (a) quoted prices for similar assets in active markets, (b) quoted prices for identical or similar assets in markets that are not active, (c) inputs other than quoted prices that are observable for the asset, or (d) inputs derived principally from or corroborated by observable market data by correlation or other means.

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 particular input to the fair value measurement in its entirety requires judgment and consideration of factors specific to the investment.

 

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 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 and is subject to review by the Board on a quarterly basis.

 

See Note 3 “Investments” for further discussion relating to the Company’s investments.

 

32

 

 

Eagle Point Income Company Inc. and Subsidiaries 

Notes to Consolidated Financial Statements 

December 31, 2023

 

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 to make an irrevocable election to use fair value as the initial and subsequent accounting measurement for certain financial assets and liabilities. The decision to elect the FVO is determined on an instrument-by-instrument basis and must be applied to an entire instrument. Assets and liabilities measured at fair value are required to be reported separately from those instruments measured using another accounting method and changes in fair value attributable to instrument-specific credit risk on financial liabilities for which the FVO is elected are required to be presented separately in other comprehensive income. Additionally, upfront offering costs related to such instruments, inclusive of costs associated with issuances under the Company’s at-the-market (“ATM”) program, are recognized in earnings as incurred and are not deferred.

 

The Company elected to account for its 5.00% Series A Term Preferred Stock due 2026 (the “Series A Term Preferred Stock”) and its 7.75% Series B Term Preferred Stock due 2028 (“Series B Term Preferred Stock”, and collectively with the Series A Term Preferred Stock, the “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 and collateralized fund obligation (“CFO”) debt is recorded using the accrual basis of accounting to the extent such amounts are expected to be collected. Interest income on such investments is generally expected to be received in cash. 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 applicable investments. Amortization of premium or accretion of discount is recognized using the effective interest method.

 

In certain circumstances, all or a portion of interest income from a given investment 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 represents the coupon rate at payment date when PIK interest is received. On the payment date, all or a portion of interest receivable is capitalized as additional principal in the investment. To the extent the Company does not believe it will ultimately be able to collect PIK interest, the investment will be placed on non-accrual status, and previously recorded PIK interest income will be reversed.

 

CLO equity investments, fee rebates and CFO equity investments 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 such investments 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 and fee rebate position held within the Company’s portfolio at the initiation of each investment and each subsequent quarter thereafter. It is the Adviser’s policy to review the effective yield for each CFO equity position at each measurement date and update periodically based on the facts and circumstances known to the Adviser.

 

Other Income 

Other income includes the Company’s share of income under the terms of fee rebate agreements and commitment fee income.

 

Interest Expense 

Interest expense includes the Company’s distributions associated with its Series A Term Preferred Stock, Series B Term Preferred Stock and amounts due under the credit facility agreement in relation to the outstanding borrowings and unused commitment fees.

 

Interest expense also includes the Company’s amortization of original issue premiums and discounts associated with its Preferred Stock.

 

33

 

 

Eagle Point Income Company Inc. and Subsidiaries 

Notes to Consolidated Financial Statements 

December 31, 2023

 

The following table summarizes the components of interest expense for the year ended December 31, 2023:

 

   Series A Term
Preferred Stock
   Series B Term
Preferred Stock
   Revolving Credit
Facility
   Total 
Distributions declared and paid  $1,902,067   $1,095,470   $-   $2,997,537 
Interest expense on credit facility   -    -    262,600    262,600 
Amortization of issuance premium   (10,290)   (568)   -    (10,858)
   $1,891,777   $1,094,902   $262,600   $3,249,279 

 

Interest expense is recorded as an expense on the Consolidated Statement of Operations. The Company’s Preferred Stock has no interest payable as of December 31, 2023.

 

Please refer to Note 6 “Mandatory Redeemable Preferred Stock” and Note 9 “Revolving Credit Facility” for further discussion relating to the Preferred Stock issuances and on the interest expense due under the credit facility agreement, respectively.

 

Original Issue Discounts and Premiums 

Original issue discounts and premiums on liabilities consist of discounts or premiums recorded in connection with the issuance of the Preferred Stock as part of the Company’s ATM program, consistent with FASB ASC Topic 835-30-35-2. The original issue discounts and premiums are capitalized at the time of issuance and amortized using the effective interest method over the respective terms of each of the Preferred Stock. Amortization and accretion of original issue discounts and premiums are reflected as an expense and a contra expense within interest expense in the Consolidated Statement of Operations, respectively.

 

Securities Transactions 

The Company records the purchase and sale of securities on the trade date. Realized gains and losses on investments sold are recorded on the basis of the specific identification method.

 

In certain circumstances where the Adviser determines it is unlikely to fully amortize a CLO equity or CLO debt investment’s remaining amortized cost, such remaining cost is written-down to its current fair value and recognized as a realized loss in the Consolidated Statement of Operations.

 

Cash and Cash Equivalents 

The Company has defined cash and cash equivalents as cash and short-term, highly liquid investments with original maturities of three months or less from the date of purchase. The Company maintains its cash in bank accounts which, at times, may exceed federal insured limits. The Adviser monitors the performance of the financial institution where the accounts are held in order to manage any risk associated with such accounts.

 

Expense Recognition 

Expenses are recorded on the accrual basis of accounting.

 

Prepaid Expenses 

Prepaid expenses consist primarily of insurance premiums, shelf registration expenses, ATM program expenses and the Committed Equity Financing (as defined in Note 5 “Common Stock”) expenses. 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

 

34

 

 

Eagle Point Income Company Inc. and Subsidiaries 

Notes to Consolidated Financial Statements 

December 31, 2023

 

of a new shelf registration or ATM program.

