8-K: Carlyle Credit Income Fund Reports Q3 2025 Results

Carlyle Credit Income Fund announced its third quarter 2025 financial results, highlighting stable dividends, new CLO investments, and strategic capital activities.

Summary

• Reported third quarter 2025 financial results for the period ending June 30, 2025.
• Net investment income was $0.19 per common share, adjusted net investment income was $0.22 per common share, and core net investment income was $0.35 per common share.
• Net asset value per common share was $6.51 as of June 30, 2025.
• Total fair value of investments reached $200.4 million.
• Maintained a monthly common stock dividend of $0.105 per share through November 2025, representing an annualized dividend rate of 22.07% based on the August 15, 2025 share price.
• Funded $28.1 million in new CLO investments with a weighted average GAAP yield of 14.56%.
• Sold 1,400,000 common shares through an At-The-Market (ATM) offering at a premium to NAV, generating net proceeds of $9.2 million.
• Converted $5.0 million of 7.125% Series B Convertible Preferred Shares into common shares at a premium to NAV.
• Entered into a new $30 million Credit Facility on July 11, 2025, with a borrowing rate of SOFR + 3.25%, which can be upsized to $50 million.
• The portfolio consists of 60 unique CLO investments managed by 33 different CLO Managers, with underlying exposure to 1,491 companies.
• The Fund's last 12-month default rate for underlying loans was 1.18%, significantly lower than the broader loan market default rate of 3.79%.

Sentiment

Score: 5

Explanation: While the Fund maintained its high dividend and executed strategic capital raises at a premium to NAV, key profitability metrics like Net Investment Income and Net Asset Value per share experienced declines. The underlying portfolio's default rate remains strong relative to the market, but overall financial performance shows some deterioration.

Positives

• Maintained a stable monthly common dividend of $0.105 per share through November 2025, equating to a high annualized yield of 22.07%.
• Successfully deployed $28.1 million into new CLO investments with an attractive weighted average GAAP yield of 14.56%.
• The At-The-Market (ATM) offering of 1,400,000 common shares was executed at a premium to Net Asset Value (NAV), generating $9.2 million in net proceeds and contributing $0.01 per share in NAV accretion.
• Conversion of $5.0 million of Series B Convertible Preferred Shares into common shares also occurred at a premium to NAV.
• Entered into a new $30 million Credit Facility, enhancing liquidity and financial flexibility, with the potential to upsize to $50 million.
• The portfolio's weighted average junior overcollateralization (OC) cushion remains healthy at 4.50%, with no holdings below 2.50%.
• The Fund's underlying loan default rate of 1.18% over the last 12 months is significantly lower than the broader loan market default rate of 3.79%, indicating strong credit quality management.
• Management believes the portfolio is well-positioned to deliver an attractive dividend yield.

Negatives

• Net Investment Income per common share decreased to $0.19 in Q3 2025 from $0.23 in Q2 2025 and $0.32 in Q3 2024.
• The Fund reported a Net Income (Loss) of $(2,672) thousand, or $(0.13) per common share, for Q3 2025, compared to a net loss of $(3,102) thousand in Q2 2025 and net income of $1,346 thousand in Q3 2024.
• Net Asset Value (NAV) per common share declined to $6.51 as of June 30, 2025, from $6.98 as of March 31, 2025, and $7.68 as of June 30, 2024.
• Recurring cash flows per share decreased to $0.55 in Q3 2025 from $0.70 in Q1 2025 and $0.81 in Q3 2024.
• Core Net Investment Income per share decreased to $0.35 in Q3 2025 from $0.45 in Q1 2025 and $0.55 in Q3 2024.
• 12% of the portfolio did not make payments during the quarter due to funds being redirected for accretive resets and refinancings, and primary issuances that had not yet made their initial distributions.
• Net realized and change in unrealized losses were $(0.33) per common share for the quarter.

Risks

• The filing contains forward-looking statements that involve substantial risks and uncertainties.
• Factors or events that could cause actual results to differ materially from expectations are identified in the 'Risk Factors' and 'Cautionary Statement Regarding Forward-Looking Statements' sections of other filings with the SEC.

Future Outlook

The Fund expects to maintain its monthly common stock dividend of $0.105 per share through November 2025. The portfolio is believed to be well-positioned to deliver an attractive dividend yield to shareholders. The newly established $30 million Credit Facility has the potential to be upsized to $50 million. Recurring cash flows for Q4 2025 are expected to be approximately $0.51 per share.

Management Comments

• "Our third quarter performance reflects CCIF's resilience in navigating a complex market environment."
• "We continue to hold a diversified portfolio of CLO equity with ample time remaining in reinvestment period, providing third-party managers the flexibility to actively manage loan portfolios."
• "During the quarter, we selectively deployed capital, completed two opportunistic resets, and maintained a stable monthly dividend that is covered by core net investment income."
• "We think the portfolio is well-positioned to deliver an attractive dividend yield to our shareholders."

Industry Context

The report highlights the Fund's focus on CLO equity and junior debt tranches, a segment of the credit market that can offer high yields but also carries specific risks related to underlying loan performance. The ability to maintain a high dividend yield and selectively deploy capital in a 'complex market environment' suggests active management within the CLO space. The comparison of CCIF's underlying loan default rate (1.18%) to the broader market (3.79%) indicates strong portfolio selection and management relative to industry averages, which is crucial in the leveraged loan and CLO market.

Comparison to Industry Standards

• The Fund's last 12-month default rate for underlying loans was 1.18%, which is significantly lower than the broader loan market default rate of 3.79% (including distressed exchanges). This suggests superior credit quality and risk management within CCIF's CLO portfolio compared to the overall market.
• The Fund's portfolio is diversified across 60 unique CLO investments managed by 33 different CLO Managers, providing broad exposure and mitigating manager-specific risk, which is a standard best practice in CLO investing.
• The weighted average junior overcollateralization (OC) cushion of 4.50% for underlying CLOs, with no holdings below 2.50%, indicates robust structural protection for the equity and junior debt tranches held by the Fund, aligning with prudent risk management in the CLO market.

Stakeholder Impact

• Shareholders (Common): Benefit from continued high monthly dividends, but face declining Net Asset Value and Net Investment Income per share. The ATM offering at a premium to NAV is accretive.
• Shareholders (Preferred): Continue to receive stable monthly dividends.
• Creditors: The new $30 million credit facility provides additional liquidity and flexibility.

Next Steps

• Host a conference call on August 20, 2025, to discuss third quarter financial results.
• Continue to pay monthly common stock dividends of $0.105 per share for September, October, and November 2025.
• Continue to pay monthly Series A Preferred Shares dividends of $0.1823 per share for September, October, and November 2025.

Key Dates

Recommendation

While the Fund maintains a very attractive dividend yield and has demonstrated strong underlying portfolio credit quality with a significantly lower default rate than the market, the consistent decline in Net Asset Value per share and Net Investment Income per share is a concern. The strategic capital raises (ATM at premium, preferred conversion at premium, new credit facility) are positive, but the core profitability trend is negative. A 'hold' recommendation is appropriate as investors should monitor if the dividend coverage remains robust and if the NAV decline stabilizes, balancing the high yield against the deteriorating fundamental metrics.

Keywords

CLO, Collateralized Loan Obligations, Credit Income Fund, Carlyle, CCIF, Dividend, Net Asset Value, Financial Results, Investment Income, Preferred Shares, ATM Offering, Credit Facility, Fixed Income, Asset Management