Eagle Point
Credit Company Inc. & Subsidiaries
Consolidated
Financial Statements
Unaudited
| September 30, 2015 | NYSE Symbols: ECC / ECCA
Eagle Point Credit Company Inc. & Subsidiaries
Consolidated Financial Statements (Unaudited) – September
30, 2015
Important Information
This report and the information and
views included herein do not constitute investment advice, or a recommendation or an offer to enter into any transaction with
Eagle Point Credit Company Inc. (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 or a solicitation of an offer to
purchase any securities 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 U.S. 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.
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, which may increase investors’ risk of loss. Past performance is not indicative
of, or a guarantee of, future performance. The information referenced herein represents information as of September 30, 2015.
Nothing herein shall 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. The information shown herein is unaudited and subject to adjustment. No obligation
to update or revise any information herein is being assumed.
Neither Eagle Point Credit Management LLC 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.
About Eagle Point Credit
Company Inc.
The Company is a publicly-traded,
non-diversified, closed-end management investment company. The Company’s investment objective is to generate high current
income and capital appreciation primarily through investment in equity and junior debt tranches of CLOs. The Company is externally
managed and advised by Eagle Point Credit Management LLC. The principals of Eagle Point Credit Management LLC are Thomas P. Majewski,
Daniel W. Ko and Daniel M. Spinner. The Company makes certain unaudited portfolio information available on its website on a monthly
basis in addition to making certain other unaudited financial information available on its website (www.eaglepointcreditcompany.com).
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.
EAGLE POINT CREDIT COMPANY INC. &
SUBSIDIARIES
CONSOLIDATED STATEMENT OF ASSETS AND
LIABILITIES
As of September 30, 2015
(expressed in U.S. dollars)
(Unaudited)
| ASSETS | |
| | |
| Investments, at fair value (cost $305,946,102) | |
$ | 262,895,383 | |
| Cash | |
| 221,574 | |
| Interest receivable | |
| 10,676,987 | |
| Prepaid expenses | |
| 98,696 | |
| Total Assets | |
| 273,892,640 | |
| | |
| | |
| LIABILITIES | |
| | |
| | |
| | |
| Mandatorily redeemable preferred stock (Note 7): | |
| | |
| Mandatorily redeemable preferred stock (1,818,000 shares outstanding) | |
| 45,450,000 | |
| Unamortized deferred debt issuance costs | |
| (2,042,875 | ) |
| Net mandatorily redeemable preferred stock less unamortized deferred debt issuance costs | |
| 43,407,125 | |
| | |
| | |
| Common stock distribution payable | |
| 8,290,178 | |
| Incentive fee payable | |
| 1,996,878 | |
| Management fee payable | |
| 1,167,685 | |
| Administration fees payable | |
| 148,674 | |
| Professional fees payable | |
| 92,906 | |
| Directors' fees payable | |
| 79,375 | |
| Due to affiliates | |
| 49,919 | |
| Other expenses payable | |
| 72,373 | |
| Total Liabilities | |
| 55,305,113 | |
| | |
| | |
| COMMITMENTS AND CONTINGENCIES (Note 8) | |
| | |
| | |
| | |
| NET ASSETS applicable to 13,816,963 shares of $0.001 par value common stock outstanding | |
$ | 218,587,527 | |
| | |
| | |
| NET ASSETS consist of: | |
| | |
| Paid-in capital (Notes 5 & 6) | |
$ | 270,148,104 | |
| Accumulated net realized gain (loss) on investments | |
| 830,708 | |
| Accumulated net unrealized appreciation (depreciation) on investments | |
| (43,050,719 | ) |
| Aggregate common stock distributions paid in excess of net investment income | |
| (9,450,119 | ) |
| Aggregate reinvestment of distributions | |
| 109,553 | |
| Total Net Assets | |
$ | 218,587,527 | |
| Net asset value per share of common stock | |
$ | 15.82 | |
See accompanying notes to the consolidated financial statements
EAGLE POINT CREDIT COMPANY INC. &
SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of September 30, 2015
(expressed in U.S. dollars)
(Unaudited)
| Company | |
Investment(1) | |
Effective
Yield(2) | | |
Principal
Amount | | |
Cost | | |
Fair
Value(3)(4) | | |
%
of Net
Assets | |
| CLO Debt | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
| CIFC Funding 2015-III, Ltd. | |
CLO Secured Note - Class F (due 10/19/27) | |
| 7.18 | % | |
$ | 1,150,000 | | |
$ | 1,039,805 | | |
$ | 972,613 | | |
| 0.44 | % |
| Cutwater 2015-I, Ltd. | |
CLO Secured Note - Class F (due 7/15/27) | |
| 7.38 | % | |
| 3,500,000 | | |
| 3,149,300 | | |
| 2,963,625 | | |
| 1.36 | % |
| Marathon CLO VIII Ltd. | |
CLO Secured Note - Class D (due 7/18/27) | |
| 6.34 | % | |
| 750,000 | | |
| 702,750 | | |
| 675,675 | | |
| 0.31 | % |
| Zais CLO 3, Ltd. | |
CLO Secured Note - Class E (due 7/15/27) | |
| 7.57 | % | |
| 2,600,000 | | |
| 2,297,880 | | |
| 2,153,710 | | |
| 0.99 | % |
| | |
| |
| | | |
| | | |
| 7,189,735 | | |
| 6,765,623 | | |
| 3.10 | % |
| CLO Equity | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
| Apidos CLO XIV | |
CLO Subordinated Note (due 4/15/25) | |
| 15.34 | % | |
| 11,177,500 | | |
| 8,301,808 | | |
| 7,496,183 | | |
| 3.43 | % |
| Avery Point V CLO, Ltd. | |
CLO Income Note (due 7/17/26) | |
| 14.57 | % | |
| 10,875,000 | | |
| 8,216,669 | | |
| 4,773,199 | | |
| 2.18 | % |
| Babson CLO Ltd. 2013-II | |
CLO Subordinated Note (due 1/18/25) | |
| 16.65 | % | |
| 12,939,125 | | |
| 8,910,466 | | |
| 8,465,015 | | |
| 3.87 | % |
| BlueMountain CLO 2013-2, Ltd. | |
CLO Subordinated Note (due 1/22/25) | |
| 15.45 | % | |
| 5,000,000 | | |
| 4,285,939 | | |
| 3,504,755 | | |
| 1.60 | % |
| Battalion CLO IX Ltd. | |
CLO Subordinated Note (due 7/15/28) | |
| 19.03 | % | |
| 18,250,000 | | |
| 16,279,000 | | |
| 15,835,443 | | |
| 7.24 | % |
| CIFC Funding 2013-I, Ltd. | |
CLO Subordinated Note (due 4/16/25) | |
| 14.85 | % | |
| 4,000,000 | | |
| 3,300,795 | | |
| 2,744,001 | | |
| 1.26 | % |
| CIFC Funding 2013-II, Ltd. | |
CLO Subordinated Note (due 4/21/25) | |
| 14.79 | % | |
| 12,325,000 | | |
| 7,979,490 | | |
| 8,003,350 | | |
| 3.66 | % |
| CIFC Funding 2014, Ltd. | |
CLO Subordinated Note (due 4/18/25) | |
| 18.04 | % | |
| 13,387,500 | | |
| 9,612,423 | | |
| 8,213,856 | | |
| 3.76 | % |
| CIFC Funding 2014, Ltd. | |
CLO Income Note (due 4/18/25) | |
| 18.04 | % | |
| 500,000 | | |
| 393,504 | | |
| 292,425 | | |
| 0.13 | % |
| CIFC Funding 2014-III, Ltd. | |
CLO Income Note (due 7/22/26) | |
| 16.19 | % | |
| 5,000,000 | | |
| 3,976,992 | | |
| 3,308,319 | | |
| 1.51 | % |
| CIFC Funding 2014-IV, Ltd. | |
CLO Income Note (due 10/17/26) | |
| 14.11 | % | |
| 7,000,000 | | |
| 5,533,868 | | |
| 4,026,647 | | |
| 1.84 | % |
| CIFC Funding 2015-III, Ltd. | |
CLO Subordinated Note (due 10/19/27) | |
| 16.75 | % | |
| 15,400,000 | | |
| 13,467,422 | | |
| 13,099,300 | | |
| 5.99 | % |
| Cutwater 2015-I, Ltd. | |
CLO Subordinated Note (due 7/15/27) | |
| 19.52 | % | |
| 27,300,000 | | |
| 24,081,330 | | |
| 22,839,936 | | |
| 10.45 | % |
| Flagship CLO VIII, Ltd. | |
CLO Subordinated Note (due 1/16/26) | |
| 14.82 | % | |
| 20,000,000 | | |
| 15,312,847 | | |
| 11,264,028 | | |
| 5.15 | % |
| Flagship CLO VIII, Ltd. | |
CLO Income Note (due 1/16/26) | |
| 14.82 | % | |
| 7,360,000 | | |
| 5,221,751 | | |
| 3,729,191 | | |
| 1.71 | % |
| Galaxy XVIII CLO, Ltd. | |
CLO Subordinated Note (due 10/15/26) | |
| 13.12 | % | |
| 5,000,000 | | |
| 3,813,612 | | |
| 2,455,622 | | |
| 1.12 | % |
| GoldenTree Loan Opportunities VIII, Ltd. | |
CLO Subordinated Note (due 4/19/26) | |
| 17.20 | % | |
| 16,560,000 | | |
| 13,881,723 | | |
| 11,477,031 | | |
| 5.25 | % |
| Halcyon Loan Advisors Funding 2014-3, Ltd. | |
CLO Subordinated Note (due 10/22/25) | |
| 13.43 | % | |
| 5,750,000 | | |
| 4,831,143 | | |