 

Deferred Financing Costs 

Deferred financing costs consist of fees and expenses incurred in connection with the Revolving Credit Facility (refer to Note 9 “Revolving Credit Facility”). Deferred financing costs are capitalized and amortized over the term of the Revolving Credit Facility, and are reflected in borrowings under the credit facility on the Consolidated Statement of Asset and Liabilities (if any). Amortization of deferred financing costs are recorded as an expense on the Consolidated Statement of Operations on a straight-line basis, which approximates the effective interest method.

 

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. Accordingly, the Company intends to distribute its taxable income and net realized gains, if any, to stockholders in accordance with timing requirements imposed by the Code. Therefore, no federal income tax provision is required. The Company’s tax year end is December 31. The Company intends to file federal income and excise tax returns as well as any applicable state tax filings. The statute of limitations on the Company’s tax return filings generally remains open for three years. The Company has analyzed its tax positions for its tax year ended December 31, 2023, including open tax years, and does not believe there are any uncertain tax positions requiring recognition in the Company’s consolidated financial statements.

 

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 capital gains recognized for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the consolidated financial statements to reflect their tax character. Temporary differences arise when certain items of income, expense, gain or loss are recognized at some time in the future. Differences in classification may also result from the treatment of short-term capital gains as ordinary income for federal income tax purposes. The tax basis components of distributable earnings 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.

 

For the year ended December 31, 2023, $2,542,562 was reclassified between aggregate distributable earnings(losses) and paid-in capital. This amount represents $1,375,980 nondeductible offering expenses related to the Series B Term Preferred Stock, $144,587 nondeductible U.S. federal excise taxes incurred in relation to the 2023 and 2022 excise tax years, and $1,021,995 of adjustments related to return of capital. This difference has no effect on net assets or net asset value per share.

 

For the tax year ended December 31, 2023, the estimated components of distributable earnings, on a tax basis, were as follows:

 

35

 

 

Eagle Point Income Company Inc. and Subsidiaries 

Notes to Consolidated Financial Statements 

December 31, 2023

 

   For the tax year ended December 31, 2023 
      
Undistributed ordinary income  $5,699,348 
      
Capital loss carryforward   14,223,033 
      
Net unrealized depreciation   (27,217,255)

  

As of the tax period ended December 31, 2023, the Company has $4,486,098 of short-term capital losses and $9,736,935 of long-term capital loses which can be carried forward for an unlimited period.

 

The following table summarizes the tax character of distributions to common and preferred shareholders for the respective tax years. Tax information for the tax year ended December 31, 2023 is estimated and is not considered final until the Company files its tax return, amounts in millions.

 

Tax Year  Ordinary Dividend  Return of Capital
2023  $21,074,943  $-
2022   12,677,539   -
2021   8,744,744   -
2020   7,997,030   1,106,093

 

As of December 31, 2023, the Company’s tax cost for federal income tax purposes was $262,134,547. Accordingly, accumulated net unrealized depreciation on investments held by the Company was $27,217,255, consisting of $1,797,281 gross unrealized appreciation and $29,014,536 gross unrealized depreciation.

 

Depending on the level of taxable income earned in a tax year, the Company is permitted to carry forward taxable income (including net capital gains, if any) in excess of its current year distributions from the current tax year into the next tax year and pay a nondeductible 4% U.S. federal excise tax on such taxable income, as required.

 

The Company has determined that its estimated current year annual taxable income will be in excess of current year distributions from such income, as a result the Company has accrued a U.S. federal excise tax for the year ended December 31, 2023 of $200,000, which was offset by an adjustment of $55,413 related to the U.S. federal excise tax for the year ended December 31, 2022, both of which are reported on the Statement of Operations.

 

For the year ended December 31, 2023, the Company incurred $79,280 in Delaware franchise tax expense related to the 2023 tax year end, which is reported on the Statement of Operations.

 

The Company’s subsidiary, Eagle Point Income Company Sub (US) LLC has elected to be treated as a corporation for U.S. tax purposes and may be subject to federal, state and local tax where it operates or is deemed to operate. The subsidiary has no significant tax liability as of December 31, 2023.

 

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 can be comprised of net investment income, net realized capital gains and return of capital for U.S. federal income tax purposes and are intended to be paid monthly. Distributions payable to common stockholders are recorded as a liability on ex-dividend date. Unless a common stockholder opts out of the Company’s dividend reinvestment plan (the “DRIP”), distributions are automatically reinvested in full shares of the Company as of the payment date, pursuant to the DRIP. The Company’s common stockholders who opt-out of participation in the

 

36

 

 

Eagle Point Income Company Inc. and Subsidiaries 

Notes to Consolidated Financial Statements 

December 31, 2023

 

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 and/or supplemental distributions representing the excess of the Company’s net taxable income over the Company’s aggregate monthly distributions paid during the year.

 

The characterization of distributions paid to common stockholders, as set forth in the Consolidated Financial Highlights, reflect estimates made by the Company for federal income tax purposes. Such estimates are subject to change once the final determination of the source of all distributions has been made and the final tax return has been filed by the Company.

 

For the year ended December 31, 2023, the Company declared and paid monthly distributions on common stock of approximately $18.1 million or $1.98 per share.

 

For the year ended December 31, 2023, the Company declared and paid dividends on the Series A Term Preferred Stock of approximately $1.9 million or approximately $1.25 per share of Series A Term Preferred Stock.

 

For the year ended December 31, 2023, the Company declared and paid dividends on the Series B Term Preferred Stock of approximately $1.1 million or approximately $0.83 per share of Series B Term Preferred Stock.

 

3.INVESTMENTS

 

Fair Value Measurement

 

The following table summarizes 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 December 31, 2023:

 

Fair Value Measurement (in millions)                
   Level I   Level II   Level III   Total 
Assets at Fair Value                    
Investments at Fair Value                    
CLO Debt  $-   $171.09   $-   $171.09 
CLO Equity   -    -    63.33    63.33 
CFO Debt   -    -    0.27    0.27 
CFO Equity   -    -    0.22    0.22 
Total Investentments at Fair Value (1)  $-   $171.09   $63.82   $234.92 
Total Assets at Fair Value (1)  $-   $171.09   $63.82   $234.92 
                     
Liabilities at Fair Value Under FVO                    
Series A Term Preferred Stock  $35.24   $-   $-   $35.24 
Series B Term Preferred Stock  $34.24    -    -    34.24 
Total Liabilities at Fair Value Under FVO (1)  $69.48   $-   $-   $69.48 

 

(1) Amounts may not foot due to rounding. 

