Eagle Point Credit Company posts 8% NAV recovery as leverage remains elevated

Eagle Point Credit Company Inc. reported an 8 per cent recovery in its net asset value for the second quarter of 2026, driven by a rebound in loan prices and collateralised loan obligation equity valuations. The firm’s management attributed earlier valuation pressures to overstated concerns regarding the impact of artificial intelligence on software borrowers, rather than a broad deterioration in credit fundamentals.

Underlying credit conditions remained resilient, with a look-through default rate of 14 basis points, significantly below the broader market average of 1 per cent. The company’s portfolio maintained a weighted average remaining reinvestment period of 3.4 years, which is 15 per cent longer than the market average, providing a buffer against future price volatility.

Active portfolio management included eight resets and seven refinancings, achieving a weighted average debt cost savings of 22 basis points. The firm strategically rotated capital away from underperforming CLO collateral managers, increasing non-CLO investments to 38 per cent of the portfolio. This shift focused on infrastructure credit and specialty finance, targeting transformative capital opportunities in digital infrastructure and energy transition.

Current leverage stands at 47 per cent of total assets, which is above the company’s long-term target range of 27.5 to 37.5 per cent due to prior net asset value fluctuations. To address this, the company completed the full redemption of ECCW and ECCX notes to reduce outstanding leverage and extend capital duration.

The firm maintains a long-duration capital structure with no financing maturities before January 2029. Management highlighted the perpetual nature of preferred stock financing as a competitive advantage that mitigates refinancing risk, while noting that software sector amendments are now resulting in wider spreads in exchange for maturity extensions.