Pearl Diver Credit Reports Q1 2025 Results, CLO Yield Rises to 15.57%
Pearl Diver Credit Company Inc. reported its financial results for the first quarter ended March 31, 2025. The quarter reflected a mix of increased investment income and higher expenses, along with market-driven unrealized losses affecting CLO equity valuations.
First Quarter 2025 Highlights:
- Net Asset Value (NAV):
- NAV per share was $18.33 as of March 31, 2025.
- This marks a decrease from $19.89 on December 31, 2024.
- The decline of $1.56 per share is primarily due to unrealized losses from rising risk premiums impacting CLO equity valuations.
- Net Investment Income and Expenses:
- Net investment income was $3.4 million, or $0.50 per share.
- Total investment income increased to $6.0 million ($0.89 per share), up by $0.6 million.
- Expenses rose to $2.6 million ($0.38 per share), mainly due to interest on newly issued preferred shares.
- Unrealized Loss and Net Loss:
- An unrealized investment loss of $9.6 million ($1.41 per share) was recorded.
- This follows a $0.5 million gain in the prior quarter.
- The company reported a net loss of $6.1 million, or $0.90 per share, versus a net income of $3.4 million ($0.50 per share) last quarter.
- Leverage Position:
- As of March 31, 2025, the Company had leverage of $40.4 million (23.2% of total assets).
- Leverage includes:
- $33.4 million of 8.00% Series A Term Preferred Stock due 2029.
- $7.0 million in reverse repurchase agreements.
- At year-end 2024, leverage was $35.6 million (19.9% of total assets).
- CLO Portfolio Metrics:
- Weighted average effective yield was 15.57%, up 68 basis points.
- All CLOs have reinvestment end dates from 2026 to 2030, providing strategic reinvestment opportunities during market volatility.
- Diversification and Exposure:
- CLO investments provide look-through exposure to approx. 1,200 unique obligors and 1,700+ underlying loans totaling $22.7 billion.
- The largest single obligor accounts for only 0.6% of the portfolio.
- Top 10 obligors collectively represent 4.4% of the CLO equity portfolio.
- Capital Market Activity:
- Closed the over-allotment option of the public offering for 8.00% Series A Term Preferred Stock Due 2029.
- Sold an additional 180,000 shares at $25/share, raising the total offering to 1,480,000 shares for net proceeds of $33.2 million.
Despite experiencing unrealized portfolio losses due to market-wide increases in risk premiums, Pearl Diver Credit Company maintained strong investment income performance and strategically grew its CLO portfolio exposure. With a diversified asset base, increased leverage capacity, and a rising yield profile, the company remains well-positioned to capitalize on long-term CLO reinvestment opportunities.