 

Significant Unobservable Inputs  

The following table summarizes the quantitative inputs and assumptions used for investments categorized as Level III of the fair value hierarchy as of December 31, 2023.

 

37

 

Eagle Point Income Company Inc. and Subsidiaries 

Notes to Consolidated Financial Statements 

December 31, 2023

 

   

Quantitative Information about Level III Fair Value Measurements 

Assets  

Fair Value as of

December 31, 2023

 

Valuation

Techniques/Methodologies

  Unobservable Inputs   Range / Weighted Average(1)
CLO Equity   $ 63.33   Discounted Cash Flows   Annual Default Rate (²)   0.00% - 4.64%
        Annual Prepayment Rate (²) (³)   15% - 25%
        Reinvestment Spread   3.63% - 3.99% / 3.78%
        Reinvestment Price (²)   98.00% - 99.50%
        Recovery Rate   68.60% - 69.95% / 69.55%
        Expected Yield   17.65% - 98.52% / 29.48% 
CFO Debt   0.27   Discounted Cash Flows   Discount Rate   11.38% - 14.66% / 12.41%
CFO Equity   0.22   Discounted Cash Flows   Discount Rate   42.50%
Total Fair Value of Level III Investments(⁵)   $ 63.82            

 

(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.

(4) Range not shown as only one position is included in the category.

(5) Amounts may not foot due to rounding.

  

In addition to the techniques and inputs noted in the above table, 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. Please refer to Note 2 “Summary of Significant Accounting Policies” for further discussion. The above table 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 December 31, 2023. Unobservable inputs and assumptions are reviewed at each measurement date and updated as necessary to reflect current market conditions.

 

Increases (decreases) in the annual default rate, reinvestment price, expected yield and discount rate 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.

 

Change in Investments Classified as Level III

 

The changes in investments classified as Level III are as follows for the year ended December 31, 2023:

 

Change in Investments Classified as Level III (in millions)                
   CLO Equity   CFO Debt   CFO Equity   Total 
Balance as of January 1, 2023  $41.11   $-   $-   $41.11 
Purchases of investments   23.99    0.27    0.19    24.45 
Proceeds from sales or maturity of investments (1)   (4.40)   -    -    (4.40)
Net realized gains (losses) and net change in unrealized appreciation (depreciation)   2.63    0.00    0.03    2.66 
Balance as of December 31, 2023 (2) (3)  $63.33   $0.27   $0.22   $63.82 
Change in unrealized appreciation (depreciation) on investments still held as of
December 31, 2023
  $2.63   $0.00   $0.03   $2.66 

 

(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.

(3) Amounts may not foot due to rounding.

 

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 Consolidated Statement of Operations. Net changes in unrealized appreciation (depreciation) are reported in the net change in unrealized appreciation (depreciation) on investments balance in the Consolidated Statement of Operations.

 

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Eagle Point Income Company Inc. and Subsidiaries 

Notes to Consolidated Financial Statements 

December 31, 2023

 

Fair Value – Valuation Techniques and Inputs 

The Adviser establishes valuation processes and procedures to ensure the valuation techniques are fair and consistent, and valuation inputs are supportable. The Adviser has a Valuation Committee comprised of various senior personnel of the Adviser, the majority of which are not members of the Company’s portfolio management function. The Valuation Committee is responsible for overseeing the valuation process, evaluating the overall fairness and consistent application of the Adviser’s written valuation policies approved by the Board. The Valuation Committee reviews and approves the valuation on a monthly basis.

 

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 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. 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. Additionally, 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.

 

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 that the Company holds as of the reporting date.

 

Valuation of CFO Debt and CFO Equity  

The Adviser engages a nationally recognized independent valuation agent to determine fair value of the CFO debt and CFO equity held by the Company. The independent valuation agent performs a discounted cash flow analysis, or other valuation techniques appropriate for the facts and circumstances, to determine the fair value of such investments, ultimately providing a high and low valuation for each investment. The final valuation recorded is within the high and low band provided by the valuation agent. Given the illiquidity of these investments and lack of observable inputs, the Adviser categorizes these investments as Level III investments.

 

The Adviser may also utilize the mid-point of an indicative broker quotation, if available, to value such investments as of the reporting date. The Adviser generally categorizes investments valued utilizing indicative broker quotations as Level II or Level III depending on whether an active market exists as of the reporting date.

 

Valuation of Preferred Stock 

The 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.

 

39

 

 

Eagle Point Income Company Inc. and Subsidiaries 

Notes to Consolidated Financial Statements 

December 31, 2023

 

Risks of Investing in CLOs and Other Structured Debt Securities  

CLOs and other structured finance securities are generally backed by a pool of credit-related assets that serve as collateral. Accordingly, CLO and structured finance securities present risks similar to those of other types of credit investments, including default (credit), interest rate and prepayment risks. In addition, CLOs and other structured finance securities are often governed by a complex series of legal documents and contracts, which increases the risk of dispute over the interpretation and enforceability of such documents relative to other types of investments.

 

Subordinated Securities Risk 

CLO junior debt and equity securities that the Company may acquire are subordinated to more senior tranches of CLO debt. CLO junior debt and equity securities are subject to increased risks of default relative to the holders of superior priority interests in the same CLO. In addition, at the time of issuance, CLO equity securities are under-collateralized in that the face amount of the CLO debt and CLO equity of a CLO at inception exceed its total assets. The Company will typically be in a subordinated or first loss position with respect to realized losses on the underlying assets held by the CLOs in which the Company is invested.

