8-K: Carlyle Credit Income posts Q4, keeps 24% yield

CCIF reports Q4 2025 results with core NII covering dividends, declares monthly payouts through Feb 2026, adds new capital, and ends the year with NAV at $6.13.

Summary

• Quarter ended September 30, 2025: Net investment income (NII) was $0.15 per common share; adjusted NII was $0.17; core NII (CNII) was $0.32 per share, fully covering quarterly dividends of $0.315.
• Maintains monthly common dividend of $0.105 for December 2025, January 2026, and February 2026; equates to a 24.14% annualized yield on the Nov 12, 2025 share price ($5.22) and 20.55% on NAV ($6.13).
• NAV per common share was $6.13 at September 30, 2025; net realized and unrealized losses were $(0.21) per share in Q4 2025.
• Total investment income was $7.736 million; total expenses were $4.574 million; quarterly net loss was $(1.354) million.
• Portfolio fair value was $192.2 million across 54 CLO holdings; weighted average GAAP yield was 14.44% (14.55% excluding called deals).
• New CLO investments funded were $34.9 million with a weighted average GAAP yield of 13.65%; sales proceeds were $36.5 million.
• Cash yield on CLO distributions received was 21.80%, equating to $0.51 of recurring cash flows per share; approximately 7% of the portfolio did not make payments during the quarter due to resets/refis and new deals not yet distributing.
• Weighted average junior overcollateralization (OC) cushion improved to 4.59% (from 4.50% as of June 30, 2025).
• Capital actions: entered a $30 million credit facility at SOFR + 3.25% (upsizable to $50 million); issued $30 million of 7.375% Series D Term Preferred (CCID); completed a private placement of 7.25% Series E Convertible Preferred for net proceeds of ~$16.3 million; redeemed all $52 million 8.75% Series A Term Preferred.
• Underlying portfolio: 1,479 unique obligors; last 12 months default rate (incl. distressed exchanges) was 1.09% versus 3.49% for the broader loan market.

Sentiment

Score: 6

Explanation: Strong cash generation and dividend coverage offset by sequential NAV and NII declines and a quarterly net loss; balance sheet actions improve funding profile.

Positives

• Core NII of $0.32 per share exceeded the quarterly dividend of $0.315, indicating dividend coverage.
• Common dividend of $0.105 per month maintained through February 2026 (24.14% annualized yield on Nov 12, 2025 price; 20.55% on NAV).
• Cash yield of 21.80% on CLO distributions, generating $0.51 recurring cash flows per share in the quarter.
• Weighted average junior OC cushion improved to 4.59%, supporting CLO tranche protections.
• Entered a $30 million credit facility at SOFR + 3.25% with no unused fee and upsize capacity to $50 million, enhancing liquidity.
• Issued $30 million of BBB+ rated 7.375% Series D Term Preferred (CCID) and privately placed 7.25% Series E Convertible Preferred (~$16.3 million net), diversifying funding.
• Redeemed higher-cost $52 million 8.75% Series A Term Preferred, lowering cost of capital.
• Completed five resets and two refinancings in the quarter (seven accretive refis/resets cited), extending reinvestment periods and enhancing the portfolio.

Negatives

• NAV per share declined to $6.13 from $6.51 at June 30, 2025.
• Sequential earnings pressure: NII per share fell to $0.15 from $0.19 in Q3 2025; total investment income decreased to $7.736 million from $8.609 million.
• Net realized and unrealized losses of $(0.21) per share drove a quarterly net loss of $(1.354) million.
• Approximately 7% of the portfolio did not make payments in the quarter due to resets/refis and new issuances awaiting first distributions, temporarily dampening cash flows.
• Leverage (preferred shares and debt to total assets) increased to 0.39x from 0.35x quarter-over-quarter.
• Portfolio is concentrated in CLO equity (98.8%), which is higher-risk and more volatile through the cycle.