| 2,752,960 | | |
| 1.26 | % |
| Marathon CLO VI Ltd. | |
CLO Subordinated Note (due 5/13/25) | |
| 14.24 | % | |
| 2,975,000 | | |
| 2,309,668 | | |
| 2,337,916 | | |
| 1.07 | % |
| Marathon CLO VII Ltd. | |
CLO Subordinated Note (due 10/28/25) | |
| 15.67 | % | |
| 10,526,000 | | |
| 8,922,122 | | |
| 7,574,360 | | |
| 3.47 | % |
| Marathon CLO VIII Ltd. | |
CLO Subordinated Note (due 7/18/27) | |
| 19.42 | % | |
| 14,500,000 | | |
| 13,775,000 | | |
| 12,731,825 | | |
| 5.82 | % |
| Octagon Investment Partners XIV, Ltd. | |
CLO Subordinated Note (due 1/15/24) | |
| 18.17 | % | |
| 12,325,000 | | |
| 9,212,118 | | |
| 6,381,379 | | |
| 2.92 | % |
| Octagon Investment Partners XIV, Ltd. | |
CLO Income Note (due 1/15/24) | |
| 18.17 | % | |
| 4,250,000 | | |
| 2,887,564 | | |
| 2,130,986 | | |
| 0.97 | % |
| Octagon Investment Partners XIX, Ltd. | |
CLO Subordinated Note (due 4/15/26) | |
| 15.76 | % | |
| 3,000,000 | | |
| 2,305,298 | | |
| 1,666,685 | | |
| 0.76 | % |
| Octagon Investment Partners XVII, Ltd. | |
CLO Subordinated Note (due 10/25/25) | |
| 15.08 | % | |
| 12,000,000 | | |
| 9,413,107 | | |
| 6,710,053 | | |
| 3.07 | % |
| Octagon Investment Partners XX, Ltd. | |
CLO Subordinated Note (due 8/12/26) | |
| 13.45 | % | |
| 2,500,000 | | |
| 2,166,407 | | |
| 1,639,101 | | |
| 0.75 | % |
| OHA Credit Partners IX, Ltd. | |
CLO Subordinated Note (due 10/20/25) | |
| 12.13 | % | |
| 6,750,000 | | |
| 5,729,899 | | |
| 4,021,574 | | |
| 1.84 | % |
| Regatta III Funding Ltd. | |
CLO Subordinated Note (due 4/15/26) | |
| 12.29 | % | |
| 2,500,000 | | |
| 1,841,803 | | |
| 1,109,882 | | |
| 0.51 | % |
| Sheridan Square CLO, Ltd. | |
CLO Subordinated Note (due 4/15/25) | |
| 27.74 | % | |
| 2,125,000 | | |
| 1,895,238 | | |
| 1,744,057 | | |
| 0.80 | % |
| THL Credit Wind River 2013-2 CLO Ltd. | |
Class M Note (due 1/18/26) | |
| 7.68 | % | |
| 1,275,000 | | |
| 198,804 | | |
| 429,018 | | |
| 0.20 | % |
| THL Credit Wind River 2013-2 CLO Ltd. | |
CLO Subordinated Note (due 1/18/26) | |
| 14.15 | % | |
| 11,462,250 | | |
| 8,745,205 | | |
| 6,857,870 | | |
| 3.14 | % |
| THL Credit Wind River 2014-3 CLO Ltd. | |
CLO Subordinated Note (due 1/22/27) | |
| 17.65 | % | |
| 13,000,000 | | |
| 11,117,253 | | |
| 9,776,898 | | |
| 4.47 | % |
| Voya CLO 2014-4, Ltd. | |
CLO Subordinated Note (due 10/14/26) | |
| 15.28 | % | |
| 10,000,000 | | |
| 8,646,099 | | |
| 6,818,325 | | |
| 3.12 | % |
| Zais CLO 3, Ltd. | |
CLO Subordinated Note (due 7/15/27) | |
| 19.04 | % | |
| 11,750,000 | | |
| 10,340,000 | | |
| 7,962,025 | | |
| 3.64 | % |
| | |
| |
| | | |
| | | |
| 256,906,367 | | |
| 214,173,215 | | |
| 97.96 | % |
| Loan
Accumulation Facilities(5) | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
| Octagon Investment Partners 26, Ltd. | |
Loan Accumulation Facility (Preference shares) | |
| | | |
| 9,450,000 | | |
| 9,450,000 | | |
| 9,450,188 | | |
| 4.32 | % |
| OFSI VIII, Ltd. | |
Loan Accumulation Facility (Class A preference shares) | |
| | | |
| 17,800,000 | | |
| 17,800,000 | | |
| 17,892,113 | | |
| 8.19 | % |
| Mountain View CLO XI Ltd. | |
Loan Accumulation Facility (Class A preference shares) | |
| | | |
| 3,800,000 | | |
| 3,800,000 | | |
| 3,800,201 | | |
| 1.74 | % |
| THL Credit Wind River 2015-3 CLO Ltd. | |
Loan Accumulation Facility (Class A preference shares) | |
| | | |
| 3,800,000 | | |
| 3,800,000 | | |
| 3,800,057 | | |
| 1.74 | % |
| Waterson Park CLO, Ltd. | |
Loan Accumulation Facility (Preference shares) | |
| | | |
| 7,000,000 | | |
| 7,000,000 | | |
| 7,013,986 | | |
| 3.21 | % |
| | |
| |
| | | |
| | | |
| 41,850,000 | | |
| 41,956,545 | | |
| 19.20 | % |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
| Total investments at fair value
as of September 30, 2015 |
| | | |
| | | |
$ | 305,946,102 | | |
$ | 262,895,383 | | |
| 120.26 | % |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
| Net assets above (below) fair
value of investments | |
| | | |
| | | |
| | | |
| (44,307,856 | ) | |
| | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
| Net assets as of September
30, 2015 | |
| | | |
| | | |
| | | |
$ | 218,587,527 | | |
| | |
| (1) |
All investments categorized as structured finance securities. |
| (2) |
CLO subordinated notes, income notes, and M notes are considered
CLO equity positions. CLO equity positions are entitled to recurring distributions which are generally equal to the remaining
cash flow of payments made by underlying securities less contractual payments to debt holders and fund expenses. The
effective yield is estimated based upon a current projection of the amount and
timing of these recurring distributions in addition to the estimated
amount of terminal principal payment. Such projections are periodically reviewed and adjusted as needed. The estimated yield
and investment cost may ultimately not be realized. |
| (3) |
Fair value is determined in good faith in accordance with the Company's valuation policy and is reviewed and accepted by the Company's Board of Directors. |
| (4) |
Fair value includes the Company's interest in fee rebates on CLO subordinated notes. |
| (5) |
Loan accumulation facilities are financing structures intended to aggregate loans that may be used to form the basis of a CLO vehicle. |
See accompanying notes to the consolidated financial statements
EAGLE POINT CREDIT COMPANY
INC. & SUBSIDIARIES
CONSOLIDATED STATEMENT OF
OPERATIONS
For the nine months ended September
30, 2015
(expressed in U.S. dollars)
(Unaudited)
| INVESTMENT INCOME | |
| | |
| Interest income | |
$ | 29,746,244 | |
| Other income | |
| 501,015 | |
| Total Investment Income | |
| 30,247,259 | |
| | |
| | |
| EXPENSES | |
| | |
| Incentive fee | |
| 4,687,811 | |
| Management fee | |
| 3,540,716 | |
| Interest expense on mandatorily redeemable preferred stock | |
| 1,411,573 | |
| Administration fees | |
| 524,489 | |
| Professional fees | |
| 509,784 | |
| Tax expense | |
| 331,902 | |
| Directors' fees | |
| 265,375 | |
| Other expenses | |
| 224,365 | |
| Total Expenses | |
| 11,496,015 | |
| | |
| | |
| NET INVESTMENT INCOME | |
| 18,751,244 | |
| | |
| | |
| REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | |
| | |
| Net realized gain (loss) on investments | |
| 299,695 | |
| Net change in unrealized appreciation (depreciation) on investments | |
| (39,267,717 | ) |
| NET GAIN (LOSS) ON INVESTMENTS | |
| (38,968,022 | ) |
| | |
| | |
| NET INCOME (LOSS) & NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | |
$ | (20,216,778 | ) |
See accompanying notes to the consolidated financial statements
EAGLE POINT CREDIT COMPANY
INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
(expressed in U.S. dollars)
(Unaudited)
| | |
For the
three months ended
September 30, 2015 | | |
For the
six months ended
June 30, 2015 | | |
For the
nine months ended
September 30, 2015 | |
| INVESTMENT INCOME | |
| | | |
| | | |
| | |
| Interest income | |
$ | 11,477,200 | | |
$ | 18,269,044 | | |
$ | 29,746,244 | |
| Other income | |
| 210,642 | | |
| 290,373 | | |
| 501,015 | |
| Total Investment Income | |
| 11,687,842 | | |
| 18,559,417 | | |
| 30,247,259 | |
| | |
| | | |
| | | |
| | |
| EXPENSES | |
| | | |
| | | |
| | |
| Incentive fee | |
| 1,741,365 | | |
| 2,946,446 | | |
| 4,687,811 | |
| Management fee | |
| 1,167,686 | | |
| 2,373,030 | | |
| 3,540,716 | |
| Interest expense on mandatorily redeemable preferred stock | |
| 955,541 | | |
| 456,032 | | |
| 1,411,573 | |
| Administration fees | |
| 220,290 | | |
| 304,199 | | |
| 524,489 | |
| Professional fees | |
| 169,458 | | |
| 340,326 | | |
| 509,784 | |
| Tax expense | |
| 241,652 | | |
| 90,250 | | |
| 331,902 | |
| Directors' fees | |
| 96,375 | | |
| 169,000 | | |
| 265,375 | |
| Other expenses | |
| 60,121 | | |
| 164,244 | | |
| 224,365 | |
| Total Expenses | |
| 4,652,488 | | |
| 6,843,527 | | |
| 11,496,015 | |
| | |
| | | |