 

High-Yield Investment Risk  

The CLO junior debt and equity securities that the Company acquires are typically rated below investment grade or, in the case of CLO equity securities, unrated and are therefore considered “higher-yield” or “junk” securities and are considered speculative with respect to timely payment of interest and repayment of principal. The senior secured loans and other credit-related assets underlying CLOs are also typically higher-yield investments. Investing in CLO junior debt and equity securities and other high-yield investments typically involves greater credit and liquidity risk than investment grade obligations, which may adversely impact the Company’s performance.

 

Leverage Risk 

The use of leverage, whether directly or indirectly through investments such as CLO junior debt and equity securities that inherently involve leverage, may magnify the Company’s risk of loss. CLO junior debt and equity securities are very highly leveraged (with CLO equity securities typically being leveraged ten times), and therefore the CLO securities in which the Company invests are subject to a higher degree of loss since the use of leverage magnifies losses.

 

Credit Risk 

If (1) a CLO in which the Company invests, (2) an underlying asset of any such CLO or (3) 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, the Company’s income, net asset value (“NAV”) and/or market price would be adversely impacted.

 

Key Personnel Risk  

The Adviser manages our investments. Consequently, the Company’s success depends, in large part, upon the services of the Adviser (including Eagle Point Credit Management LLC, which provides the Adviser with investment professionals and other resources under a personnel and resources agreement) and the skill and expertise of the Adviser’s professional personnel. There can be no assurance that the professional personnel of the Adviser (or Eagle Point Credit Management LLC) will continue to serve in their current positions or continue to be employed by the Adviser. We can offer no assurance that their services will be available for any length of time or that the Adviser will continue indefinitely as the Company’s investment adviser.

 

Conflicts of Interest Risk 

The Company’s executive officers and directors, and the Adviser and certain of its affiliates and their officers and employees, including the Senior Investment Team, have several conflicts of interest as a result of the other activities in which they engage.

 

Prepayment Risk 

The assets underlying the CLO securities in which the Company invests are subject to prepayment by the underlying corporate borrowers. As such, the CLO securities and related investments in which the Company invests are subject to prepayment risk. If the Company or a CLO collateral manager are unable to reinvest prepaid amounts in a new

 

40

 

 

Eagle Point Income Company Inc. and Subsidiaries 

Notes to Consolidated Financial Statements 

December 31, 2023

 

investment with an expected rate of return at least equal to that of the investment repaid, the Company’s investment performance will be adversely impacted.

 

Liquidity Risk 

Generally, there is no public market for the CLO investments in which the Company invests. As such, the Company may not be able to sell such investments quickly, or at all. If the Company is able to sell such investments, the prices the Company receives may not reflect the Adviser’s assessment of their fair value or the amount paid for such investments by the Company.

 

Management Fee Risk  

The Company’s management fee structure may incentivize the Adviser to use leverage in a manner that adversely impacts the Company’s performance.

 

Fair Valuation of the Company’s Portfolio Investments  

Generally, there is no public market for the CLO investments and certain other credit assets in which the Company may invest. The Adviser values these securities at least quarterly, or more frequently as may be required from time to time, at fair value. The Adviser’s determinations of the fair value of the Company’s investments have a material impact on the Company’s net earnings through the recording of unrealized appreciation or depreciation of investments and may cause the Company’s NAV on a given date to understate or overstate, possibly materially, the value that the Company ultimately realizes on one or more of the Company’s investments.

 

Limited Investment Opportunities Risk 

The market for CLO securities is more limited than the market for other credit related investments. The Company can offer no assurances that sufficient investment opportunities for the Company’s capital will be available. In recent years there has been a marked increase in the number of, and flow of capital into, investment vehicles established to pursue investments in CLO securities whereas the size of this market is relatively limited. While the Company cannot determine the precise effect of such competition, such increase may result in greater competition for investment opportunities, which may result in an increase in the price of such investments relative to the risk taken on by holders of such investments. Such competition may also result under certain circumstances in increased price volatility or decreased liquidity with respect to certain positions.

 

Market Risk  

Political, regulatory, economic and social developments, and developments that impact specific economic sectors, industries or segments of the market, can affect the value of the Company’s investments. A disruption or downturn in the capital markets and the credit markets could impair the Company’s ability to raise capital, reduce the availability of suitable investment opportunities for the Company, or adversely and materially affect the value of the Company’s investments, any of which would negatively affect the Company’s business. These risks may be magnified if certain events or developments adversely interrupt the global supply chain, and could affect companies worldwide.

 

Loan Accumulation Facilities Risk 

The Company may invest in LAFs, which are short to medium term facilities often provided by the bank that will serve as placement agent or arranger on a CLO transaction and which acquire loans on an interim basis which are expected to form part of the portfolio of a future CLO. Investments in LAFs have risks similar to those applicable to investments in CLOs. Leverage is typically utilized in such a facility and as such the potential risk of loss will be increased for such facilities employing leverage. In the event a planned CLO is not consummated, or the loans are not eligible for purchase by the CLO, the Company may be responsible for either holding or disposing of the loans. This could expose the Company to credit and/or mark-to-market losses, and other risks.

 

Synthetic Investments Risk 

The Company may invest in synthetic investments, such as significant risk transfer securities and credit risk transfer securities issued by banks or other financial institutions, or acquire interests in lease agreements that have the general characteristics of loans and are treated as loans for withholding tax purposes. In addition to the credit risks associated with the applicable reference assets, the Company will usually have a contractual relationship only with the

 

41

 

 

Eagle Point Income Company Inc. and Subsidiaries 

Notes to Consolidated Financial Statements 

December 31, 2023

 

counterparty of such synthetic investment, and not with the reference obligor of the reference asset. Accordingly, the Company generally will have no right to directly enforce compliance by the reference obligor with the terms of the reference asset nor will it have any rights of setoff against the reference obligor or rights with respect to the reference asset. The Company will not directly benefit from the collateral supporting the reference asset and will not have the benefit of the remedies that would normally be available to a holder of such reference asset. In addition, in the event of the insolvency of the counterparty, the Company may be treated as a general creditor of such counterparty, and will not have any claim with respect to the reference asset.

