Carlyle Credit Income Fund signals continued dividend coverage and portfolio resets amid tightening CLO spreads

Earnings Call Insights: Carlyle Credit Income Fund (CCIF) Q3 2025

MANAGEMENT VIEW

* Nishil Mehta, Principal Executive Officer and President, highlighted that the fund maintained its monthly dividend at $0.105 per share, representing a 22.1% annualized yield based on the share price as of August 15, 2025, and declared through November 2025. Mehta stated that this dividend is "supported by $0.55 of recurring cash flows for the quarter, providing 174% of dividend coverage." The fund completed $28.1 million in new CLO investments with a weighted average GAAP yield of 14.6% and rotated out of 7 CLO investments for proceeds of $16.2 million. Two refinancings and resets were completed in the quarter, which "reduced the cost of liabilities and extended the reinvestment period across these CLOs and bolstered equity cash flows" (Mehta). Mehta also reported the sale of 1.4 million common shares above NAV through the ATM offering program for total net proceeds of $9.2 million. He emphasized the defensive positioning of the portfolio and the focus on high-quality managers, noting a weighted average junior overcollateralization cushion of 4.5% and a weighted average portfolio GAAP yield of 15.1% as of June 30.
* Lauren Michelle Basmadjian, Chair and Global Head of Liquid Credit, discussed the stabilization of the CLO market after April volatility, with CLO issuance totaling $42 billion for the quarter. She noted that "CLO liability spreads fully recouped the April widening and partially recouped the widening we witnessed in the second half of the first quarter." Basmadjian indicated that reset activity is expected to remain strong as spreads tighten, and highlighted the portfolio's resilience with an average borrower EBITDA growth of 5.1% and an average interest coverage ratio of 3.4x.
* Nelson Joseph, Principal Financial Officer, reported "cash-on-cash yield of 23.11% on CLO investment quarterly payments resulted in $0.55 of recurring cash flow." Joseph stated, "Total investment income for the third quarter was $8.6 million or $0.43 per share... Total net investment income for the third quarter was $4 million or $0.19 per share. Adjusted net investment income for the third quarter was $4.5 million or $0.22 per share." Net asset value as of June 30 was $6.51 per share.

OUTLOOK

* Management expects refinancing and reset activity to increase as CLO liability spreads continue to tighten, providing opportunities for value creation. Mehta indicated that the portfolio's remaining reinvestment period increased and "provides CLO managers the opportunity to capitalize on periods of volatility through active management."
* Basmadjian projected continued resilience in credit fundamentals despite macro uncertainty and indicated that reset activity would remain robust as many 2021 vintage CLOs approach the end of their reinvestment periods in 2026.

FINANCIAL RESULTS

* Recurring cash flows for the quarter were $0.55, and the monthly dividend of $0.105 per share was covered by core net investment income of $0.35 per share, providing 111% dividend coverage. Total investment income was $8.6 million, with total expenses of $4.7 million and adjusted net investment income of $4.5 million.
* Net asset value decreased to $6.51 per share from $6.98 in the previous quarter. The fund continued to hold one legacy real estate asset valued at $2.2 million.
* The sale of 1.4 million common shares at a premium to NAV resulted in accretion of $0.01 per share to NAV. Series B preferred shares were partially converted to common stock at a price above NAV, with $3.5 million remaining outstanding.

Q&A

* Timothy Egan D'Agostino, B. Riley Securities: Asked about the trend in portfolio yield and the impact of potential Fed rate cuts. Mehta explained that "the repricing wave continues...the trend continues to be unfavorable in terms of loan repricing is going to cause the GAAP yield to decline." He noted that both assets and financings are floating rate, so rate cuts would not have a material impact on GAAP yields.
* D'Agostino also asked about cash yield sustainability. Mehta replied that cash yields "might decline as well...but what we're hoping is that cash yields will stabilize as we continue to do these refinancings and resets."
* Erik Edward Zwick, Lucid Capital Markets: Inquired about non-U.S. CLO positions and the use of the new $30 million credit facility. Mehta confirmed no non-U.S. CLOs currently, but "we are looking at it pretty actively" and may add European investments in the next 3 to 6 months. The credit line is intended as a working capital facility, not for balance sheet leverage.
* Zwick also asked about potential share repurchases. Mehta stated, "we'll continue to have those discussions internally on whether it's more accretive to repurchase versus making new investments."

SENTIMENT ANALYSIS

* Analysts focused on sustainability of yields, future impact of loan repricings, and strategic use of credit facilities, with a neutral to slightly cautious tone. Questions were direct, probing the impact of macro factors and portfolio strategy.
* Management maintained a confident tone in prepared remarks and Q&A, emphasizing defensive portfolio positioning and ongoing refinancing efforts. Phrases such as "we remain encouraged" and "we are looking at it pretty actively" signaled optimism, while acknowledging market headwinds.
* Compared to the previous quarter, analysts’ tone was more focused on forward-looking risks, while management’s tone remained steady but with heightened emphasis on mitigation strategies.

QUARTER-OVER-QUARTER COMPARISON

* The current quarter saw a continuation of loan repricing pressure, with further declines in GAAP yield and net asset value versus the previous quarter.
* Dividend coverage improved, with recurring cash flows rising from $0.49 to $0.55 and coverage exceeding 100%.
* Fewer CLO resets and refinancings were completed in Q3 (2) compared to Q2 (13), attributed to spread widening earlier in the period.
* Management’s tone remained constructive, but there was greater discussion of the challenges posed by market volatility and repricing. Analysts’ focus shifted more toward sustainability and risk management.
* The outlook on European CLO investments became more prominent, with management indicating openness to geographic diversification.

RISKS AND CONCERNS

* Management cited ongoing loan repricing as a headwind for portfolio yields, noting that repricing is a market-wide issue.
* Volatility in loan prices and CLO equity valuations was acknowledged, with management highlighting the potential for opportunistic investing during periods of dislocation.
* The risk of further declines in cash and GAAP yields was addressed, with management emphasizing active refinancing, resets, and portfolio rotation as mitigation strategies.
* Analysts expressed concern about the sustainability of yields, potential impact of Fed rate changes, and the balance between share repurchases and new investments.

FINAL TAKEAWAY

CCIF management highlighted continued strong dividend coverage, resilient portfolio fundamentals, and active mitigation of loan repricing headwinds through refinancing and resets. The portfolio remains defensively positioned with a focus on quality and flexibility, while management expressed confidence in maintaining attractive yield and capitalizing on market opportunities, including potential expansion into European CLO investments.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/ccif/earnings/transcripts]

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* Carlyle Credit Income Fund (CCIF) Q3 2025 Earnings Call Transcript [https://seekingalpha.com/article/4815307-carlyle-credit-income-fund-ccif-q3-2025-earnings-call-transcript]
* Carlyle Credit Income Fund 2025 Q3 - Results - Earnings Call Presentation [https://seekingalpha.com/article/4815303-carlyle-credit-income-fund-2025-q3-results-earnings-call-presentation]
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