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EICB: Covered 7.8% Yield From This CEF Preferred Equity

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Thesis
Eagle Point Income Company Inc. (EIC) is a closed end fund. The fund aims to generate a high level of income via investments in junior CLO tranches. These represent the below investment grade portion of CLO debt, and are usually rated in the BB band. The CEF can also take positions in CEF equity, which represents 25% of the current collateral pool:
Collateral Composition (Company Presentation)
CLO debt is less risky than CLO equity because it contains a higher degree of subordination, but nonetheless the CEF contains leveraged high yielding collateral that can gap down substantially in a prolonged recession.
One has to keep in mind that securitized products that are tranched have embedded leverage, with the equity and junior tranches of a CLO structure being the first ones to absorb any collateral losses. As an example, if you have a pool of leveraged loans worth $100, the first $10 in defaults/write-downs here come exclusively from the CLO equity / junior tranches. Thus low overall default levels do not affect the BBB/AAA CLO slices, but can wipe out the entire junior capital structure.
The riskiness of a CEF’s collateral pool has a 1:1 correlation with the leverage it can get from a bank and the cost of that leverage. As we have seen with Oxford Lane Capital Corporation (OXLC) and Eagle Point Credit Co LLC (ECC), the direct result of such collateral is the reshuffling of the liability structure for such CEFs when compared to traditional fixed income ones. While most fixed income CEFs have a mix of bank facilities and preferred equity, CLO equity CEFs contain unsecured notes and term preferred equity.
EIC is a hybrid of the two, containing both a small bank facility (currently undrawn) and two series of term preferred equity. In this article we are going to analyze the Series B Term Preferred Stock due 2028 (NYSE:EICB), its analytics and metrics, and derive an opinion regarding the risk and rewards associated with owning this security.
CEF Liability structure
As discussed above the CEF has a small bank facility and two series of preferred equity, as shown in its Q3 figures:
Liability Structure (Presentation)
As per its Semi-Annual Report back in June, the bank facility had the following characteristics:
On September 24, 2021 the Company entered into a credit agreement, which was amended on September 6, 2022, with BNP Paribas, as lender, that established a revolving credit facility (the

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