 

Currency Risk  

Although the Company primarily makes investments denominated in U.S. dollars, the Company may make investments denominated in other currencies. The Company’s investments denominated in currencies other than U.S. dollars will be subject to the risk that the value of such currency will decrease in relation to the U.S. dollar. The Company may or may not hedge currency risk.

 

Hedging Risk 

Hedging transactions seeking to reduce risks may result in poorer overall performance than if the Company had not engaged in such hedging transactions. Additionally, such transactions may not fully hedge the Company’s risks.

 

Reinvestment Risk  

CLOs will typically generate cash from asset repayments and sales that may be reinvested in substitute assets, subject to compliance with applicable investment tests. If the CLO collateral manager causes the CLO to purchase substitute assets at a lower yield than those initially acquired or sale proceeds are maintained temporarily in cash, it would reduce the excess interest-related cash flow, thereby having a negative effect on the fair value of the Company’s assets and the market value of the Company’s securities. In addition, the reinvestment period for a CLO may terminate early, which would cause the holders of the CLO’s securities to receive principal payments earlier than anticipated. There can be no assurance that the Company will be able to reinvest such amounts in an alternative investment that provides a comparable return relative to the credit risk assumed.

 

Interest Rate Risk 

The price of certain of the Company’s investments may be significantly affected by changes in interest rates, including recent increases in interest rates. Although senior secured loans are generally floating rate instruments, the Company’s investments in senior secured loans through investments in junior equity and debt tranches of CLOs are sensitive to interest rate levels and volatility. For example, because CLO debt securities are floating rate securities, a reduction in interest rates would generally result in a reduction in the coupon payment and cash flow the Company receives on the Company’s CLO debt investments. Further, in the event of a significant rising interest rate environment and/or economic downturn, loan defaults may increase and result in credit losses that may adversely affect the Company’s cash flow, fair value of the Company’s assets and operating results. Because CLOs generally issue debt on a floating rate basis, an increase in the relevant benchmark index will increase the financing costs of CLOs.

 

Furthermore, certain senior secured loans that constitute the collateral of the CLOs in which the Company invests may continue to pay interest at a floating rate based on LIBOR (or a “synthetic” calculation of LIBOR which is currently expected to continue to be published until September 30, 2024) or may convert to a fixed rate of interest. To the extent that any LIBOR replacement rate utilized for senior secured loans differs from that utilized for debt of a CLO that holds those loans, for the duration of such mismatch, the CLO would experience an interest rate mismatch between its assets and liabilities, which could have an adverse impact on the cash flows distributed to CLO equity investors (and, therefore, the Company’s net investment income and portfolio returns) until such mismatch is corrected or minimized.

 

Refinancing Risk 

If the Company incurs debt financing and subsequently refinance such debt, the replacement debt may be at a higher cost and on less favorable terms and conditions. If the Company fails to extend, refinance or replace such debt financings prior to their maturity on commercially reasonable terms, the Company’s liquidity will be lower than it would have been with the benefit of such financings, which would limit the Company’s ability to grow, and holders

 

42

 

 

Eagle Point Income Company Inc. and Subsidiaries 

Notes to Consolidated Financial Statements 

December 31, 2023

 

of the Company’s common stock would not benefit from the potential for increased returns on equity that incurring leverage creates.

 

Tax Risk 

If the Company fails to qualify for tax treatment as a RIC under Subchapter M of the Code for any reason, or otherwise becomes subject to corporate income tax, the resulting corporate taxes (and any related penalties) could substantially reduce the Company’s net assets, the amount of income available for distributions to the Company’s stockholders, and the amount of income available for payment of the Company’s other liabilities.

 

Counterparty Risk 

The Company may be exposed to counterparty risk, which could make it difficult for the Company or the issuers in which the Company invests to collect on obligations, thereby resulting in potentially significant losses.

 

Price Risk 

Investors who buy shares at different times will likely pay different prices.

 

Global Risks  

Due to highly interconnected global economies and financial markets, the value of the Company’s securities and its underlying investments may go up or down in response to governmental actions and/or general economic conditions throughout the world. Events such as war, military conflict, acts of terrorism, social unrest, natural disasters, recessions, inflation, rapid interest rate changes, supply chain disruptions, sanctions, the spread of infectious illness or other public health threats could also significantly impact the Company and its investments.

 

Banking Risk 

The possibility of future bank failures poses risks of reduced financial market liquidity at clearing, cash management and other custodial financial institutions. The failure of banks which hold cash on behalf of the Company, the Company’s underlying obligors, the collateral managers of the CLOs in which the Company invests (or managers of other securitized or pooled vehicles in which the Company invests), or the Company’s service providers could adversely affect the Company’s ability to pursue its investment strategies and objectives. For example, if an underlying obligor has a commercial relationship with a bank that has failed or is otherwise distressed, such company may experience delays or other disruptions in meeting its obligations and consummating business transactions. Additionally, if a collateral manager has a commercial relationship with a distressed bank, the manager may experience issues conducting its operations or consummating transactions on behalf of the CLOs it manages, which could negatively affect the performance of such CLOs (and, therefore, the performance of the Company).

 

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 year ended December 31, 2023, the Company was charged a management fee of approximately $2.3 million, of which $0.7 million was payable as of December 31, 2023.

