Carlyle Credit Income Fund (NYSE:CCIF) reported third-quarter core net investment income of $0.25 per share, covering its monthly $0.06-per-share dividend by 139%, as management cited broadly stable credit fundamentals and signs that loan-spread compression may be moderating.
The fund maintained its monthly dividend at $0.06 per share, which management said equated to a 24.9% annualized rate based on the Aug. 17, 2026 share price. The dividend has been declared through November 2026.
Net asset value was $3.32 per share as of June 30. Principal Financial Officer Nelson Joseph said the fund’s NAV and valuations are based on bid-side marks from a third party for its entire CLO portfolio.
Portfolio activity and credit metrics
Principal Executive Officer and President Nishil Mehta said the CLO equity market was “fairly stable” during the second quarter after substantial first-quarter volatility, leaving CCIF’s NAV largely flat. The fund’s weighted average spread also remained relatively flat, supported by portfolio rotation into CLOs with slightly higher-spread collateral and partly offset by slowing loan repricings.
CCIF made $11.9 million of new CLO investments during the quarter at a weighted average GAAP yield of 13%, while recording $12.5 million in sales proceeds as it continued to optimize its portfolio. Mehta said the fund is currently finding more attractive relative value in secondary-market CLO equity than in the primary market.
The fund completed three CLO refinancings and resets during the quarter, bringing its fiscal-year total to 10. These actions reduced liability costs and extended reinvestment periods, according to management. The weighted average remaining reinvestment period rose to approximately 3.5 years from 3.3 years.
- Underlying investments generated an annualized cash-on-cash yield of approximately 20% during the quarter.
- Recurring cash flows were $0.37 per share, while core net investment income was $0.25 per share.
- The portfolio’s weighted average junior overcollateralization cushion was 4.24%.
- Loans rated CCC by S&P averaged 4.1% of the portfolio, below the 7.5% CLO limit cited by management.
- The portfolio had exposure to approximately 1,900 underlying loans across roughly 1,400 obligors, with no single issuer accounting for more than 1% of exposure.
- More than 97% of portfolio exposure consisted of first-lien senior secured loans.
CCIF also continued to hold one legacy real estate asset, with a fair market value of $2.2 million. Mehta said the fund is working with its partner to maximize the value of the underlying land and remains focused on exiting the position, although he described the process as slow-moving.
Spread outlook and CLO market conditions
Management said loan-spread compression has moderated equity distributions across the CLO industry because loan spreads have narrowed faster than CLO liability costs. Still, Mehta said the market is becoming more balanced, rather than continuing a one-way pattern of compression.
Lauren Basmadjian, CCIF chair and Carlyle’s global head of liquid credit, said some stabilization appears sustainable. While part of the loan market still trades above par and could see additional repricings, she said the market is beginning to see more amend-and-extend transactions for 2028 and 2029 maturities. Transactions involving software or AI-adjacent businesses have included significant additional spread, she said.
Basmadjian said new data-center and graphics processing unit-related loans could also support spread stabilization or a modest reversal of the compression trend. She said between five and 10 such transactions had entered the loan market over the prior four months, though she characterized the activity as still in its early stages.
New-issue CLO volume totaled approximately $23 billion during the quarter, down about 35% from the first quarter and the lowest quarterly level in roughly two and a half years, according to Basmadjian. CLO resets rose to $49 billion from $28 billion in the first quarter, while refinancings increased to $41 billion from $23 billion.
Loan-market fundamentals remain stable
After a volatile start to the year, U.S. leveraged loans stabilized in the second quarter. Basmadjian said the loan index recovered its first-quarter loss and returned approximately 1.3% year to date, while the average bid price rose to about $0.95 at quarter-end.
Gross broadly syndicated loan issuance was approximately $220 billion, roughly level with the first quarter, while net issuance rose 14% to $73 billion. She said activity was largely driven by opportunistic refinancings, with new-money, merger-and-acquisition, and leveraged-buyout activity remaining subdued.
Within Carlyle’s U.S. loan portfolio of more than 550 borrowers, first-quarter average year-over-year EBITDA and revenue growth were each approximately 10%, the highest rate in two and a half years. Average interest coverage was 3.4 times, with less than 2% of the portfolio reporting interest coverage below one times. The trailing 12-month loan default rate was 2.3%, below the 2.7% rate for high-yield bonds.
Management said it expects the second half of 2026 to remain marked by dispersion amid AI, geopolitical and inflation risks. CCIF plans to continue selectively deploying capital, pursuing refinancings and resets, and emphasizing experienced CLO managers, longer reinvestment periods and bottom-up analysis of underlying collateral.
About Carlyle Credit Income Fund (NYSE:CCIF)
Carlyle Credit Income Fund is a close ended fixed income mutual fund launched and managed by Vertical Capital Asset Management, LLC. The fund is co – managed by Behringer Advisors, LLC. The Fund invests mainly in fixed-income securities. The fund invests in stocks of companies operating across diversified sectors. It seeks to benchmark the performance of its portfolio against the Barclays Capital U.S. Mortgage Backed Securities Index. Carlyle Credit Income Fund was formed on December 30, 2011 and is domiciled in the United States.