| | | |
| | |
| NET INVESTMENT INCOME | |
| 7,035,354 | | |
| 11,715,890 | | |
| 18,751,244 | |
| | |
| | | |
| | | |
| | |
| REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | |
| | | |
| | | |
| | |
| Net realized gain (loss) on investments | |
| 41,551 | | |
| 258,144 | | |
| 299,695 | |
| Net change in unrealized appreciation (depreciation) on investments | |
| (37,475,563 | ) | |
| (1,792,154 | ) | |
| (39,267,717 | ) |
| NET GAIN (LOSS) ON INVESTMENTS | |
| (37,434,012 | ) | |
| (1,534,010 | ) | |
| (38,968,022 | ) |
| |
| | | |
| | | |
| | |
| NET INCOME (LOSS) & NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS | |
$ | (30,398,658 | ) | |
$ | 10,181,880 | | |
$ | (20,216,778 | ) |
| Note: The above Consolidated Statement of Operations represents the quarter ended September 30, 2015, the semi-annual period ended June 30, 2015, and the nine months ended September 30, 2015, and has been provided as supplemental information to the consolidated financial statements. |
See accompanying notes to the consolidated financial statements
EAGLE POINT CREDIT COMPANY
INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CHANGES IN NET ASSETS
(expressed in U.S. dollars, except
share amounts)
(Unaudited)
| | |
For the
nine months ended
September 30, 2015 | | |
For the period from
October 6, 2014
to December 31, 2014 | |
| Net income (loss) and net increase (decrease) in net assets resulting from operations: | |
| | | |
| | |
| Net investment income | |
$ | 18,751,244 | | |
$ | 4,260,591 | |
| Net realized gain (loss) on investments | |
| 299,695 | | |
| 531,013 | |
| Net change in unrealized appreciation (depreciation) on investments | |
| (39,267,717 | ) | |
| (9,078,984 | ) |
| Total net income (loss) and net increase (decrease) in net assets resulting from operations | |
| (20,216,778 | ) | |
| (4,287,380 | ) |
| | |
| | | |
| | |
| Common stock distributions paid to stockholders: | |
| | | |
| | |
| Common stock distributions from net investment income | |
| (18,751,244 | ) | |
| (4,260,591 | ) |
| Common stock distributions from net realized gains on investments | |
| (299,695 | ) | |
| - | |
| Common stock distributions from return of capital | |
| (5,814,769 | ) | |
| (3,335,655 | ) |
| Total common stock distributions paid to stockholders | |
| (24,865,708 | ) | |
| (7,596,246 | ) |
| | |
| | | |
| | |
| Capital share transactions: | |
| | | |
| | |
| Issuance of shares of common stock upon conversion | |
| - | | |
| 173,338,066 | |
| Issuance of shares of common stock upon the Company's initial public offering | |
| - | | |
| 102,106,020 | |
| Proceeds from issuance of shares of common stock in accordance with the Company's dividend reinvestment plan | |
| 109,553 | | |
| - | |
| Total capital share transactions | |
| 109,553 | | |
| 275,444,086 | |
| | |
| | | |
| | |
| Total increase (decrease) in net assets | |
| (44,972,933 | ) | |
| 263,560,460 | |
| Net assets at beginning of period | |
| 263,560,460 | | |
| - | |
| Net assets at end of period | |
$ | 218,587,527 | | |
$ | 263,560,460 | |
| | |
| | | |
| | |
| Capital share activity: | |
| | | |
| | |
| Shares of common stock issued upon conversion | |
| - | | |
| 8,656,057 | |
| Shares of common stock sold upon the Company's initial public offering | |
| - | | |
| 5,155,301 | |
| Shares of common stock issued in accordance with the Company's dividend reinvestment plan | |
| 5,605 | | |
| - | |
| Total increase (decrease) in capital share activity | |
| 5,605 | | |
| 13,811,358 | |
See accompanying notes to the consolidated financial statements
EAGLE POINT CREDIT COMPANY
INC. & SUBSIDIARIES
CONSOLIDATED STATEMENT OF
MEMBER'S EQUITY
For the period from June 6, 2014
(Commencement of Operations) to October 5, 2014
(expressed in U.S. dollars)
(Unaudited)
| Member's equity at beginning of period | |
$ | - | |
| Contributed securities at fair value | |
| 148,926,566 | |
| Contributed cash | |
| 15,256,539 | |
| Net investment income | |
| 7,755,029 | |
| Net realized gain (loss) on investments | |
| 1,204,960 | |
| Net change in unrealized appreciation (depreciation) on investments | |
| 194,972 | |
| Member's equity at end of period | |
$ | 173,338,066 | |
| | |
| | |
| Units issued and outstanding as of October 5, 2014 (prior to conversion)(1) | |
| 2,500,000 | |
| | |
| | |
| Net asset value per unit | |
$ | 69.34 | |
(1) Units were converted into 8,656,057 shares of
common stock, effective October 6, 2014.
See Note 5 "Sole Member's Equity" for further discussion
relating to Member's Equity for the period from June 6, 2014 (Commencement of Operations) to October 5, 2014.
Note: The above Consolidated Statement of Member's Equity
represents the period when the Company was initially organized as a Delaware limited liability company and a wholly-owned subsidiary
of Eagle Point Credit Partners Sub Ltd., and has been provided as supplemental information to the consolidated financial statements.
See accompanying notes to the consolidated financial statements
EAGLE POINT CREDIT COMPANY
INC. & SUBSIDIARIES
CONSOLIDATED STATEMENT OF
CASH FLOWS
For the nine months ended September
30, 2015
(expressed in U.S. dollars)
(Unaudited)
| CASH FLOWS FROM OPERATING ACTIVITIES | |
| | |
| Net income (loss) and net increase (decrease) in net assets resulting from operations | |
$ | (20,216,778 | ) |
| | |
| | |
| Adjustments to reconcile net income (loss) and net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities: | |
| | |
| Purchases of investments | |
| (189,699,299 | ) |
| Proceeds from sales of investments (1) | |
| 104,825,865 | |
| Net realized (gain) loss on investments | |
| (299,695 | ) |
| Net change in unrealized (appreciation) depreciation on investments | |
| 39,267,717 | |
| Changes in assets and liabilities: | |
| | |
| Interest receivable | |
| (6,133,295 | ) |
| Receivable for securities sold | |
| 14,496,825 | |
| Prepaid expenses | |
| (24,147 | ) |
| Payable for securities purchased | |
| (27,488,200 | ) |
| Incentive fee payable | |
| 1,996,878 | |
| Management fee payable | |
| 91,971 | |
| Administration fees payable | |
| 128,598 | |
| Professional fees payable | |
| 17,906 | |
| Directors' fees payable | |
| 55,750 | |
| Due to affiliates | |
| 49,919 | |
| Other expenses payable | |
| 72,373 | |
| | |
| | |
| Net cash provided by (used in) operating activities | |
| (82,857,612 | ) |
| | |
| | |
| CASH FLOWS FROM FINANCING ACTIVITIES | |
| | |
| Common stock distributions paid to stockholders | |
| (24,171,776 | ) |
| Proceeds from shares of common stock issued in accordance with the Company's dividend reinvestment plan | |
| 109,553 | |
| Mandatorily redeemable preferred stock | |
| 45,450,000 | |
| Unamortized deferred debt issuance costs | |
| (2,042,875 | ) |
| | |
| | |
| Net cash provided by (used in) financing activities | |
| 19,344,902 | |
| | |
| | |
| NET INCREASE (DECREASE) IN CASH | |
| (63,512,710 | ) |
| | |
| | |
| CASH, BEGINNING OF PERIOD | |
| 63,734,284 | |
| | |
| | |
| CASH, END OF PERIOD | |
$ | 221,574 | |
| | |
| | |
| Supplemental disclosure of non-cash financing activities: | |
| | |
| Change in distributions declared on shares of common stock, not yet paid | |
$ | 693,932 | |
| | |
| | |
| Supplemental disclosures: | |
| | |
| Cash paid for interest expense on mandatorily redeemable preferred stock | |
$ | 1,301,325 | |
| Amortization included in interest expense on mandatorily redeemable preferred stock | |
| 110,248 | |
| Total interest expense on mandatorily redeemable preferred stock | |
$ | 1,411,573 | |
| (1) Proceeds from sales of investments includes $21,414,150 of cash flows reflected as return of capital on portfolio investments. |
|
|
See accompanying notes to the consolidated financial statements
EAGLE POINT CREDIT COMPANY INC. &
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2015
(Unaudited)
Eagle Point Credit Company Inc.
