Eagle Point Income (NYSE:EIC) reported fourth-quarter and full-year 2025 results against what management described as a challenging CLO market backdrop, citing lower benchmark rates, spread compression in leveraged loans, and negative credit sentiment as key headwinds during the year.
Full-year results shaped by rates, spread compression, and heavy CLO refinancing activity
Chairman and CEO Thomas Majewski said 2025 performance was “adversely impacted” by the effect of reduced SOFR levels on CLO debt investment income, ongoing loan spread compression affecting CLO equity holdings, and broader negative sentiment toward credit. He noted that while loan market default rates remained below long-term historical averages, market technicals weighed on valuations and earnings.
- A GAAP return on equity of -0.7%
- A total return on common stock of -15.2% (assuming reinvestment of distributions)
- Cash distributions to common shareholders of $1.98 per share, which management said was about 15% of the average stock price during the year
Majewski also highlighted elevated CLO refinancings, resets, and calls that drove early repayments in the CLO debt portfolio. Paydowns in CLO debt totaled $147 million in 2025. Because many positions had been purchased at discounts and repaid at par, the company generated $0.12 per share of realized capital gains during the year.
Across the CLO equity portfolio, the company participated in 10 resets and six refinancings during 2025. Management said each reset extended the reinvestment period to five years and, together with the refinancings, reduced average CLO debt costs by 46 basis points for the affected transactions.
Fourth-quarter earnings: NII slipped, realized losses tied to portfolio repositioning
In the fourth quarter, the company generated net investment income (NII) of $0.35 per share, down from $0.39 in the prior quarter. NII less realized losses was $0.03 per share, consisting of $0.35 of NII offset by $0.32 of realized losses, which management attributed primarily to portfolio repositioning, including rotating out of certain underperforming CLO collateral managers.
Chief Accounting Officer Lena Umnova said NII less realized losses totaled $0.7 million, or $0.03 per share, versus $0.26 per share in the prior quarter and NII and realized gains of $0.54 per share in the year-ago quarter. Including unrealized losses, GAAP net loss for the quarter was $15 million, or $0.60 per share, compared with GAAP net income of $0.43 per share in the third quarter.
Umnova broke down the quarterly net loss as investment income of $15 million, offset by $16 million of net unrealized losses, $8 million of net realized losses, and $6 million of financing and operating expenses. The company also recorded an other comprehensive loss of $1 million related to mark-to-market changes in liabilities carried at fair value.
Asked on the call whether the quarter included any non-recurring items, Umnova said there were none.
Cash flows, NAV movement, and distributions
Despite lower NII, management emphasized portfolio cash generation. Majewski said recurring cash flows totaled $19 million, or $0.79 per share, in the fourth quarter, up from $17 million, or $0.67 per share, in the prior quarter. He added that recurring cash flows exceeded regular common distributions and total expenses by about $0.15 per share in the quarter.
Net asset value declined to $13.31 per share as of Dec. 31 from $14.21 at the end of September, which Majewski attributed largely to spread compression driving lower CLO equity valuations. Umnova said total NAV at year-end was $312 million, or $13.31 per share.
The company paid three monthly distributions of $0.13 per share during the fourth quarter of 2025. Management also declared three monthly distributions of $0.11 per share for the second quarter of 2026, in line with the first-quarter 2026 level. Majewski said the board believes the $0.11 monthly rate aligns with near-term earnings potential in a lower-rate environment and reiterated that CLO debt earnings generally move with benchmark rates because the assets are floating-rate.
Portfolio activity, financing actions, and share repurchases
Eagle Point Income deployed about $45 million into new investments during the quarter. Of that amount, $26 million went into other credit asset classes such as infrastructure credit, asset-backed securities, portfolio debt securities, and regulatory capital relief transactions, with a weighted average effective yield of 21.6%, according to Majewski.
During Q&A, portfolio manager Daniel Ko said the company rotated out of certain CLO positions tied to managers that had “more credit issues” and underperformed expectations, and redeployed toward assets the advisor also invests in across its broader platform. Ko said the shift was driven by relative value, and that allocations could change if CLO opportunities again look more attractive.
On the capital structure, Majewski said the company fully redeemed its 7.75% Series B Term Preferred Stock during the quarter and entered into a new revolving credit facility with a three-year maturity. The company also announced an intention to fully redeem its 8% Series C Term Preferred Stock, which management described as its highest cost of capital. Ko said the Series C redemption would be funded through a combination of the new revolver and cash, along with proceeds from CLO debt payoffs tied to ongoing refinancings and resets.
Eagle Point Income also continued repurchasing shares. During the fourth quarter, the company repurchased about $19 million of common stock at an average discount to NAV of 18.2%, which management said resulted in NAV accretion of approximately $0.14 per share. Umnova said more than 1.6 million shares were repurchased during the quarter. The board increased the common share repurchase authorization to $60 million in November 2025.
As of Dec. 31, preferred securities totaled 31% of total assets less current liabilities, within the company’s stated long-term target leverage ratio range of 25% to 35%, Umnova said.
Market commentary: stable fundamentals, heavy issuance, and a potential catalyst for spreads
Ko said leveraged loan fundamentals remained largely stable in 2025, with loan issuers showing positive revenue and EBITDA growth. He cited a 1.2% fourth-quarter return and a 5.9% full-year 2025 return for the S&P UBS Leveraged Loan Index. The trailing 12-month default rate fell to 1.2% as of Dec. 31 from 1.5% at the end of September, below the long-term average of 2.6%. Ko added that Eagle Point Income’s portfolio default exposure was 32 basis points as of year-end.
In the CLO market, Ko said new issuance rose to $55 billion in the fourth quarter, with $209 billion issued in 2025, exceeding 2024’s record. Fourth-quarter resets and refinancings were $54 billion and $20 billion, respectively, and total 2025 issuance including resets and refinancings reached $546 billion.
Ko said tight loan spreads and increased supply of new-issue CLOs pressured CLO equity returns, but noted that rising new-issue loan activity could increase supply and potentially widen loan spreads over time, which could support higher equity cash flows in the future.
Liquidity remained a focus. Ko said that as of Dec. 31 the company had $52 million of cash and undrawn revolver capacity. Umnova added that, net of pending transactions, cash and revolver capacity available was $85 million as of the end of January, and management’s unaudited estimate of NAV at January month-end was between $13.23 and $13.33 per share.
About Eagle Point Income (NYSE:EIC)
Eagle Point Income Company (NYSE: EIC) is a closed-end management investment company that primarily invests in the equity and junior debt tranches of collateralized loan obligations (CLOs). Launched in 2019 and domiciled in Maryland, the company seeks to provide shareholders with high current income and the potential for capital appreciation by focusing on structured credit opportunities. Eagle Point Income maintains a diversified portfolio of CLO equity positions, targeting both seasoned and newly issued transactions across multiple risk profiles.
The company’s investment strategy centers on identifying mispriced or underfollowed CLO tranches, where it believes its team’s deep industry expertise can add value.
