Ellington Credit Company Announces Financial Results for the Third Fiscal Quarter Ended December 31, 2025
Highlights
-
Net asset value (NAV) per share was
$5.19 as ofDecember 31, 2025 , which includes the effects of distributions of$0.24 per share for the quarter. -
GAAP net income (loss) was
$(21.1) million or$(0.56) per share. -
Net investment income ("NII") was
$7.8 million , or$0.21 per share.-
Adjusted net investment income1 was
$7.8 million , or$0.21 per share.
-
Adjusted net investment income1 was
-
CLO portfolio was
$369.5 million as ofDecember 31, 2025 .- CLO debt investments—$176.9 million.
- CLO equity investments—$192.6 million.
-
Purchased
$65.8 million of CLO investments and sold$17.4 million , across 47 trades.
- Weighted average GAAP yield2 for the quarter was 13.7% on the total CLO portfolio.
-
Received
$19.1 million in recurring cash distributions3 from the investment portfolio, or$0.51 per share.
Management Commentary
"The fourth calendar quarter was challenging for the CLO equity market. For Ellington Credit, our relative up-in-credit bias and active trading strategy helped partially offset the challenges, as CLO mezzanine debt tranches, which have been a focus of our investment activity in recent months, proved more resilient, and with opportunistic trading contributing positively to results," said
"Thanks to our portfolio management strategy, Ellington Credit delivered another quarter of outperformance relative to its peer set. Nevertheless—and as previously reported in our monthly NAV updates—the underperformance in the CLO equity market resulted in a significant drop in our NAV, and thereby a net loss for the quarter overall. We believe that a meaningful portion of the drop in NAV reflected credit spread widening rather than fundamental deterioration, so a substantial portion of these losses could reverse should market conditions normalize.
"Moving forward, we believe that the recent headwinds in CLO equity, spanning the fourth quarter and continuing into 2026, are repricing that market and expanding the opportunity set in a very meaningful way. As a result, while early in 2026 we had favored purchases of mezzanine debt, we now expect to selectively increase our CLO equity position as opportunities arise.
"I am confident that the current market environment plays precisely to our strengths in active investing and trading. Coupled with our substantial credit hedging portfolio coming into 2026, I believe that we are well positioned to capitalize on market dislocations and deliver attractive risk-adjusted returns for shareholders."
| _________________ | ||
|
1 |
Adjusted net investment income is a non-GAAP financial measure. See "Reconciliation of Adjusted Net Investment Income to Net Investment Income" below for an explanation regarding the calculation of Adjusted net investment income. |
|
|
2 |
Based on amortized cost; used in the calculation of interest income. |
|
|
3 |
"Recurring cash distributions" primarily includes distributions received from our CLO investments but excludes cash received from CLO redemptions or sales during the quarter. | |
Distributions
During and subsequent to the quarter ended
|
Declaration Date |
|
Record Date |
|
Payment Date |
|
Distribution Per Share |
|
|
|
|
|
|
|
|
$ |
0.08 |
|
|
|
|
|
|
|
|
0.08 |
|
|
|
|
|
|
|
|
0.08 |
|
|
