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The significant decline in Net Asset Value (NAV) per share from $15.51 to $10.56 was primarily driven by a 17-point decrease in median U.S. CLO equity values.

Management attributed the unrealized depreciation to a combination of continued loan spread compression and a sharp sell-off in the loan market, particularly within tech and software sectors.

A notable pullback in CLO equity buyers during the quarter caused bid-ask spreads to 'blow out,' further impacting mark-to-market valuations.

Operational focus remained on liability management, with the company participating in resets and refinancings to lower funding costs and extend the weighted average reinvestment period to October 2029.

The 12-month trailing default rate for the loan index rose slightly to 1.4%, though management noted this figure excludes elevated levels of out-of-court restructurings and subpar buybacks.

Core net investment income decreased to $1.03 per share, influenced by a decline in weighted average cash distribution yields from 19% to 16.7%.

Management reported a stabilization in the market quarter-to-date, with the April NAV midpoint estimate rising to $11.27 as buyers returned to the CLO equity space.

The company intends to maintain a conservative leverage profile, stating they do not plan to issue additional debt unless it is used to repay existing obligations.

Future performance remains sensitive to loan repricings, as management observed 40% to 50% of loans are currently trading above par.

The investment strategy remains opportunistic and unconstrained across CLO equity, debt, and warehouses, leveraging the firm's permanent capital structure to maintain a long-term view.

Secondary market liquidity has improved meaningfully post-quarter-end, with management seeing increased trading activity and tightening bid-ask spreads.

As of March 31, the company held $64 million in newly acquired CLO equity investments that have not yet reached their initial distribution phase.

Net realized losses of $38.4 million were recorded alongside the $381.4 million in net unrealized depreciation.

The weighted average effective yield at current cost declined to 11.7% from 13.8% in the prior quarter, reflecting the broader market yield compression.

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Management identified three factors: continued asset-side loan spread compression, a loan market sell-off led by tech/software names, and a technical lack of buyers for CLO equity.

They noted that while fundamental factors like NAV sell-offs were substantial, the technical 'blow out' of bid-ask spreads at quarter-end was a major contributor.

Management confirmed that while Q1 deployment was light ($500,000), liquidity and trading activity have 'stepped up pretty dramatically' in the current quarter.

The improvement is characterized by more participants in the secondary market and a meaningful tightening of bid-ask spreads compared to early 2026.

The company is taking a 'fairly conservative perspective' on leverage, viewing current levels as manageable despite the recent market downturn.

Management explicitly stated they are not looking to increase the debt-to-equity ratio through new debt issuances at this time.