(the “Company”) is an externally managed, non-diversified closed-end management investment company registered under
the Investment Company Act of 1940, as amended (the “1940 Act”). The Company’s common stock is listed on the
New York Stock Exchange (the “NYSE”) under the symbol “ECC.”
As of September 30, 2015, the
Company had two wholly-owned subsidiaries: Eagle Point Credit Company Sub LLC, a Delaware limited liability company, and Eagle
Point Credit Company Sub (Cayman) Ltd., a Cayman Islands exempted company.
The Company was initially formed
on March 24, 2014 as Eagle Point Credit Company LLC, a Delaware limited liability company and a wholly-owned subsidiary of Eagle
Point Credit Partners Sub Ltd., a Cayman Island exempted company (the “Sole Member”), which, in turn, is a subsidiary
of Eagle Point Credit Partners LP (the “Private Fund”). The Private Fund is a master fund in a master feeder structure
and has three feeder funds which invest substantially all of their assets in the Private Fund.
The Company commenced operations
on June 6, 2014, the date the Sole Member contributed, at fair value, a portfolio of cash and securities to the Company.
On October 6, 2014, the Company
converted from a Delaware limited liability company into a Delaware corporation (the “Conversion”). At the time of
the Conversion, the Sole Member became a stockholder of Eagle Point Credit Company Inc. In connection with the Conversion, the
Sole Member converted 2,500,000 units of the Delaware limited liability company into shares of common stock in the Delaware corporation
at $20 per share, resulting in 8,656,057 shares and an effective conversion rate of 3.4668 shares per unit, immediately therewith,
the Sole Member distributed such shares to the Private Fund, which in turn, distributed such shares as a redemption in-kind to
certain of its ultimate beneficial owners. On October 7, 2014, the Company priced its initial public offering (the “IPO”)
and, on October 8, 2014, the Company’s shares began trading on the NYSE.
See Note 5 “Sole Member’s
Equity” and Note 6 “Common Stock” for further discussion relating to the Conversion and IPO.
The Company has elected to be
treated 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 Credit 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, a wholly-owned subsidiary of the Adviser, is the administrator of the Company (the “Administrator”).
The Company’s primary investment
objective is to generate high current income, with a secondary objective to generate capital appreciation. The Company seeks to
achieve its investment objectives by investing primarily in equity and junior debt tranches of collateralized loan obligations
(“CLOs”) that are collateralized by a portfolio consisting primarily of below investment grade U.S. senior secured
loans. The CLO securities in which the Company will primarily seek to invest are unrated or rated below investment grade and are
considered speculative with respect to timely payment of interest and repayment of principal. The Company may also invest in other
securities and instruments related to these investments or that the Adviser believes are consistent with the Company’s investment
objectives, including senior debt tranches of CLOs and loan accumulation facilities. From time to time, in connection with the
acquisition of newly issued CLO equity, the Company may receive fee rebates from the CLO issuer. The Company’s interests
in fee rebates are held in the name of Eagle Point Credit Company Sub LLC.
EAGLE POINT CREDIT COMPANY INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2015
(Unaudited)
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Basis of Accounting
The consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts have been eliminated upon consolidation.
The Company is considered an investment company under accounting principles generally accepted in the United States of America
(“U.S. GAAP”). The Company follows the accounting and reporting guidance applicable to investment companies in the
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946 Financial
Services – Investment Companies. Items included in the consolidated financial statements are measured and presented in
United States dollars.
Fair Value of Financial Instruments
Assets and liabilities, which
qualify as financial instruments under FASB ASC Topic 825 Financial Instruments, are carried at fair value or contractual
amounts approximating fair value.
Use of Estimates
The preparation of the consolidated
financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions which affect the reported
amounts included in the consolidated financial statements and accompanying notes as of the reporting date. Actual results may differ
from those estimated.
Valuation of Investments
The most significant estimate
inherent in the preparation of the consolidated financial statements is the valuation of investments. In the absence of readily
determinable fair values, fair value of the Company’s investments is determined in accordance with the Company’s valuation
policy. Due to the uncertainty of valuation, this estimate may differ significantly from the value that would have been used had
a ready market for the investments existed, and the differences could be material.
There is no single method for
determining fair value in good faith. As a result, determining fair value requires judgment be applied to the specific facts and
circumstances of each portfolio investment while employing a consistently applied valuation process for the types of investments
held by the Company.
The Company accounts for its
investments in accordance with U.S. GAAP, which defines fair value, establishes a framework for measuring fair value and requires
enhanced disclosures about fair value measurements. Investments are reflected on 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). The Company’s fair valuation process
is reviewed and approved by the Board.
The fair value hierarchy prioritizes
and ranks the level of market price observability used in measuring investments at fair value. Market price observability is impacted
by a number of factors, including the type of investment, the characteristics specific to the investment and the state of the marketplace
(including the existence and transparency of transactions between market participants). Investments with readily available actively
quoted prices, or for which fair value can be measured from actively quoted prices in an orderly market, will generally have a
higher degree of market price observability and a lesser degree of judgment used in measuring fair value.
EAGLE POINT CREDIT COMPANY INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2015
(Unaudited)
Investments measured and reported
at fair value are classified and disclosed in one of the following categories based on inputs:
| · | Level I – Observable, quoted prices for identical investments in active markets as
of the reporting date. |
| · | Level II – Quoted prices for similar investments in active markets or quoted prices
for identical investments in markets that are not active as of the reporting date. |
| · | Level III – Pricing inputs are unobservable for the investment and little, if any,
active market exists. Fair value inputs require significant judgment or estimation from the Adviser. |
In certain cases, the inputs
used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the determination of which
category within the fair value hierarchy is appropriate for any given investment is based on the lowest level of input significant
to that fair value measurement. The assessment of the significance of a particular input to the fair value measurement in its entirety
requires judgment and consideration of factors specific to the investment.
Investments for which observable,
quoted prices in active markets do not exist are reported at fair value based on Level III inputs. The amount determined to be
fair value may incorporate the Adviser’s own assumptions (including assumptions the Adviser believes market participants
would use in valuing investments and assumptions relating to appropriate risk adjustments for nonperformance and lack of marketability),
as provided for in the Company’s valuation policy and accepted by the Board.
An estimate of fair value is
made for each investment at least monthly taking into account information available as of the reporting date. For financial reporting
purposes, valuations are accepted by the Board on a quarterly basis.
See Note 3 “Investments”
for further discussion relating to the Company’s investments.
In valuing the Company’s
investments in CLO debt, CLO equity and loan accumulation facilities, the Adviser considers a variety of relevant factors as set
forth in the Company’s valuation policy, including price indications from multiple dealers, recent trading prices for specific
investments, recent purchases and sales known to the Adviser in similar securities and output from a third-party financial model.
The third-party financial model
contains detailed information on the characteristics of CLOs, including recent information about assets and liabilities, and is
used to project future cash flows. Key inputs to the model, including 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.
Investment Income Recognition
Interest income from debt positions
in CLO investment vehicles is recorded using the accrual basis of accounting to the extent such amounts are expected to be collected.
Interest income from investments
in CLO equity is recorded based upon an effective yield to maturity utilizing assumed cash flows. The Company monitors the expected
cash flows from its CLO equity investments and effective yield is determined and adjusted as needed. Cash flows received in excess
of the effective yield are reflected as return of capital.
Interest income from loan accumulation
facilities is characterized and recorded based on information provided by the trustees of each loan accumulation facility.
EAGLE POINT CREDIT COMPANY INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2015
(Unaudited)
Other Income
Other income may include the
Company’s share of income under the terms of Class M notes and fee rebate agreements and is recorded based upon an effective
yield to maturity utilizing assumed cash flows. The Company monitors the expected cash flows from its Class M notes and fee rebate
agreements and effective yield is determined and adjusted as needed. Cash flows received in excess of the effective yield are reflected
as return of capital.
Interest Expense
Interest expense includes the
Company’s paid distributions, distributions declared but not yet paid, and amortization of deferred debt issuance costs associated
with its 7.75% Series A Term Preferred Stock due 2022 (the “Series A Term Preferred Stock”).
See Note 7 “Mandatorily
Redeemable Preferred Stock” for further discussion relating to the Series A Term Preferred Stock issuance.
Deferred Debt Issuance Costs
Deferred debt issuance costs
consist of fees and expenses incurred in connection with the issuance of the Series A Term Preferred Stock. Deferred debt issuance
costs were capitalized at the time of issuance and will be amortized on a straight-line basis over the term of the Series A Term
Preferred Stock. Amortization of deferred debt issuance costs are reflected in the Interest expense on mandatorily redeemable preferred
stock balance in the Consolidated Statement of Operations.
See Note 10 “Recent Accounting
Pronouncements” for further discussion on the Company’s early adoption of ASU 2015-03 “Simplifying the Presentation
of Debt Issuance Costs.”
Securities Transactions
The Company records the purchases
and sales of securities on trade date. Realized gains and losses on investments sold are recorded on the basis of the specific
identification method.
Cash and Cash Equivalents
The Company has defined cash
and cash equivalents as cash and short-term, highly liquid investments with original maturities of three months or less from the
date of purchase. The Company maintains its cash in 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. No cash equivalent balances were held as of September 30, 2015.