|
|
|
|
|
|
0.08 |
|
|
|
|
|
|
|
|
0.08 |
Investment Portfolio
The following table summarizes the composition of the investment portfolio as of
|
(In thousands) |
|
Amortized Cost |
|
Fair Value |
|
% of Total Investments |
|||
|
|
|
$ |
139,295 |
|
$ |
136,212 |
|
36.8 |
% |
|
European CLO debt |
|
|
41,831 |
|
|
40,700 |
|
11.0 |
% |
|
Total CLO debt |
|
|
181,126 |
|
|
176,912 |
|
47.8 |
% |
|
|
|
|
207,087 |
|
|
187,323 |
|
50.7 |
% |
|
European CLO equity |
|
|
7,111 |
|
|
5,231 |
|
1.4 |
% |
|
Total CLO equity |
|
|
214,198 |
|
|
192,554 |
|
52.1 |
% |
|
Total CLO debt and equity |
|
|
395,324 |
|
|
369,466 |
|
99.9 |
% |
|
Other investments |
|
|
418 |
|
|
419 |
|
0.1 |
% |
|
Total investments |
|
$ |
395,742 |
|
$ |
369,885 |
|
100.0 |
% |
Credit Hedges
The following table summarizes our credit hedges, expressed in estimated notional equivalents(1) of the Markit CDX North American High Yield Index (the "Index"), as of
|
|
|
Estimated Index Equivalents |
||||||
|
(In thousands) |
|
|
|
|
||||
|
Credit Hedges(2) |
|
$ |
(174,824 |
) |
|
$ |
(90,568 |
) |
|
(1) |
Notional equivalents are estimated based on historical price relationships between credit hedges (and/or their underlying components) and the Index, together with other factors. Our estimations of price relationships between instruments may change over time, and actual price relationships experienced may differ from those previously estimated. |
|
|
(2) |
Includes CDS on corporate indices and options on corporate indices and ETFs. |
Results of Operations
The following table summarizes our operating results for the quarter ended
|
|
Quarter Ended |
||||||||||||||||||||||||||
|
|
Debt |
|
European CLO Debt |
|
Equity |
|
European CLO Equity |
|
Other(1) |
|
Total |
|
Total Per Share(2) |
||||||||||||||
|
(In thousands, except share and per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Interest income |
$ |
4,870 |
|
|
$ |
1,311 |
|
|
$ |
6,573 |
|
|
$ |
439 |
|
|
$ |
263 |
|
|
$ |
13,456 |
|
|
$ |
0.35 |
|
|
Other investment income |
|
— |
|
|
|
— |
|
|
|
215 |
|
|
|
— |
|
|
|
— |
|
|
|
215 |
|
|
|
0.01 |
|
|
Total investment income |
|
4,870 |
|
|
|
1,311 |
|
|
|
6,788 |
|
|
|
439 |
|
|
|
263 |
|
|
|
13,671 |
|
|
|
0.36 |
|
|
Interest expense |
|
(1,299 |
) |
|
|
(217 |
) |
|
|
(791 |
) |
|
|
(29 |
) |
|
|
— |
|
|
|
(2,336 |
) |
|
|
(0.06 |
) |
|
Other expenses |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(3,584 |
) |
|
|
(3,584 |
) |
|
|
(0.09 |
) |
|
Net investment income |
|
3,571 |
|
|
|
1,094 |
|
|
|
5,997 |
|
|
|
410 |
|
|
|
(3,321 |
) |
|
|
7,751 |
|
|
|
0.21 |
|
|
Net realized gain (loss) on investments |
|
121 |
|
|
|
240 |
|
|
|
75 |
|
|
|
222 |
|
|
|
12 |
|
|
|
670 |
|
|
|
0.02 |
|
|
Change in net unrealized gain (loss) on investments |
|
(4,707 |
) |
|
|
(2,523 |
) |
|
|
(18,633 |
) |
|
|
(1,622 |
) |
|
|
(41 |
) |
|
|
(27,526 |
) |
|
|
(0.74 |
) |
|
Credit and foreign currency hedges, and other activities |
|
|
|
|
|
|
|
|
|
(1,962 |
) |
|
|
(1,962 |
) |
|
|
(0.05 |
) |
||||||||
|
Net income (loss) |
$ |
(1,015 |
) |
|
$ |
(1,189 |
) |
|
$ |
(12,561 |
) |
|
$ |
(990 |
) |
|
$ |
(5,312 |
) |
|
$ |
(21,067 |
) |
|
$ |
(0.56 |
) |
|
Net income (loss) per share(2) |
$ |
(0.03 |
) |
|
$ |
(0.03 |
) |
|
$ |
(0.33 |
) |
|
$ |
(0.03 |
) |
|
$ |
(0.14 |
) |
|
$ |
(0.56 |
) |
|
|
||
|
(1) |