 

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

 

43

 

 

Eagle Point Income Company Inc. and Subsidiaries 

Notes to Consolidated Financial Statements 

December 31, 2023

 

of the Company’s tax returns, monitors the Company’s compliance with tax laws and regulations, and prepares and assists the Company with any audits by an independent public accounting firm of the consolidated financial statements. The Administrator is also responsible for printing and disseminating reports to the Company’s stockholders and maintaining the Company’s website, providing support to investor relations, generally overseeing the payment of the Company’s expenses and the performance of administrative and professional services rendered to the Company by others, and providing such other administrative services as the Company may from time to time designate.

 

Payments under the Administration Agreement are equal to an amount based upon the Company’s allocable portion of the Administrator’s overhead in performing its obligations under the Administration Agreement, including rent, the fees and expenses associated with performing compliance functions and the Company’s allocable portion of the compensation of the Company’s chief compliance officer, chief financial officer, chief operating officer and the Company’s allocable portion of the compensation of any related support staff. The Company’s allocable portion of such compensation is based on an allocation of the time spent on the Company relative to other matters. To the extent the Administrator outsources any of its functions, the Company pays the fees on a direct basis, without profit to the Administrator. Certain accounting and other administrative services have been delegated by the Administrator to SS&C Technologies, Inc. (“SS&C”). The Administration Agreement may be terminated by the Company without penalty upon not less than sixty days’ written notice to the Administrator and by the Administrator upon not less than ninety days’ written notice to the Company. The Administration Agreement is approved by the Board, including by a majority of the Company’s independent directors, on an annual basis.

 

For the year ended December 31, 2023, the Company was charged a total of approximately $0.56 million in administration fees consisting of approximately $0.43 million and $0.13 million, relating to services provided by the Administrator and SS&C, respectively, which are included in the Consolidated Statement of Operations, and of which approximately $0.13 million was payable as of December 31, 2023 and reflected on the Consolidated Statement of Assets and Liabilities.

 

Affiliated Ownership 

As of December 31, 2023, the Adviser and its affiliates and senior investment team held an aggregate of 0.5% 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 December 31, 2023. An affiliate of Enstar holds an indirect non-controlling ownership interest in the Adviser. As of December 31, 2023, subsidiaries of Enstar, including Cavello Bay, held an aggregate of 34.2% of the Company’s common stock.

 

Exemptive Relief 

On March 17, 2015, the SEC issued an order granting the Company exemptive relief to co-invest in certain negotiated investments with affiliated investment funds managed by the Adviser, subject to certain conditions.

 

Due to Affiliates 

Due to affiliates reported in the Consolidated Statement of Assets and Liabilities represents amounts payable to the Adviser for expenses paid on behalf of the Company.

 

5.COMMON STOCK

 

As of December 31, 2022, there were 150,000,000 shares of common stock authorized, of which 7,896,757 shares were issued and outstanding.

 

On December 13, 2022, the Company launched a new ATM offering to sell up to $4.0 million aggregate amount of its common stock, pursuant to a prospectus supplement filed with the SEC on May 29, 2020 and additional supplements thereafter. On January 20, 2023, the Company filed a prospectus supplement to update the aggregate offering price of common stock sold through the existing ATM offering from $4.0 million to $5.75 million, exclusive of any shares of common stock previously sold through the ATM offering. On May 12, 2023, the Company filed a prospectus supplement to update the aggregate offering price of common stock sold through the existing ATM offering from $5.75 million to $4.1 million, exclusive of any shares of common stock previously sold through the

 

44

 

 

Eagle Point Income Company Inc. and Subsidiaries 

Notes to Consolidated Financial Statements 

December 31, 2023

 

ATM offering. On June 12, 2023, the Company filed a prospectus supplement to update the aggregate offering price of common stock sold through the existing ATM offering from $4.1 million to $1.54 million, exclusive of any shares of common stock previously sold through the ATM offering. On June 14, 2023, the Company filed a prospectus supplement to update the aggregate offering price of common stock sold through the existing ATM offering from $1.5 million to $75.0 million, exclusive of any shares of common stock previously sold through the ATM offering.

 

On June 29, 2023, the Company filed a new shelf registration statement with 150,000,000 shares of common stock authorized. As a result of the new shelf registration, $123,158 in remaining prepaid expense balance associated with the previous shelf registration was expensed into professional fees in the Consolidated Statement of Operations.

 

On June 30, 2023, the Company launched a new ATM offering to sell up to $75.0 million aggregate amount of its common stock, pursuant to a prospectus filed with the SEC on June 29, 2023.

 

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 $20.0 million 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 registration statement on December 15, 2022 in relation to the Committed Equity Financing.

 

For the year ended December 31, 2023, the Company sold 3,065,862 shares of its common stock, pursuant to the ATM offerings and Committed Equity Financing, for total net proceeds to the Company of approximately $42.3 million. In connection with such sales, the Company paid a total of approximately $0.7 million in sales agent commissions.

 

For the year ended December 31, 2023, 34,779 shares of common stock were issued in connection with the DRIP for total net proceeds to the Company of approximately $0.5 million.

 

As of December 31, 2023, there were 150,000,000 shares of common stock authorized, of which 10,997,398 shares were issued and outstanding.

 

6.MANDATORY REDEEMABLE PREFERRED STOCK

 

As of December 31, 2023, 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 and 1,372,482 of Series B Term Preferred were issued and outstanding.

 

The Company has accounted for its Preferred Stock as a liability under ASC 480 due to their mandatory redemption requirements.

 

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.

 

The Company has elected the FVO under ASC 825 for its Preferred Stock. Accordingly, the Preferred Stock is measured at fair value.

 

Series A Term Preferred Stock 

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

 

45

 

 

Eagle Point Income Company Inc. and Subsidiaries 

Notes to Consolidated Financial Statements 

December 31, 2023

 

outstanding shares of the Series A Term Preferred Stock.

 

The estimated change in fair value of the Series A Term Preferred Stock attributable to market risk for the year ended December 31, 2023 is approximately ($0.9) million, which is recorded as unrealized (appreciation) depreciation on liabilities at fair value under the FVO on the Consolidated Statement of Operations.