Expense Recognition
Expenses are recorded on the
accrual basis of accounting.
Organization Costs
The Adviser has paid all of the
Company’s organization costs.
Prepaid Expenses
Prepaid expenses consist primarily
of insurance premiums and debt issuance related expenses.
Federal and Other Taxes
The Company intends to operate
so as to qualify to be taxed as a RIC under subchapter M of the Code and, as such, to not be subject to federal income tax on the
portion of its taxable income and gains distributed to stockholders. To qualify for RIC tax treatment, among other requirements,
the Company is required to distribute at least 90% of its investment company taxable income, as defined by the Code.
Because U.S. federal income tax
regulations differ from U.S. GAAP, distributions in accordance with tax regulations may differ from net investment income and realized
gains recognized for financial reporting
EAGLE POINT CREDIT COMPANY INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2015
(Unaudited)
purposes. Differences may be permanent or temporary. Permanent differences are reclassified
among capital accounts in the consolidated financial statements to reflect their tax character. Temporary differences arise when
certain items of income, expense, gain or loss are recognized at some time in the future. Differences in classification may also
result from the treatment of short-term gains as ordinary income for federal income tax purposes.
As of September 30, 2015, the
federal income tax cost and net unrealized depreciation on securities held by the Company were as follows:
| Cost for federal income tax purposes | |
$ | 308,121,796 | |
| | |
| | |
| Gross unrealized appreciation | |
$ | 866,654 | |
| Gross unrealized depreciation | |
$ | (46,093,067 | ) |
| Net unrealized depreciation | |
$ | (45,226,413 | ) |
Temporary differences arise when
certain items of income, expense, gain or loss are recognized at some time in the future. The tax basis components of distributable
earnings differ from the amounts reflected in the Consolidated Statement of Assets and Liabilities due to temporary book/tax differences
primarily arising from partnerships and passive foreign investment company investments. These amounts will be finalized before
filing the Company’s federal income tax return.
Distributions
Distributions paid to common
stockholders from net investment income and capital gain distributions are determined in accordance with U.S. federal income tax
regulations, which differ from U.S. GAAP. Distributions to common stockholders from net investment income, if any, are expected
to be declared and paid quarterly. Distributions paid to common stockholders are recorded as a liability on declaration date and
are automatically reinvested in full shares of the Company in accordance with the Company’s dividend reinvestment plan (the
“DRIP”). The Company’s common stockholders who opt-out of participation in the DRIP (including those common stockholders
whose shares are held through a broker who has opted out of participation in the DRIP) will receive all distributions in cash.
The characterization of distributions
paid to stockholders reflect estimates made by the Company for U.S. GAAP purposes. Such estimates are subject to re-characterization
for federal income tax purposes at year-end.
Fair
Value Measurement
The following tables summarize
the valuation of the Company’s investments measured and reported at fair value under the fair value hierarchy levels described
in Note 2 “Summary of Significant Accounting Policies” as of September 30, 2015:
| Fair Value Measurement | |
| | |
| | |
| |
| | |
Level I | | |
Level II | | |
Level III | | |
Total | |
| | |
| | |
| | |
| | |
| |
| CLO Debt | |
$ | - | | |
$ | - | | |
$ | 6,765,623 | | |
$ | 6,765,623 | |
| | |
| | | |
| | | |
| | | |
| | |
| CLO Equity | |
| - | | |
| - | | |
| 214,173,215 | | |
| 214,173,215 | |
| | |
| | | |
| | | |
| | | |
| | |
| Loan Accumulation Facilities | |
| - | | |
| - | | |
| 41,956,545 | | |
| 41,956,545 | |
| Total Investments at Fair Value | |
$ | - | | |
$ | - | | |
$ | 262,895,383 | | |
$ | 262,895,383 | |
There were no transfers of investments
between these levels during the nine months ended September 30, 2015.
EAGLE POINT CREDIT COMPANY INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2015
(Unaudited)
The changes in investments classified
as Level III are as follows for the nine months ended September 30, 2015:
| Change in Investments Classified as Level III | |
| | |
| | |
| | |
| |
| | |
CLO Debt | | |
CLO Equity | | |
Loan
Accumulation
Facilities | | |
Total | |
| | |
| | |
| | |
| | |
| |
| Beginning Balance at January 1, 2015 | |
$ | 2,963,185 | | |
$ | 184,026,786 | | |
$ | 30,000,000 | | |
$ | 216,989,971 | |
| | |
| | | |
| | | |
| | | |
| | |
| Purchases of investments | |
| 14,440,635 | | |
| 99,658,664 | | |
| 75,600,000 | | |
| 189,699,299 | |
| | |
| | | |
| | | |
| | | |
| | |
| Proceeds from sales of investments | |
| (10,300,875 | ) | |
| (30,657,563 | ) | |
| (63,867,427 | ) | |
| (104,825,865 | ) |
| |
| | | |
| | | |
| | | |
| | |
| Net realized gains (losses) and net change in unrealized appreciation
(depreciation) | |
| (337,322 | ) | |
| (38,854,672 | ) | |
| 223,972 | | |
| (38,968,022 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Balance as of September 30, 2015 | |
$ | 6,765,623 | | |
$ | 214,173,215 | | |
$ | 41,956,545 | | |
$ | 262,895,383 | |
| | |
| | | |
| | | |
| | | |
| | |
| Change in unrealized appreciation (depreciation) on investments still held as of September
30, 2015 | |
$ | (358,466 | ) | |
$ | (40,192,188 | ) | |
$ | 106,545 | | |
$ | (40,444,109 | ) |
The net realized gains (losses)
recorded for Level III investments 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.
The change in unrealized depreciation
on investments still held as of September 30, 2015 was $(40,444,109).
Valuation of CLO Subordinated
and Income Notes
The Adviser gathers price indications
from dealers, if available, as part of its valuation process to estimate fair value of each CLO subordinated and income note investment.
Dealer price indications are not firm bids and may not be representative of the actual value where trades can be consummated.
In addition, the Adviser utilizes
a third party financial model to estimate the fair value of CLO subordinated and income note 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. The following
table summarizes the quantitative inputs and assumptions used for investments categorized in Level III of the fair value hierarchy
as of September 30, 2015. In addition to the techniques and inputs noted in the table below, according to the Company’s valuation
policy, the Adviser may use other valuation techniques and methodologies when determining the Company’s fair value measurements
as provided for in the valuation policy and approved by the Board. The table below is not intended to be all-inclusive, but rather
provides information on the significant Level III inputs as they relate to the Company’s fair value measurements.
EAGLE POINT CREDIT COMPANY INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2015
(Unaudited)
| | | |
Quantitative
Information about Level III Fair Value Measurements | |
| Assets | | |
Fair
Value as of
September
30, 2015 | | |
Valuation
Techniques/Methodologies
| | |
Unobservable
Input | | |
Range
/ Weighted Ave rage | |
| | CLO
Equity | | |
$ | 214,173,215 | | |
| Discounted Cash Flows | | |
| Constant
Default Rate | | |
| 0.00%
- 2.00% | |
| | | | |
| | | |
| | | |
| | | |
| | |
| | | | |
| | | |
| | | |
| Constant
Prepayment Rate | | |
| 25.00% | |
| | | | |
| | | |
| | | |
| | | |
| | |
| | | | |
| | | |
| | | |
| Reinvestment
Spread | | |
| 3.40%
- 3.95% / 3.78% | |
| | | | |
| | | |
| | | |
| | | |
| | |
| | | | |
| | | |
| | | |
| Reinvestment
Price | | |
| 99.50% | |
| | | | |
| | | |
| | | |
| | | |
| | |
| | | | |
| | | |
| | | |
| Reinvestment
Floor (1) | | |
| 1.00% | |
| | | | |
| | | |
| | | |
| | | |
| | |
| | | | |
| | | |
| | | |
| Recovery
Rate | | |
| 70.00% | |
| | | | |
| | | |
| | | |
| | | |
| | |
| | | | |
| | | |
| | | |
| Discount
Rate to Maturity | | |
| 14.10%
- 42.70% / 21.24% | |
(1) Assumed 1.0% reinvestment floor for 2 years after purchase of asset and 0.0% thereafter
Increases (decreases) in the
constant default rate, reinvestment price and discount rate in isolation would result in a lower (higher) fair value measurement.
Increases (decreases) in the reinvestment spread, reinvestment floor and recovery rate in isolation would result in a higher (lower)
fair value measurement. Changes in the constant prepayment rate may result in a higher (lower) fair value, depending on the circumstances.
Generally, a change in the assumption used for the constant default rate may be accompanied by a directionally opposite change
in the assumption used for the constant prepayment rate and recovery rate.
Valuation of CLO Secured
Notes
The Company’s CLO debt
has been valued using unadjusted indicative broker dealer quotes. As a result, there were no unobservable inputs that have been
internally developed by the Company in determining the fair values of these investments as of September 30, 2015.
Valuation of Loan Accumulation
Facilities
Loan accumulation facilities
are typically short- to medium-term in nature and are entered into in contemplation of a specific CLO investment. Unless the loan
accumulation facility documents contemplate transferring the underlying loans at a price other than original cost plus accrued
interest or the Adviser determines the originally contemplated CLO is unlikely to be consummated, the fair value of the loan accumulation
facility is based on the cost of the underlying loans plus accrued interest and realized gains (losses) reported by the trustee.
