Pearl Diver Credit Company (PDCC) Q1 2025 earnings summary

Executive summary

• Focused on maximizing total return and generating high current income through investments in equity and junior debt tranches of CLOs, with an annualized dividend yield of 13.9% as of March 31, 2025.

• Portfolio is diversified across 50 CLO positions managed by 33 distinct managers, with exposure to over 1,700 unique loans in more than 30 sectors.

• Largest single manager exposure is 12.1% and largest CLO equity position is 4.9%, with no significant concentration risk.

• IPO completed in July 2024, with a public offering of 8.00% Series A Preferred Stock in December 2024.

• Managed by a team with 140+ years of combined experience and a 16-year track record in CLO investing.

Financial highlights

• Q1 2025 investment income was $6 million ($0.89 per share), with net investment income of $3.4 million ($0.50 per share).

• Net unrealized loss on investments was $9.6 million ($1.41 per share), resulting in a net loss of $6.1 million ($0.90 per share).

• Net asset value per share declined to $18.33 as of March 31, 2025, from $19.89 at December 31, 2024.

• Total expenses were $2.6 million ($0.38 per share), mainly due to interest on preferred shares.

• Distributed $0.22 per common share dividend in each of January, February, and March.

Outlook and guidance

• Anticipates a slowdown in CLO primary issuance and refinancing as many have already locked in favorable spreads.

• Expects CLOs to benefit from loan market volatility due to extended reinvestment periods, with all CLOs having reinvestment end dates from 2026 to 2030.

• Predicts only a moderate increase in defaults despite tariff-related volatility, with CLOs expected to remain resilient.

• Portfolio weighted average effective yield was 15.57% at quarter-end, indicating strong income potential.