Includes interest income and net realized and change in unrealized gains (losses) associated with corporate debt and equity investments. Also includes management fees, performance fees, and various other operating expenses. |
|
|
(2) |
Based on weighted average shares outstanding of 37,570,694 shares for the quarter ended |
The following table summarizes our operating results for the quarter ended
|
|
Quarter Ended |
||||||||||||||||||||||||||
|
|
Debt |
|
European CLO Debt |
|
Equity |
|
European CLO Equity |
|
Other(1) |
|
Total |
|
Total Per Share(2) |
||||||||||||||
|
(In thousands, except share and per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Interest income |
$ |
5,161 |
|
|
$ |
1,256 |
|
|
$ |
6,728 |
|
|
$ |
420 |
|
|
$ |
281 |
|
|
$ |
13,846 |
|
|
$ |
0.37 |
|
|
Other investment income |
|
— |
|
|
|
— |
|
|
|
305 |
|
|
|
— |
|
|
|
— |
|
|
|
305 |
|
|
|
0.01 |
|
|
Total investment income |
|
5,161 |
|
|
|
1,256 |
|
|
|
7,033 |
|
|
|
420 |
|
|
|
281 |
|
|
|
14,151 |
|
|
|
0.38 |
|
|
Interest expense |
|
(1,296 |
) |
|
|
(208 |
) |
|
|
(435 |
) |
|
|
(25 |
) |
|
|
— |
|
|
|
(1,964 |
) |
|
|
(0.05 |
) |
|
Other expenses |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(3,702 |
) |
|
|
(3,702 |
) |
|
|
(0.10 |
) |
|
Net investment income |
|
3,865 |
|
|
|
1,048 |
|
|
|
6,598 |
|
|
|
395 |
|
|
|
(3,421 |
) |
|
|
8,485 |
|
|
|
0.23 |
|
|
Net realized gain (loss) on investments |
|
907 |
|
|
|
223 |
|
|
|
235 |
|
|
|
(88 |
) |
|
|
(16 |
) |
|
|
1,261 |
|
|
|
0.03 |
|
|
Change in net unrealized gain (loss) on investments |
|
(61 |
) |
|
|
(39 |
) |
|
|
(3,638 |
) |
|
|
(413 |
) |
|
|
54 |
|
|
|
(4,097 |
) |
|
|
(0.11 |
) |
|
Credit and foreign currency hedges, and other activities |
|
|
|
|
|
|
|
|
|
(1,369 |
) |
|
|
(1,369 |
) |
|
|
(0.04 |
) |
||||||||
|
Net income (loss) |
$ |
4,711 |
|
|
$ |
1,232 |
|
|
$ |
3,195 |
|
|
$ |
(106 |
) |
|
$ |
(4,752 |
) |
|
$ |
4,280 |
|
|
$ |
0.11 |
|
|
Net income (loss) per share(2) |
$ |
0.13 |
|
|
$ |
0.03 |
|
|
$ |
0.08 |
|
|
$ |
— |
|
|
$ |
(0.13 |
) |
|
$ |
0.11 |
|
|
|
||
|
(1) |
Includes interest income and net realized and change in unrealized gains (losses) associated with corporate debt and equity investments. Also includes management fees, performance fees, and various other operating expenses. |
|
|
(2) |
Based on weighted average shares outstanding of 37,563,048 shares for the quarter ended |
CLO Performance
During the quarter ended
The weakness in leveraged loans, together with rising credit concerns, led to a widening of CLO debt spreads during the quarter. CLOs with greater exposure to lower-quality loans were most negatively impacted, while higher-quality, seasoned mezzanine debt tranches outperformed as loan prepayment and repricing activity remained elevated. Meanwhile, CLO equity was negatively impacted by loan coupon spread compression and continued weakness in CCC-rated credits. This combination of factors contributed to losses across most CLO equity profiles as both excess interest and underlying asset values in CLOs declined simultaneously.
Meanwhile, despite continued dispersion in credit performance within the high-yield corporate bond market, corporate credit spreads were modestly tighter overall; and equity indexes extended their strong performance, boosted by robust corporate earnings and interest rate cuts.