In all other situations, the fair value of the CLO loan accumulation facility is based on the market value of the underlying loans
plus accrued interest.
Investment
Risk Factors and Concentration of Investments
Market Risk. Certain
events particular to each market in which the Company’s investments conduct operations, as well as general economic and political
conditions, may have a significant negative impact on the operations and profitability of the Company’s investments and/or
on the fair value of the Company’s investments. Such events are beyond the Company’s control, and the likelihood they
may occur and the potential effect on the Company cannot be predicted.
Concentration Risk.
The Company is classified as “non-diversified” under the 1940 Act. As a result, the Company can invest a greater portion
of its assets in obligations of a single issuer than a “diversified” fund. The Company may therefore be more susceptible
than a diversified fund to being adversely affected by any single corporate, economic, political or regulatory occurrence. In particular,
because the Company’s portfolio of investments may lack diversification among CLO securities and related investments, the
Company is susceptible to a risk of significant loss if one or more of these CLO securities and related investments experience
a high level of defaults on the collateral they hold.
Liquidity Risk.
The securities issued by CLOs generally offer less liquidity than below investment grade or high-yield corporate debt, and are
subject to certain transfer restrictions imposed on certain financial and other
EAGLE POINT CREDIT COMPANY INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2015
(Unaudited)
eligibility requirements on
prospective transferees. Other investments the Company may purchase through privately negotiated transactions may also be illiquid
or subject to legal restrictions on their transfer. As a result of this illiquidity, the Company’s ability to sell certain
investments quickly, or at all, in response to changes in economic and other conditions and to receive a fair price when selling
such investments may be limited, which could prevent the Company from making sales to mitigate losses on such investments. In
addition, CLOs are subject to the possibility of liquidation upon an event of default, which could result in full loss of value
to the CLO equity and junior debt investors. CLO equity tranches are the most likely tranche to suffer a loss of all of their
value in these circumstances.
Risks of Investing in CLOs.
The Company’s investments consist in part of CLO securities and the Company may invest in other related structured
finance securities. CLOs and structured finance securities are generally backed by an asset or a pool of assets (typically senior
secured loans and other credit-related assets in the case of a CLO) which serve as collateral. The Company and other investors
in CLO and structured finance securities ultimately bear the credit risk of the underlying collateral. If there are defaults or
the relevant collateral otherwise underperforms, scheduled payments to senior tranches of such securities take precedence over
those of mezzanine tranches, and scheduled payments to mezzanine tranches take precedence over those to subordinated/equity tranches.
Therefore, CLO and other structured finance securities may present risks similar to those of the other types of debt obligations
and, in fact, such risks may be of greater significance in the case of CLO and other structured finance securities. In addition
to the general risks associated with investing in debt securities, CLO securities carry additional risks, including, but not limited
to: (1) the possibility that distributions from collateral assets will not be adequate to make interest or other payments; (2)
the quality of the collateral may decline in value or default; (3) the fact that investments in CLO equity and junior debt tranches
will likely be subordinate to other senior classes of CLO debt; and (4) the complex structure of the security may not be fully
understood at the time of investment and may produce disputes with the issuer or unexpected investment results. Additionally, changes
in the collateral held by a CLO may cause payments on the instruments the Company holds to be reduced, either temporarily or permanently.
Structured investments, particularly the subordinated interests in which the Company invests, are less liquid than many other types
of securities and may be more volatile than the assets underlying the CLOs the Company may target. In addition, CLO and other structured
finance securities may be subject to prepayment risk.
Risks of Investing in Loan
Accumulation Facilities. The Company invests in loan accumulation facilities, 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 loan accumulation facilities have risks
similar to those applicable to investments in CLOs. In addition, there typically will be no assurance future CLOs will be consummated
or that loans held in such a facility are eligible for purchase by the CLO. Furthermore, the Company likely will have no consent
rights in respect of the loans to be acquired in such a facility and in the event the Company does have any consent rights, they
will be limited. In the event a planned CLO is not consummated, or the loans are not eligible for purchase by the CLO, the Company
may be responsible for either holding or disposing of the loans. This could expose the Company primarily to credit and/or mark-to-market
losses, and other risks. Leverage is typically utilized in such a facility and as such the potential risk of loss will be increased
for such facilities employing leverage.
Interest Rate Risk. The
fair value of certain investments held by the Company may be significantly affected by changes in interest rates. Although senior
secured loans are generally floating rate instruments, the Company’s investments in senior secured loans through CLOs are
sensitive to interest rate levels and volatility. Although CLOs are generally structured to mitigate the risk of interest rate
mismatch, there may be some difference between the timing of interest rate resets on the assets and liabilities of a CLO. Such
a mismatch could have a negative effect on the amount of funds distributed to CLO equity investors. In addition, CLOs may not be
able to enter into hedge agreements, even if it may otherwise be in the best interests of the CLO to hedge such interest rate risk.
Furthermore, in the event of a significant rising interest rate environment and/or economic downturn, loan defaults may increase
and result in credit losses which may adversely affect the Company’s cash flow, fair value of its assets and operating results.
In the event the Company’s interest expense was to
EAGLE POINT CREDIT COMPANY INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2015
(Unaudited)
increase relative to income, or sufficient financing became unavailable,
return on investments and cash available for distribution would be reduced. In addition, future investments in different types
of instruments may carry a greater exposure to interest rate risk.
LIBOR Floor Risk.
An increase in LIBOR will increase the financing costs of CLOs. Since many of the senior secured loans within these CLOs have LIBOR
floors, there may not be corresponding increases in investment income (if LIBOR increases but stays below the average LIBOR floor
rate of such senior secured loans) resulting in smaller distribution payments to the equity investors in these CLOs.
LIBOR Risk. The
CLOs in which the Company invests typically obtain financing at a floating rate based on LIBOR. Regulators and law-enforcement
agencies from a number of governments, including entities in the United States, Japan, Canada and the United Kingdom, have conducted
or are conducting civil and criminal investigations into potential manipulation of LIBOR. Several financial institutions have reached
settlements with the Commodity Futures Trading Commission, the U.S. Department of Justice Fraud Section and the United Kingdom
Financial Services Authority in connection with investigations by such authorities into submissions made by such financial institutions
to the bodies whom set LIBOR and other interbank offered rates. Additional investigations remain ongoing with respect to other
major banks. There can be no assurance there will not be additional admissions or findings of rate-setting manipulation or manipulations
of LIBOR or other similar interbank offered rates will not be shown to have occurred. ICE Benchmark Administration Limited (formerly
NYSE Euronext Rate Administration Limited) assumed administration of LIBOR on February 1, 2014. Any new administrator of LIBOR
may make methodological changes to the way in which LIBOR is calculated or may alter, discontinue or suspend calculation or dissemination
of LIBOR. Any such actions or other effects from the ongoing investigations could adversely affect the liquidity and value of the
Company’s investments. Further, additional admissions or findings of manipulation may decrease the confidence of the market
in LIBOR and lead market participants to look for alternative, non-LIBOR based types of financing, such as fixed rate loans or
bonds or floating rate loans based on non-LIBOR indices. An increase in alternative types of financing at the expense of LIBOR-based
CLOs may impair the liquidity of the Company’s investments. Additionally, it may make it more difficult for CLO issuers to
satisfy certain conditions set forth in a CLO’s offering documents.
Historically Low Interest
Rate Environment. As of the date of the consolidated financial statements, interest rates in the United States are
at, or near, historic lows, which may increase the Company’s exposure to risks associated with rising interest rates. Moreover,
interest rate levels are currently impacted by extraordinary monetary policy initiatives, the effect of which is impossible to
predict with certainty.
Leverage Risk.
The Company has incurred leverage through the issuance of the Series A Term Preferred Stock and the Company 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 and other structures and instruments, in significant
amounts and on terms the Adviser and the Board deem appropriate, subject to applicable limitations under the 1940 Act. Any such
leverage does not include embedded or inherent leverage in CLO structures in which the Company invests or in derivative instruments
in which the Company may invest. Accordingly, there may be a layering of leverage in overall structure. The more leverage is employed,
the more likely a substantial change will occur in the Company’s net asset value (“NAV”). Accordingly, any event
adversely affecting the value of an investment would be magnified to the extent leverage is utilized.
Highly Subordinated and
Leveraged Securities Risk. The Company’s portfolio includes equity and junior debt investments in CLOs, which involve
a number of significant risks. CLO equity and junior debt securities are typically very highly levered (with CLO equity securities
typically being leveraged nine to thirteen times), and therefore the junior debt and equity tranches in which the Company is currently
invested are subject to a higher degree of risk of total loss. In particular, investors in CLO securities indirectly bear risks
of the collateral held by such CLOs. The Company will generally have the right to receive payments only from the CLOs, and will
generally not have direct rights against the underlying borrowers or the entity that sponsored
EAGLE POINT CREDIT COMPANY INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2015
(Unaudited)
the CLO. While the CLOs the Company
intends to initially target generally enable the investor to acquire interests in a pool of senior secured loans without the expenses
associated with directly holding the same investments, the Company will generally pay a proportionate share of the CLOs’
administrative, management and other expenses. In addition, the Company may have the option in certain CLOs to contribute additional
amounts to the CLO issuer for purposes of acquiring additional assets or curing coverage tests, thereby increasing overall exposure
and capital at risk to such CLO.
