8-K: Carlyle Credit Income Fund Announces Strong Second Quarter Results, Maintains High Dividend

Carlyle Credit Income Fund reports a solid second quarter with increased net investment income and a high dividend yield, driven by successful deployment of capital into CLO investments.

Summary

• Carlyle Credit Income Fund (CCIF) announced its financial results for the second quarter ending March 31, 2024.
• The fund successfully deployed the remaining proceeds from a preferred stock offering into new CLO equity positions.
• The portfolio's weighted average GAAP yield was 20.8% as of March 31, 2024.
• CCIF maintained a monthly dividend of $0.105 per share through August 2024, which equates to a 15.95% annualized dividend based on the share price as of May 28, 2024.
• The fund sold 570,000 common shares through an ATM offering at a premium to NAV, generating net proceeds of $4.5 million.
• Net investment income for the quarter was $0.33 per common share, and the net asset value per common share was $7.88 as of March 31, 2024.
• The total fair value of investments was $142.1 million as of March 31, 2024.
• The fund's cash yield on CLO investments was 25.13% for the quarter, resulting in $0.64 of recurring cash flows per share.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong financial results, high dividend yield, and successful deployment of capital. The increase in net investment income and recurring cash flows are particularly encouraging. However, the slight decrease in NAV and the inherent risks of CLO investments temper the overall sentiment.

Positives

• The fund successfully deployed the remaining proceeds from the preferred stock offering into new CLO equity positions.
• The portfolio is producing historically high cash distributions.
• The fund's net investment income increased from $0.24 per share in Q1 2024 to $0.33 per share in Q2 2024.
• Recurring cash flows per share increased to $0.64 in Q2 2024 from $0.50 per share in Q1 2024.
• The fund's diversified portfolio includes 41 unique CLO investments managed by 24 different CLO managers.
• The fund has a large number of underlying borrowers across various industry sectors, with 1,554 unique loan obligors.
• The fund's management expects net investment income to continue to exceed the quarterly dividend total.

Negatives

• The fund experienced a net realized and change in unrealized loss of $0.14 per share.
• The net asset value per share decreased slightly from $7.99 in Q1 2024 to $7.88 in Q2 2024.

Risks

• The press release contains forward-looking statements that involve substantial risks and uncertainties.
• Factors or events could cause actual results to differ materially from expectations.
• The fund's performance is subject to market conditions and the performance of its underlying CLO investments.
• There is no guarantee that future dividends will match or exceed historical rates or will be paid at all.

Future Outlook

The fund expects its net investment income to continue to exceed the quarterly dividend total and is supported by approximately $0.82 of recurring cash flows per share received in fiscal quarter Q3 2024.

Management Comments

• Lauren Basmadjian, CCIF's Chief Executive Officer, stated that the fund has successfully deployed the remaining proceeds from the preferred stock offering into new CLO equity positions.
• She also noted that the diversified portfolio of CLO investments is producing historically high cash distributions, supporting the fund's investment strategy.

Industry Context

This announcement reflects a continued trend of investment firms focusing on CLOs as a source of high yield, particularly in a market with fluctuating interest rates. Carlyle's expertise in CLO management positions CCIF to capitalize on these opportunities.

Comparison to Industry Standards

• CCIF's 20.8% weighted average GAAP yield is competitive compared to other CLO-focused funds, which typically range from 15% to 22%.
• The fund's 15.95% annualized dividend yield is also high compared to the average dividend yield of other closed-end funds, which often fall in the 5% to 10% range.
• The fund's focus on CLO equity and junior debt tranches is a common strategy for funds seeking higher returns, but it also carries higher risk compared to funds investing in senior debt.
• Compared to other large CLO managers like Ares and KKR, Carlyle's $50 billion in CLO AUM positions them as a significant player in the market.
• The fund's diversification across 41 CLO investments and 24 managers is a positive sign, reducing concentration risk compared to funds with fewer holdings.

Stakeholder Impact

• Shareholders will benefit from the high dividend yield and the potential for capital appreciation.
• Employees of Carlyle Global Credit Investment Management will continue to manage the fund's investments.
• Customers of the fund will receive regular updates on its performance and investment strategy.
• Suppliers and creditors of the fund will be paid according to their agreements.

Next Steps

• The fund will host a conference call on May 30, 2024, to discuss the second quarter financial results.
• The fund will continue to pay a monthly dividend of $0.105 per share through August 2024.
• The fund will continue to monitor its CLO investments and seek opportunities for further growth.

Key Dates

Keywords

CLO, Collateralized Loan Obligations, Credit, Investment, Dividend, Carlyle, Income, Yield, Net Asset Value, GAAP