 

The estimated change in fair value of the Series A Term Preferred Stock attributable to instrument-specific credit risk for the year ended December 31, 2023 is approximately $1.9 million, which is recorded as unrealized (appreciation) depreciation on liabilities at fair value under the FVO on the Consolidated Statement of Comprehensive Income. The Company defines the change in fair value attributable to instrument-specific credit risk as the excess of the total change in fair value over the change in fair value attributable to changes in a base market rate, such as a United States treasury bond index with a similar maturity to the instrument being valued.

 

On June 30, 2023, the Company launched a new ATM offering to sell up to 1,000,000 shares of Series A Term Preferred Stock with an aggregate liquidation preference of $25 million, pursuant to a prospectus filed with the SEC on June 29, 2023.

 

Series B Term Preferred Stock 

On July 26, 2023, the Company closed an underwritten public offering of 1,130,500 shares of its Series B Term Preferred Stock, resulting in net proceeds to the Company of approximately $27.1 million after payment of underwriting discounts and commissions of approximately $0.9 million and offering expenses of approximately $0.3 million. On August 3, 2023, the underwriters purchased an additional 169,575 shares of its Series B Term Preferred Stock pursuant to the underwriters’ overallotment option, which resulted in additional net proceeds to the Company of approximately $4.1 million after payment of underwriting discounts and commissions of approximately $0.1 million.

 

The Company is required to redeem all outstanding shares of the Series B Term Preferred Stock on July 31, 2028, at a redemption price of $25 per share (the “Series B Liquidation Preference”), plus accumulated but unpaid dividends, if any. At any time on or after July 31, 2025, the Company may, at its sole option, redeem the outstanding shares of the Series B Term Preferred Stock.

 

The Company has accounted for its Series B Term Preferred Stock utilizing the FVO under ASC 825. Accordingly, the Series B Term Preferred Stock are measured at their fair value and issuance costs in the aggregate amount of approximately $1.3 million, which consisted of approximately $1.0 million of underwriting commissions, $0.2 million of professional fees and $0.1 million of other expenses, were expensed as incurred in the year ended December 31, 2023.

 

The estimated change in fair value of the Series B Term Preferred Stock attributable to market risk for the year ended December 31, 2023 is approximately ($0.3) million, which is recorded as unrealized (appreciation) depreciation on liabilities at fair value under the FVO on the Consolidated Statement of Operations.

 

The estimated change in fair value of the Series B Term Preferred Stock attributable to instrument-specific credit risk for the year ended December 31, 2023 is approximately $0.4 million, which is recorded as unrealized (appreciation) depreciation on liabilities at fair value under the FVO on the Consolidated Statement of Comprehensive Income. The Company defines the change in fair value attributable to instrument-specific credit risk as the excess of the total change in fair value over the change in fair value attributable to changes in a base market rate, such as a United States treasury bond index with a similar maturity to the instrument being valued.

 

Pursuant to a prospectus supplement filed with the SEC on August 22, 2023, the Company updated the ATM offering to allow the Company to sell up to 1,000,000 shares of Series B Term Preferred Stock with an aggregate liquidation preference of $25 million, pursuant to a prospectus filed with the SEC on June 29, 2023.

 

For the year ended December 31, 2023, the Company sold 72,407 shares of its Series B Term Preferred Stock pursuant to the ATM offering for total proceeds to the company of approximately $1.8 million. In connection with such sales,

 

46

 

 

Eagle Point Income Company Inc. and Subsidiaries 

Notes to Consolidated Financial Statements 

December 31, 2023

 

the Company paid a total of $36,274 in sales 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 December 31, 2023, the Company had total unfunded commitments of $0.8 million arising from CFO debt and CFO equity investments.

 

8.INDEMNIFICATIONS

 

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.

 

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 and September 18, 2023, with BNP Paribas, as lender, that established a revolving credit facility (the “Revolving Credit Facility”). Pursuant to the terms of the Revolving Credit Facility, the Company can borrow up to an aggregate principal balance of $25.0 million (the “Commitment Amount”). The Revolving Credit facility is collateralized by certain investments held by the Company. The Company has granted a security interest in certain assets to BNP Paribus, as lender. Such borrowings under the Revolving Credit Facility bore interest at 1-month LIBOR plus a spread under the original credit agreement, and 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 Revolving Credit Facility will mature on the earlier of (i) the termination of the Commitment, as defined by the terms of the Revolving Credit Facility or (ii) the scheduled maturity date of September 21, 2024. The Company has the option to extend the maturity from time to time in accordance with the Revolving Credit Facility agreement.

 

For the year ended December 31, 2023, the Company had an average outstanding borrowing and average interest rate of approximately $3.1 million and 5.90%, respectively. The interest expense for the year ended December 31, 2023 on the Revolving Credit Facility was approximately $0.3 million, inclusive of the unused fee, and is recorded on the Consolidated Statement of Operations. As of December 31, 2023, the Company had an outstanding borrowing amount of $14.5 million.

 

See Note 10 “Asset Coverage” for further discussion on the Company’s calculation of asset coverage with respect to

 

47

 

 

Eagle Point Income Company Inc. and Subsidiaries 

Notes to Consolidated Financial Statements 

December 31, 2023

 

the Revolving Credit Facility.

 

10.ASSET COVERAGE

 

Under the provisions of the 1940 Act, the Company is permitted to issue senior securities, including debt securities and preferred stock, and borrow from banks or other financial institutions, provided that the Company satisfies certain asset coverage requirements.

 

With respect to senior securities that are stocks, such as the Preferred Stock, the Company is required to have asset coverage of at least 200%, as measured at the time of issuance of any such senior securities that are stocks and calculated as the ratio of the Company’s total consolidated assets, less all liabilities and indebtedness not represented by senior securities, over the aggregate amount of the Company’s outstanding senior securities representing indebtedness plus the aggregate liquidation preference of any outstanding shares of senior securities that are stocks.