Credit Risk. If
a CLO in which the Company invests, an underlying asset of any such CLO or any other type of credit investment in the Company’s
portfolio declines in price or fails to pay interest or principal when due because the issuer or debtor, as the case may be, experiences
a decline in its financial status either or both the Company’s income and NAV may be adversely impacted. Non-payment would
result in a reduction of the Company’s income, a reduction in the value of the applicable CLO security or other credit investment
experiencing non-payment and, potentially, a decrease in the Company’s NAV. With respect to investments in CLO securities
and credit investments that are secured, there can be no assurance liquidation of collateral would satisfy the issuer’s obligation
in the event of non-payment of a scheduled dividend, interest or principal or such collateral could be readily liquidated. In the
event of bankruptcy of an issuer, the Company could experience delays or limitations with respect to its ability to realize the
benefits of any collateral securing a CLO security or credit investment. To the extent the credit rating assigned to a security
in the Company’s portfolio is downgraded, the market price and liquidity of such security may be adversely affected. In addition,
if a CLO triggers an event of default as a result of failing to make payments when due or for other reasons, the CLO would be subject
to the possibility of liquidation, which could result in full loss of value to the CLO equity and junior debt investors. CLO equity
tranches are the most likely tranche to suffer a loss of all of their value in these circumstances.
| 4. | RELATED PARTY TRANSACTIONS |
Investment Adviser
On June 6, 2014, the Company
entered into an investment advisory agreement (the ‘‘Advisory Agreement’’) with the Adviser. Pursuant to
the terms of the Advisory Agreement, the Company pays the Adviser a management fee and an incentive fee for its services.
The management fee is calculated
and payable quarterly, in arrears, at an annual rate equal to 1.75% of the Company’s “total equity base.” “Total
equity base” means the net asset value attributable to the common stock and the paid-in, or stated, capital of the Series
A Term Preferred Stock. The management fee for any partial quarter is pro-rated (based on the number of days actually elapsed at
the end of such partial quarter relative to the total number of days in such calendar quarter). The Company was charged a management
fee of $3,540,716 for the nine months ended September 30, 2015, of which, $1,167,685 was payable as of September 30, 2015.
The incentive fee is calculated
and payable quarterly, in arrears, based on the pre-incentive fee net investment income (the “PNII”) of the Company
for the immediately preceding calendar quarter. For this purpose, PNII means interest income, dividend income and any other income
(including any other fees, such as commitment, origination, structuring, diligence and consulting fees or other fees the Company
receives from an investment) accrued during the calendar quarter, minus the Company’s operating expenses for the quarter
(including the base management fee, expenses payable under the Administration Agreement (as defined below) and any interest expense
and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee). PNII includes, in the case
of investments with a deferred interest feature (such as original issue discount, debt instruments payment-in-kind interest and
zero coupon securities), accrued income the Company has not yet received in cash. PNII does not include any realized capital gains
or realized or unrealized losses.
PNII, expressed as a rate of
return on the value of the Company’s NAV at the end of the immediately preceding calendar quarter, is compared to a hurdle
rate of 2.00% per quarter (8.00% annualized). The Company pays the Adviser an incentive fee with respect to the Company’s
PNII in each calendar quarter as follows: (1) no
EAGLE POINT CREDIT COMPANY INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2015
(Unaudited)
incentive fee in any calendar quarter in which the Company’s PNII does not
exceed 2.00%; (2) 100% of the Company’s PNII with respect to that portion of such PNII, if any, exceeding the hurdle rate
but less than 2.50% in any calendar quarter; and (3) 20% of the amount of the Company’s PNII, if any, exceeding 2.50% in
any calendar quarter. The Company incurred incentive fees of $4,687,811 for the nine months ended September 30, 2015, of which,
$1,996,878 was payable as of September 30, 2015.
Administrator
Effective June 6, 2014, the Company
entered into an administration agreement (the ‘‘Administration Agreement’’) with the Administrator, a wholly-owned
subsidiary of the Adviser. Subject to supervision by and the overall control of the Board, the Administrator acts as administrator
of the Company, and furnishes, or arranges for others to furnish, the administrative services, personnel and facilities necessary
for the operation of the Company. The Company reimburses the Administrator for the costs and expenses incurred in performing its
obligations under the Administration Agreement. The Administrator has delegated to SS&C Technologies Inc. (“SS&C”)
certain administrative and clerical services to perform on behalf of the Company.
For the nine months ended September
30, 2015, the Company was charged a total of $524,489 in administration fees consisting of $384,402 and $140,087 relating to services
provided by the Administrator and SS&C, respectively, which are included in the Consolidated Statement of Operations and, of
which, $148,674 was payable as of September 30, 2015.
Affiliated Ownership
Certain directors, officers and
other related parties, including members of the Company’s management, hold 64.0% of the common stock and 0.8% of the Series
A Term Preferred Stock of the Company as of September 30, 2015. This represents 56.7% of the total outstanding voting stock of
the Company as of September 30, 2015.
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.
For the period of June 6, 2014
to October 5, 2014, the Company was a wholly-owned subsidiary of the Sole Member, which in turn was a wholly-owned subsidiary of
the Private Fund. As of October 5, 2014, the Company had 2,500,000 units issued and outstanding, all of which were held by the
Sole Member.
On June 6, 2014, the Sole Member
contributed $155,301,542 to the Company, consisting of cash of $6,374,976 and securities with a fair value of $148,926,566 (cost
basis of $143,825,556) as detailed in the following table:
Contributed Portfolio
| | |
Cost
as of June 6, 2014 | | |
Fair Value
as of June 6, 2014 | |
| | |
| | |
| |
| CLO Debt | |
$ | 6,586,030 | | |
$ | 6,632,450 | |
| | |
| | | |
| | |
| CLO Equity | |
| 79,864,526 | | |
| 83,219,961 | |
| | |
| | | |
| | |
| Loan Accumulation Facilities | |
| 57,375,000 | | |
| 59,074,155 | |
| | |
| | | |
| | |
| Total | |
$ | 143,825,556 | | |
$ | 148,926,566 | |
The contribution price represents
fair value of the securities as determined in accordance with U.S. GAAP as of the contribution date and as accepted by the Company’s
audit committee and the Board.
EAGLE POINT CREDIT COMPANY INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2015
(Unaudited)
On October 6, 2014, the Company
converted from a Delaware limited liability company into a Delaware corporation. At the time of the Conversion, the Sole
Member of Eagle Point Credit Company LLC became a stockholder of Eagle Point Credit Company Inc. and was issued an aggregate of
8,656,057 shares of common stock, par value $0.001 per share. The Sole Member distributed such shares to the Private Fund, which
in turn, distributed such shares as a redemption in-kind to certain of its ultimate beneficial owners.
On October 7, 2014, the Company
priced its IPO and sold an additional 5,155,301 shares of its common stock at a public offering price of $20 per
share. The Company raised gross proceeds of $103,106,020. The Company paid $1,000,000 or $0.07 per share in offering costs associated
with the successful offering. This cost was borne by all common stockholders of the Company as a charge to stockholders’
equity. The Company has used the net proceeds from the IPO to acquire investments in accordance with the Company’s investment
objectives and strategies and for general working capital purposes.
On October 8, 2014, the Company’s
shares began trading on the NYSE under the symbol “ECC.”
As of September 30, 2015, there
were 100,000,000 shares of common stock authorized, of which 13,816,963 shares were issued and outstanding.
| 7. | MANDATORILY REDEEMABLE PREFERRED STOCK |
On May 18, 2015, the Company
closed an underwritten, public offering of 1,600,000 shares of Series A Term Preferred Stock at a public offering price of $25
per share, resulting in gross proceeds of $40.0 million and approximately $38.1 million in net proceeds to the Company, after payment
of underwriting discounts and commissions and offering expenses.
The underwriters partially exercised
the thirty-day overallotment option granted to them in connection with the offering and on June 2, 2015, purchased an additional
218,000 shares of Series A Term Preferred Stock, resulting in additional gross proceeds of $5.5 million and approximately $5.2
million in additional net proceeds to the Company, after payment of underwriting discounts and commissions.
The Series A Term Preferred Stock
is listed on the NYSE under the symbol “ECCA.”
As of September 30, 2015, there
were 20,000,000 shares of preferred stock authorized, of which 1,818,000 shares were issued and outstanding.
The Company is required to redeem
all outstanding shares of the Series A Term Preferred Stock on June 30, 2022 at a redemption price of $25 per share (the “Liquidation
Preference”), plus accumulated but unpaid dividends, if any. At any time on or after June 29, 2018, the Company may, at its
sole option, redeem the outstanding shares of the Series A Term Preferred Stock at a redemption price per share equal to the Liquidation
Preference, plus accumulated but unpaid dividends, if any. In addition, if the Company fails to maintain asset coverage with respect
to the mandatorily redeemable preferred stock of at least 200% and is unable to cure such failure by a certain date, it will be
required to redeem shares of mandatorily redeemable preferred stock, including the Series A Term Preferred Stock, at least equal
to the lesser of (1) the minimum number of shares of mandatorily redeemable preferred stock that will result in achieving asset
coverage of at least 200%, or (2) the maximum number of shares of mandatorily redeemable preferred stock that can be redeemed out
of funds legally available for redemption.
| 8. | COMMITMENTS AND CONTINGENCIES |
The Company is not currently
subject to any material legal proceedings. From time to time, the Company may
EAGLE POINT CREDIT COMPANY INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2015
(Unaudited)
be a party to certain legal
proceedings in the ordinary course of business, including proceedings relating to the enforcement of the Company’s rights
under contracts. While the outcome of these legal proceedings cannot be predicted with certainty, the Company does not expect
these proceedings will have a material effect upon its financial condition or results of operations.
