TICC ups investments in CLO equity

TICC Capital’s second-quarter CLO performance improvement upped its investment income from the previous quarter, bumping the quarter’s performance to $17 million from $15.3 million

Specifically, TICC improved its $8 million income from CLO equity investments from the $5.9 million it made in CLO equity investments in the first quarter 2016. Its other second-quarter investment income came from $8.7 million of debt investments and $300,000 from other sources.

Chief executive Jonathan Cohen noted last quarter it was not an optimum time for TICC to exit its CLO positions, and an analyst on the call said Cohen’s take was “obviously correct since we’ve seen a strong rally in the market.” He inquired how the Cohen views the CLO market for the rest of the year.

Cohen said the “market has become more specialised” and noted he was seeing “a greater delta” between new issuance and secondary CLO markets. In its earnings results, TICC did note that it will have a harder time estimating its CLO equity investment taxable income though, which it normally uses cash flow to estimate, “in light of recent volatility in the corporate loan market.”

In the second quarter, TICC upped its CLO equity investments in the second quarter in a large way—it invested $37.9 million in CLO equity, up from $400,000 it put into CLO equity in the first quarter. It pulled back on its CLO debt investments, though. TICC invested $2.7 million in CLO debt in the first quarter while only investing $1.6 million in CLO debt in the second quarter.

Cohen also said TICC exited almost $60 million of corporate loans above par, which he said is part of the company’s strategy to move to higher yield, less liquid loans. The company’s average yield of its debt investments increased from 7.1 percent at the end of the first quarter to 7.5 percent for the second quarter.