Carlyle Credit Income Fund (NYSE:CCIF) reported first-quarter 2026 results and discussed a market backdrop that management said continued to pressure CLO equity returns due to leveraged-loan spread compression, while credit fundamentals remained resilient.
Management cited loan repricings and spread compression as key headwinds
Principal Executive Officer and President Nishil Mehta said CLO equity faced challenges in 2025 from “continued loan repricings and bearish sentiment,” which weighed on returns for both the broader CLO equity market and CCIF. Even so, he said credit fundamentals remained strong and default rates continued to decline.
Dividend revised to $0.06 per share
Following discussions with the board, management said CCIF revised its monthly dividend to $0.06 per share. Mehta said the board considered current and expected GAAP yields and the fund’s objective to support net asset value. He added that the revised dividend equates to an annualized dividend of 20% based on the closing share price as of Feb. 23, 2026.
Portfolio activity: new investments, resets, and credit metrics
Mehta said CCIF’s underlying CLO investments generated an annualized cash-on-cash yield of 22.67% for the quarter, resulting in $0.48 of recurring cash flows at the fund level. During the quarter, CCIF made $13.1 million of new CLO investments with a weighted average GAAP yield of 13.6% and rotated out of two CLO investments for total proceeds of $4.4 million.
The fund completed three resets in the first quarter of 2026, following 26 refinancings and resets in calendar 2025 that reduced the cost of liabilities by 31 basis points on average. Mehta said management expects refinancing and reset activity to continue given “historically tight” CLO liability spreads.
Management also pointed to several portfolio indicators as of Dec. 31:
- Weighted average years left in reinvestment increased slightly to 3.4 years from 3.3 years.
- Zero CLOs in the portfolio were post-reinvestment period.
- Weighted average junior overcollateralization cushion of 4.48%.
- Average percentage of loans rated CCC by S&P of 4.2%, below the 7.5% CCC limit in CLOs.
- Percentage of loans trading below 80 of 3.8%, which management said is below the market average.
Market update: record CLO activity, resilient loan performance, and AI-related volatility
Chair Lauren Basmadjian, Carlyle’s global head of liquid credit, said CLO issuance totaled $53 billion for the quarter, bringing 2025 issuance to a record $211 billion. Including resets and refinancings, she said total gross CLO activity reached an all-time high of $538 billion.
Basmadjian said CLO liability spreads tightened across the capital stack over the course of the year and that reset and refinancing activity remained robust, with $52 billion of refinancing and $20 billion of resets pricing during the quarter. She also noted the share of U.S. CLOs out of their reinvestment period declined to roughly 11%, down from about 40% in 2023.
In leveraged loans, she said 2025 performance was resilient despite rate cuts and tariff concerns. The LSTA Leveraged Loan Index returned 5.9% in 2025 and about 1.2% in the fourth quarter. She added that issuance remained driven by repricing as borrowers took advantage of limited loan supply.
On credit, Basmadjian said borrower performance across Carlyle’s U.S. loan portfolio of more than 550 borrowers remained encouraging, including over 70% of borrowers generating free cash flow in the third quarter (the highest level over the past year) and revenue and EBITDA growth of 6% and 7% year-over-year. She said the broadly syndicated loan default rate, inclusive of liability management exercises, declined from 4.5% at the end of 2024 to 2.9% by year-end 2025, and that CCIF’s underlying loan portfolio experienced a 1.1% default rate inclusive of out-of-court restructurings.
Management also discussed volatility tied to AI-related concerns, particularly in software. Basmadjian said the risk appears less about immediate operating deterioration and more about valuation pressure, potential slowing in sales growth, and the need for investment in AI solutions. In Q&A, management said AI fears contributed to loan price declines and reduced repricing activity; Mehta said the longer-term impact is still “to be determined” and that the issue is “multi-year” in nature.
Financial results and capital structure actions
Principal Financial Officer Nelson Joseph reported total investment income of $7.1 million, or $0.34 per share, and total expenses of $5.2 million for the quarter. Net investment income (NII) was $2.0 million, or $0.09 per share, down from $0.15 per share in the prior quarter. Joseph attributed the change to $0.06 per share of interest expense from amortization of deferred offering costs related to the redemption of the fund’s Series A Term Preferred Shares.
Adjusted NII was $3.7 million, or $0.17 per share, in line with the prior quarter, while core net investment income was $0.32 per share, also in line. Joseph said $0.32 per share of core net investment income provides dividend coverage of 178% on the revised monthly dividend of $0.06 per share. Net asset value as of Dec. 31 was $5.17 per share, and Joseph said valuations were based on bid-side marks from a third party on 100% of the CLO portfolio.
On funding, Joseph said the fund refinanced $52 million of 8.75% Series A Term Preferred Shares through the issuance of $30 million of 7.375% Series D Term Preferred Shares and a private placement of 5-year 7.25% Series E Convertible Preferred Shares that generated net proceeds before expenses of approximately $16.3 million. The Series D shares are listed on the NYSE under the symbol CCID, and Joseph said Series E holders can convert after six months into common stock at the greater of NAV or the average closing price of the prior five trading days. Management said the transactions reduced cost of capital by about 1.42%.
In Q&A, management said loan repricings have “generally stopped” as volatility pushed more loans below par, and noted discount margins have widened over the last month. Management also said leverage was at the high end of its target range and that it is mindful of bringing it back toward historical targets over time.
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.