Risks

• Forward-looking statements involve substantial risks and uncertainties; actual results may differ materially due to factors described in SEC risk factor disclosures.
• There can be no assurances that future dividends will match or exceed historical rates or will be paid at all.
• Non-GAAP measures (CNII and adjusted NII) may not indicate taxable earnings; taxable income can differ materially from CNII, especially during periods of market disruption and volatility.
• CLO equity cash flows can be interrupted by resets and refinancings and by new deals that have not yet made initial distributions (approximately 7% of the portfolio did not make payments during the quarter).
• Exposure to underlying loan defaults and credit deterioration; the broader loan market default rate (including distressed exchanges) stood at 3.49% versus CCIF’s 1.09% over the last 12 months.
• Market conditions and macroeconomic factors could impact operating results, financial condition, and portfolio performance.

Future Outlook

Management emphasizes positioning the portfolio for long-term success through accretive resets and refinancings that extend reinvestment periods, and expects to maintain the monthly dividend through February 2026, noting coverage by core net investment income and healthy CLO OC cushions, while acknowledging evolving market conditions and associated uncertainties.

Management Comments

• Management highlights continued focus on positioning CCIF for long-term success, citing five resets and two refinancings completed in the quarter to extend reinvestment periods and enhance the portfolio.
• States the monthly dividend is covered by core net investment income and the portfolio remains well positioned as market conditions evolve.

Industry Context

Results reflect the current CLO equity environment: elevated base rates are supporting high cash distribution yields and dividend coverage, while mark-to-market pressure on loan collateral continues to weigh on NAVs. Peer CLO funds have similarly leaned on resets/refis to bolster reinvestment periods and cash flow durability amid higher default and downgrade activity relative to pre-2022 baselines.

Comparison to Industry Standards

• Dividend yield and coverage: A 24.14% market yield with CNII coverage is broadly in line with high-yielding CLO equity funds such as Eagle Point Credit (ECC), Oxford Lane Capital (OXLC), and OFS Credit (OCCI), which typically target double-digit yields supported by cash distributions from CLO equity.
• NAV volatility: The sequential NAV decline mirrors broader CLO equity fund trends where loan market price softness and spread changes drive unrealized losses; comparable vehicles have experienced similar NAV pressure during periods of heightened credit dispersion.
• Funding cost: The 7.375% Series D preferred compares favorably to the redeemed 8.75% Series A, aligning with industry efforts to refinance higher-cost legacy capital as markets stabilize.
• Portfolio health metrics: A 4.59% weighted average junior OC cushion and a below-market default rate (1.09% vs. the loan market’s 3.49%) are consistent with stronger-performing CLO equity portfolios managed by established platforms.

Stakeholder Impact

• Common shareholders receive high monthly income ($0.105 per share) with coverage from core NII.
• Preferred shareholders benefit from declared monthly dividends on 7.375% Series D shares.
• Redemption of 8.75% Series A preferred and issuance of lower-coupon preferred reduces the fund’s cost of capital over time.
• Credit facility enhances liquidity and investment flexibility, potentially improving execution on resets/refis.
• Convertible preferred issuance introduces potential future dilution upon conversion but provides immediate growth capital.

Next Steps

• Host earnings conference call at 10:00 a.m. EDT on November 19, 2025.
• Pay common and Series D preferred dividends on December 31, 2025; January 30, 2026; and February 27, 2026, to holders of record on the respective record dates.

Key Dates

Recommendation

Maintain a neutral stance: dividend coverage by core NII and improved funding costs are positives, but NAV and NII trends weakened and the quarter posted a net loss. Await evidence of stabilized NAV and sustained cash coverage post-resets/refis before upgrading.

Keywords

Carlyle Credit Income Fund, CCIF, CLO equity, dividend, net investment income, NAV, Series D Term Preferred, CCID, convertible preferred, credit facility, SOFR + 3.25%, OC cushion, cash yield, earnings presentation, NYSE: CCIF