Our investment portfolio generated negative results for the quarter, as unrealized losses concentrated in CLO equity investments, along with credit hedge losses, exceeded net investment income, trading gains, and the positive impact of deal calls of mezzanine debt positions owned at discounts to par. As of
Net Asset Value Summary
The following table summarizes our assets and liabilities as of
|
(In thousands, except share and per share amounts) |
|
|
|
|
Assets |
|
|
|
|
Investments, at fair value |
|
$ |
369,885 |
|
Cash and cash equivalents |
|
|
24,271 |
|
Other assets |
|
|
20,807 |
|
Total assets |
|
|
414,963 |
|
Liabilities |
|
|
|
|
Reverse repurchase agreements |
|
|
201,037 |
|
Other liabilities |
|
|
18,892 |
|
Total liabilities |
|
|
219,929 |
|
Net asset value |
|
$ |
195,034 |
|
Common shares outstanding |
|
|
37,568,800 |
|
Net asset value per common share |
|
$ |
5.19 |
About
Conference Call
We will host a conference call at
A dial-in replay of the conference call will be available on
Cautionary Statement Regarding Forward-Looking Statements
This release may contain forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical in nature and can be identified by words such as "anticipate," "estimate," "will," "should," "may," "expect," "project," "believe," "intend," "seek," "plan" and similar expressions or their negative forms, or by references to strategy, plans, or intentions. Forward-looking statements are based on our beliefs, assumptions and expectations of our future operations, business strategies, performance, financial condition, liquidity and prospects, taking into account information currently available to us. These beliefs, assumptions, and expectations are subject to numerous risks and uncertainties and can change as a result of many possible events or factors, not all of which are known to us. If a change occurs, our business, financial condition, liquidity, results of operations and strategies may vary materially from those expressed or implied in our forward-looking statements. The following factors are examples of those that could cause actual results to vary from those stated or implied by our forward-looking statements: changes in interest rates and the market value of our investments, market volatility, changes in the default rates on corporate loans, our ability to borrow to finance our assets, changes in government regulations affecting our business, a deterioration in the market for collateralized loan obligations, our ability to adapt to the new regulatory regime associated with our conversion to a closed-end fund/RIC, potential business disruption related to our conversion to a closed-end fund/RIC, ability to achieve the anticipated benefits of our conversion to a closed-end fund/RIC, and other changes in market conditions and economic trends, such as changes to fiscal or monetary policy, heightened inflation, increased tariffs, slower growth or recession, and currency fluctuations. Furthermore, as stated above, forward-looking statements are subject to numerous risks and uncertainties, including, among other things, those described under the heading “Risk Factors” in our Registration Statement on Form N-2, which can be accessed through the link to our
This release and the information contained herein do not constitute an offer of any securities or solicitation of an offer to purchase securities.
Reconciliation of Adjusted Net Investment Income to Net Investment Income
We calculate Adjusted Net Investment Income as net investment income adjusted for: (i) non-recurring expenses; and (ii) net realized and change in net appreciation (depreciation) associated with periodic settlements on interest rate swaps. Adjusted Net Investment Income is a supplemental non-GAAP financial measure. We believe that the presentation of Adjusted Net Investment Income provides information useful to investors, because: (i) we believe that it is a useful indicator of both current and projected long-term financial performance, in that it excludes the impact of certain expenses that we believe are less useful in forecasting long-term performance and distribution-paying ability; and (ii) we believe that realized and accrued periodic settlements on interest rates swaps are similar to net interest income and are more appropriately classified as recurring.
Our calculation of Adjusted Net Investment Income may differ from the calculation of similarly titled non-GAAP financial measures by our peers, with the result that these non-GAAP financial measures might not be directly comparable. In addition, because Adjusted Net Investment Income is an incomplete measure of our financial results and differs from net investment income computed in accordance with
In setting our distributions, our
The following table reconciles, for the quarters ended
|
|
|
Quarter Ended |
||||||
|
(In thousands except share amounts and per share amounts) |
|
|
|
|
||||
|
Net Investment Income |
|
$ |
7,751 |
|
|
$ |
8,485 |
|
|
Adjustments: |
|
|
|
|
||||
|
Less: Non-recurring expenses—Strategic transformation costs |
|
|
(49 |
) |
|
|
(35 |
) |
|
Plus: Net realized and change in net appreciation (depreciation) on periodic settlements of interest rate swaps |
|
|
2 |
|
|
|
— |
|
|
Adjusted Net Investment Income |
|
$ |
7,802 |
|
|
$ |
8,520 |
|
|
Weighted Average Shares Outstanding |
|
|
37,570,694 |
|
|
|
37,563,048 |
|
|
Adjusted Net Investment Income Per Share |
|
$ |
0.21 |
|
|
$ |
0.23 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20260304793605/en/
Investors:
Investor Relations
(203) 409-3773
info@ellingtoncredit.com
or
Media:
for
(212) 257-4170
Ellington@gasthalter.com
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