As of September 30, 2015, the
Company had no unfunded commitments.
Under the Company’s organizational
documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties
to the Company. In addition, during the normal course of business, the Company enters into contracts containing a variety of representations
which provide general indemnifications. The Company’s maximum exposure under these agreements cannot be known; however, the
Company expects any risk of loss to be remote.
| 10. | RECENT ACCOUNTING PRONOUNCEMENTS |
In April 2015, the FASB issued
Accounting Standards Update No. 2015-03 (“ASU 2015-03”), “Simplifying the Presentation of Debt Issuance Costs,”
which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated
debt liability, consistent with the presentation of a debt discount or premium. ASU 2015-03 is effective for public entities for
annual and interim reporting periods in fiscal years beginning after December 15, 2015. Early adoption of ASU 2015-03 is permitted
for financial statements that have not been previously issued.
The Company has decided to early
adopt ASU 2015-03 and has reported deferred debt issuance costs associated with its Series A Term Preferred Stock as a deduction
from the carrying amount of the financial liability.
See Note 7 “Mandatorily
Redeemable Preferred Stock” for further discussion relating to the Series A Term Preferred Stock issuance.
The Company has recorded a common
stock distribution payable of $8,290,178 or $0.60 per share, for distributions declared as of September 30, 2015. These distributions
were paid to common stockholders on October 30, 2015. In accordance with the Company’s DRIP, 3,147 new shares of common stock
were issued to common stockholders as of October 30, 2015.
On October 1, 2015, the Company
declared three separate distributions of $293,532 or $0.161459 per share on its Series A Term Preferred Stock. The first distribution
was paid on October 30, 2015 to holders of record on October 15, 2015. The additional distributions are payable on each of November
30, 2015 and December 31, 2015 to holders of record on November 16, 2015 and December 15, 2015, respectively.
On November 5, 2015, the Company
filed a pre-effective amendment to a pending registration statement on file with the SEC to register the issuance and sale of its
common stock, preferred stock, debt securities and rights to purchase its common stock for an aggregate maximum offering price
not to exceed $300 million pursuant to the shelf registration procedures of the SEC.
Management of the Company has
evaluated the need for disclosures and/or adjustments resulting from subsequent events through the date of release of this report.
Management has determined there are no events in addition to those described above which would require adjustment to or disclosure
in the consolidated financial statements and related notes through the date of release of this report.
EAGLE POINT CREDIT COMPANY INC. &
SUBSIDIARIES
FINANCIAL HIGHLIGHTS
SEPTEMBER 30, 2015
(Unaudited)
| Per Share Data | |
For the
nine months ended
September 30, 2015 | | |
For the period from
October 6, 2014
to December 31, 2014 | |
| | |
| | |
| |
| Net asset value at beginning of period | |
$ | 19.08 | | |
$ | 20.00 | |
| | |
| | | |
| | |
| Offering costs associated with the Company's initial public offering | |
| - | | |
| (0.07 | ) |
| | |
| | | |
| | |
| Net asset value at beginning of period net of offering costs | |
| 19.08 | | |
| 19.93 | |
| | |
| | | |
| | |
| Net investment income (1) | |
| 1.36 | | |
| 0.32 | |
| | |
| | | |
| | |
| Net realized gain (loss) and change in unrealized appreciation (depreciation) on investments | |
| (2.82 | ) | |
| (0.62 | ) |
| | |
| | | |
| | |
| Net income (loss) and net increase (decrease) in net assets resulting from operations | |
| (1.46 | ) | |
| (0.30 | ) |
| | |
| | | |
| | |
| Common stock distributions from net investment income | |
| (1.36 | ) | |
| (0.31 | ) |
| | |
| | | |
| | |
| Common stock distributions from net realized gains on investments | |
| (0.02 | ) | |
| - | |
| | |
| | | |
| | |
| Common stock distributions from tax return of capital | |
| (0.42 | ) | |
| (0.24 | ) |
| | |
| | | |
| | |
| Total common stock distributions declared to stockholders | |
| (1.80 | ) | |
| (0.55 | ) |
| | |
| | | |
| | |
| Net asset value at end of period | |
$ | 15.82 | | |
$ | 19.08 | |
| | |
| | | |
| | |
| Per share market value at beginning of period | |
$ | 20.10 | | |
$ | 19.93 | |
| | |
| | | |
| | |
| Per share market value at end of period | |
$ | 19.04 | | |
$ | 20.10 | |
| | |
| | | |
| | |
| Total return (2) | |
| 3.08 | % | |
| 0.85 | % |
| | |
| | | |
| | |
| Shares of common stock outstanding at end of period | |
| 13,816,963 | | |
| 13,811,358 | |
| | |
| | | |
| | |
| Ratios and Supplemental Data: | |
| | | |
| | |
| | |
| | | |
| | |
| Net asset value at end of period | |
$ | 218,587,527 | | |
$ | 263,560,460 | |
| Ratio of expenses to average net assets (3) | |
| 6.02 | % | |
| 2.13 | % |
| Ratio of net investment income to average net assets (3) | |
| 9.82 | % | |
| 6.84 | % |
| Portfolio turnover rate (4) | |
| 34.32 | % | |
| 37.11 | % |
| Asset coverage ratio of mandatorily redeemable preferred stock | |
| 576 | % | |
| N/A | |
| (1) | Per share distributions paid to preferred stockholders and the aggregate amount of amortized deferred
debt issuance costs are reflected in net investment income, and totaled ($0.09) and ($0.01) per share of common stock, respectively,
for the nine months ended September 30, 2015. |
| (2) | Total return based on market value is calculated assuming that shares of the Company’s common
stock were purchased at the market price as of the beginning of the period, and that distributions paid to common stockholders
during the period were reinvested at prices obtained by the Company’s dividend reinvestment plan, and that the total number
of shares were sold at the closing market price per share on the last day of the period. Total return does not reflect any sales
load. Total returns for the nine months ended September 30, 2015 and for the period from October 6, 2014 to December 31, 2014 are
not annualized. |
| (3) | Ratios for the nine months ended September 30, 2015 and for the period from October 6, 2014 to
December 31, 2014 are annualized. Ratios include distributions paid to preferred stockholders. |
| (4) | The portfolio turnover rate is calculated as the total of investment sales executed during the
period, divided by the average fair value of investments for the same period. |
EAGLE POINT CREDIT COMPANY INC. &
SUBSIDIARIES
FINANCIAL HIGHLIGHTS
SEPTEMBER 30, 2015
(Unaudited)
Financial highlights for the period from
June 6, 2014 (Commencement of Operations) to October 5, 2014 for the Sole Member are as follows:
| Per Unit Data | |
For the period from
June 6, 2014
(Commencement of Operations)
to October 5, 2014 | |
| | |
| |
| Net asset value at beginning of period | |
$ | 62.12 | |
| | |
| | |
| Net investment income | |
| 3.10 | |
| | |
| | |
| Net realized and unrealized capital gain (loss) on investments | |
| 0.56 | |
| | |
| | |
| Total from investment operations | |
| 3.66 | |
| | |
| | |
| Adjustment for additional cash contributions | |
| 3.56 | |
| | |
| | |
| Net asset value at end of period | |
$ | 69.34 | |
| | |
| | |
| Total return (1) | |
| 5.89 | % |
| | |
| | |
| Ratios and Supplemental Data: | |
| | |
| | |
| | |
| Net asset value at end of period | |
$ | 173,338,066 | |
| Ratio of total expenses to average net assets (1) | |
| 0.00 | % |
| Ratio of net investment income to average net assets (1) | |
| 4.74 | % |
| Portfolio turnover rate (2) | |
| 52.07 | % |
| |
(1) | Total return and ratios for the period from June 6, 2014 (Commencement of Operations) to October
5, 2014 are not annualized. |
| |
(2) | The portfolio turnover rate is calculated as the total of investment sales executed during the
period from June 6, 2014 (Commencement of Operations) to October 5, 2014, divided by the average fair value of investments for
the same period. |
Note: The above Financial
Highlights for the period from June 6, 2014 (Commencement of Operations) to October 5, 2014 for the Sole Member represents the
period when the Company was initially organized as a Delaware limited liability company and a wholly-owned subsidiary of Eagle
Point Credit Partners Sub Ltd.
Eagle Point Credit Company Inc.
20 Horseneck Lane
Greenwich, CT 06830
(203) 340-8500
Investment Adviser
Eagle Point Credit Management LLC
20 Horseneck Lane
Greenwich, CT 06830
Transfer Agent, Registrar, Dividend Disbursement and Stockholder
Servicing Agent
American Stock Transfer & Trust Company, LLC
6201 15th Avenue
Brooklyn, NY 11219
(800) 937-5449
www.eaglepointcreditcompany.com
This report, including the financial statements herein, is
made available to stockholders of the Company for their information. It is not a prospectus, circular or representation intended
for use in the purchase or sale of shares of the Company or any securities mentioned in this report.
© Eagle Point Credit Company Inc. All rights reserved.
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