Sound Point Meridian Capital reported a shortfall in NII due to loan spread compression, CLO liability costs, and reduced credit available, leading to a decrease in NAV to $14.02 per share. During the quarter, they deployed $6.8 million in warehouse investments and purchased new equity positions with an average cap yield of 9.31%. The CLO equity portfolio’s weighted average gap yield was 11%, down from 12% due to loan spread compression.

Monthly distributions for Q2 2026 were announced at 20¢ per share, down from the previous quarter’s 25¢. The decision was based on factors like portfolio yield, maintaining balance sheet flexibility, and supporting NAV. The CLO equity investments have significant refinancing optionality in 2026 to offset loan yield compression. The portfolio remains diversified with 97 CLOs across 30 managers.

For the quarter ended December 31, 2025, net investment income was $9 million, with a net realized loss of $1.1 million and an unrealized loss of $51.8 million. Total expenses were $9 million, GAAP net loss was $43.9 million. Total assets were $474.7 million, with net assets at $287.9 million and NAV at $14.02 per share. The fair value of the investment portfolio was $473.5 million.

The leveraged loan market remained active in 2025, with substantial repricing amendments. The weighted average spread of the leveraged loan index dropped to SOFR plus 3.2%, the lowest since 2012. US managers priced $55 billion in new issue CLOs in Q4, setting a new annual issuance record. The loan market is expected to transition towards modest growth in new money issuance in 2026.

New issue CLO equity investments have been less attractive compared to secondary equity. The portfolio yield increased to 11.4% in January, reflecting refinancing activity. The Board set the monthly dividend at 20¢ per share, aiming to cover it with NII over time. Leverage ratio is at 39%, currently being monitored for potential adjustments.

Read more at Yahoo Finance: Sound Point Meridian Capital Q3 2026 Earnings Call