 

With respect to senior securities representing indebtedness, such as the Revolving 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 consolidated assets, less all liabilities and indebtedness not represented by senior securities, over the aggregate amount of the Company’s outstanding senior securities representing indebtedness.

 

If the Company’s asset coverage declines below 300% (or 200%, as applicable), the Company would be prohibited under the 1940 Act from incurring additional debt or issuing additional preferred stock and from declaring certain distributions to its stockholders. In addition, the terms of the Revolving 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.

 

The following table summarizes the Company’s asset coverage with respect to its Preferred Stock and Revolving Credit Facility as of December 31, 2023, and as of December 31, 2022:

 

   As of   As of 
   December 31, 2023   December 31, 2022 
Total Assets  $243,728,043   $148,573,523 
Less liabilities and debts not represented by senior securities   (1,513,315)   (1,414,870)
Net total assets and liabilities  $242,214,728   $147,158,653 
Preferred Stock  $72,353,275   $38,041,225 
Revolving Credit Facility   14,520,000    9,030,000 
   $86,873,275   $47,071,225 
Asset coverage for preferred stock (1)   279%   313%
Asset coverage for debt securities (2)   1668%   1630%

 

(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.

 

11.RECENT ACCOUNTING PRONOUCEMENT

 

In March 2020, FASB issued Accounting Standards Update No. 2020-04 (“ASU 2020-04”) related to FASB ASC Topic 848 Reference Rate Reform– Facilitation of the Effects of Reference Rate Reform. ASU 2020-04 provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The Company has fully adopted the provisions of ASU 2020-04, which did not have a material impact on the Company’s consolidated financial statements and related disclosures.

 

48

 

 

Eagle Point Income Company Inc. and Subsidiaries 

Notes to Consolidated Financial Statements 

December 31, 2023

 

In June 2022, the FASB issued Accounting Standards Update No. 2022-03 (“ASU 2022-03”) related to FASB ASC Topic 820 Fair Value Measurements - Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. This change prohibits entities from taking into account contractual restrictions on the sale of equity securities when estimating fair value and introduces required disclosures for such transactions. The standard is effective for annual periods beginning after December 15, 2023, and should be applied prospectively. The Company is currently evaluating the impact, if any, of applying ASU 2022-03.

 

12.SUBSEQUENT EVENTS

 

On January 31, 2024, the Company paid a monthly distribution of $0.20 per share on its common stock to holders of record as of January 11, 2024. Additionally, on February 13, 2024, the Company declared three separate distributions of $0.20 per share on its common stock. The distributions are payable on each of April 30, 2024, May 31, 2024 and June 28, 2024 to holders of record as of April 10, 2024, May 13, 2024 and June 10, 2024, respectively.

 

On January 31, 2024, the Company paid a monthly distribution of $0.104167 per share on its Series A Preferred Stock to holders of record as of January 11, 2024. Additionally, on February 13, 2024, the Company declared three separate distributions of $0.104167 per share on its Series A Preferred Stock. The distributions are payable on each of April 30, 2024, May 31, 2024 and June 28, 2024 to holders of record as of April 10, 2024, May 13, 2024 and June 10, 2024, respectively.

 

On January 31, 2024, the Company paid a monthly distribution of $0.161459 per share on its Series B Preferred Stock to holders of record as of January 11, 2024. Additionally, on February 13, 2024, the Company declared three separate distributions of $0.161459 per share on its Series B Preferred Stock. The distributions are payable on each of April 30, 2024, May 31, 2024 and June 28, 2024 to holders of record as of April 10, 2024, May 13, 2024 and June 10, 2024, respectively.

 

For the period from January 1, 2024 to February 21, 2024, the Company sold 1,178,064 shares of its common stock, pursuant to the ATM offering, for total net proceeds to the Company of approximately $17.4 million. In connection with such sales, the Company paid a total of approximately $0.4 million in sales agent commissions.

 

For the period from January 1, 2024 to February 21, 2024, the Company sold 49,611 shares of its Series B Preferred Stock, pursuant to the ATM offering, for total net proceeds to the Company of approximately $1.2 million. In connection with such sales, the Company paid a total of approximately $24,812 in sales agent commissions.

 

As of February 20, 2024, the BNP Credit Facility was fully undrawn.

 

Management’s unaudited estimate of the range of the Company’s NAV per common share as of January 31, 2024 was $14.94 to $15.04.

 

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 consolidated financial statements and related notes through the date of release of this report.

 

49

 

Eagle Point Income Company Inc.

Consolidated Financial Highlights

 

Per Share Data  For the year ended
December 31,
2023
   For the year ended
December 31,
2022
   For the year ended
December 31,
2021
   For the year ended
December 31,
2020
   For the year ended
December 31,
2019
   For the period from
October 16, 2018
to December 31, 2018
 
                               
Net asset value, beginning of period  $12.91   $16.76   $16.89   $19.34   $18.28   $20.00 
                               
Net investment income, before fee waivers and expenses reimbursed (1) (2)   1.90    1.64    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   1.90    1.64    0.98    1.27    1.32    0.35 
                               
Net realized gain (loss) and change in unrealized appreciation (depreciation) on investments (1) (3)   1.32    (4.45)   0.38    (2.21)   0.70    (1.72)
Net change in unrealized (appreciation) depreciation on liabilities at fair value under the fair value option   (0.14)   0.53    (0.01)   -    -    - 
                               
Net income (loss) and net increase (decrease) in net assets resulting from operations   3.08    (2.28)   1.35    (0.94)   2.02    (1.37)
                               
Common stock distributions from net investment income (4)   (1.98)   (1.53)   (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)   (1.98)   (1.53)   (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   (1.98)   (1.53)   (1.35)   (1.50)   (0.84)   (0.35)