Good day everyone, and welcome to this Sound Point Meridian Capital Inc. second fiscal quarter ended September 30th, 2024 earnings conference call. Getting started today, all participants are in a listen-only mode, but later you will have the opportunity to ask questions during the question- and- answer session. You may register to ask a question at any time by pressing the star and one on your touch-tone phone. Please note this call may be recorded. I will be standing by should you need any assistance. It is now my pleasure to turn the floor over to Peter Sceusa with Investor Relations.
Good day, ladies and gentlemen. Thank you for standing by. Sound Point Meridian Capital refers participants on this call to the investor webpage, www.soundpointmeridiancap.com for the press release, investor information, and filings with the SEC for a discussion of the risks that can affect the business. Sound Point Meridian Capital specifically refers participants to the presentation furnished today on Form 8-K with the Securities and Exchange Commission and to remind listeners that some of the comments today may contain forward-looking statements, and as such, will be subject to risks and uncertainties which, if they materialize, could materially affect results. Reference is made to a section titled Forward-Looking Statements in the company's earnings press release for the period ended September 30th, 2024, which is incorporated herein by reference.
We note forward-looking statements, whether written or oral, include but are not limited to Sound Point Meridian Capital's expectation or prediction of financial and business performance and conditions, as well as its competitive and industry outlook. Forward-looking statements are subject to risks, uncertainties, and assumptions which, if they materialize, could materially affect results. As such, forward-looking statements do not guarantee performance and Sound Point Meridian Capital gives no such assurances. Sound Point Meridian Capital is under no obligation and expressly disclaims any obligation to update, alter, or otherwise revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, historical data pertaining to the operating results and other performance indicators applicable to Sound Point Meridian Capital are not necessarily indicative of results to be achieved in succeeding periods.
I will now turn the call over to Ujjaval Desai, Chief Executive Officer of Sound Point Meridian Capital.
Thank you to everyone joining us today for your interest in Sound Point Meridian Capital, or SPMC, and welcome to our earnings call for the second fiscal quarter ending September 30th, 2024. We would like to invite you to download our investor presentation from our website, which provides additional information about the company and our portfolio. With me today is our Chief Financial Officer, Kevin Gerlitz, and after our prepared remarks, we will open it up to your questions. We are thrilled to report that for our first full quarter since our IPO, SPMC delivered strong results. For the quarter, we generated net investment income, or NII, of $17.5 million, or $0.86 per share, which exceeded our distributions for the quarter of $0.70 per share.
Net asset value per share ended the quarter at $19.59, down modestly from where it stood on June 30th at $19.91, driven primarily by unrealized losses of $9.5 million for the quarter. During the quarter, we deployed approximately $160 million across 14 new CLO equity investments with a weighted average yield of 14.8%. Additionally, we participated in eight loan accumulation facilities, also known as CLO warehouses, which generated $6.7 million of other income, or $0.33 per share. As of September 30th, the weighted average GAAP yield on our equity portfolio was 15.7% versus 16.9% as of June 30th. The decrease in GAAP yield was the result of lower rates as well as loan repricings in the underlying CLO portfolios, both of which reduced estimated future cash flows available to CLO equity holders.
This was slightly offset by CLO refinancing and reset activity, which lowered the CLO liability costs on certain CLO investments in the portfolio. Our portfolio as of September 30th was diversified across 70 investments managed by 22 CLO managers. The underlying loan portfolio consisted of over 1,500 loan issuers across 30 plus sectors on a look-through basis. We believe this strategy of broad diversification enables us to manage risk effectively, providing us with dividend sustainability and downside protection through changing market conditions. Subsequent to the end of the quarter, on October 31st, we successfully priced a public offering of 2 million shares of our 8.00% Series A Term Preferred Stock due 2029, resulting in net proceeds of approximately $48.2 million. We expect to use these proceeds to acquire new portfolio investments in accordance with our investment objectives and strategies, make distributions to our stockholders, and for general working capital purposes.
This successful offering reflects a strong financial standing and marks a significant milestone for SPMC, reinforcing our commitment to dividend growth and value creation for our shareholders. As of October 31st, our estimated NAV per common share was $20.58, a significant increase of 5% from September 30th, mainly driven by month-to-month unrealized gains that resulted from refinancing and reset activity, as well as tightening of CLO equity market yields. Additionally, on November 7th, we announced monthly distributions for calendar Q1 2025 of $0.24 per share, an increase of 9.1% over the current distribution rate of $0.22 per share. This announcement is consistent with our strategy of raising distribution steadily over time as we deploy the proceeds from our IPO offering, our senior facility, and now our Series A preferred stock.
With that, I'll now turn the call over to Kevin for a more detailed review of our financial highlights for the quarter. Kevin?
Thanks, Ujjaval, and hello, everyone. As Ujjaval mentioned, for the quarter ended September 30th, 2024, we delivered net investment income of $17.5 million, or $0.86 per share. For the quarter ended September 30th, 2024, we recorded a net realized and unrealized loss on investments of $9.9 million. Total expenses for the period ended September 30th, 2024 were $7.7 million. GAAP net income for the quarter was $7.6 million, or $0.38 per share. Moving to our balance sheet. As of September 30th, 2024, total assets including priced CLO warehouse equity were $501.9 million. Net assets were $396.4 million, and our net asset value stood at $19.59 per share. The fair value of our investment portfolio, including priced CLO warehouse equity, stood at $485.4 million, while available liquidity consisting of cash was approximately $2.6 million at the end of the quarter.
During the quarter, we entered into a $100 million net asset value revolving credit facility with CIBC. The facility may be increased up to $125 million. As of September 30th, 2024, the company had outstanding debt that totaled 8.7% of total assets, including priced CLO warehouse equity. Subsequent to quarter end, we successfully priced a public offering of 2 million shares of our 8.00% Series A Term Preferred Stock due 2029. These shares are redeemable in 2029. After underwriting discounts, commissions, and estimated offering expenses, the transaction resulted in net proceeds of approximately $48.2 million. Pro forma for the preferred stock offering, the outstanding preferred stock and debt stood at approximately 15% of total assets, including priced CLO warehouse equity as of October 31st, 2024. During the quarter, we declared monthly income distributions of $0.22 per share payable at the end of October, November, and December.
Based on our share price as of September 30th, 2024, this represents an annualized dividend yield of 13.4%. Overall, we are pleased with our strong results this quarter and believe we are well-positioned to sustain our momentum moving forward. I will now turn it back to our CEO, Ujjaval Desai.
Thanks, Kevin. Before opening up for questions, I would like to give a quick update on the overall market environment for corporate loans and CLO equity. Primary loan activity totaled $224 billion in Q3 2024. Although this marked a 44% decrease from prior quarter's record-breaking $405 billion, Q3 activities still exceeded all quarterly totals from second half of 2021 to the end of 2023. Of the $224 billion of activity, 36% came from new issuance unrelated to a refinancing or repricing, adding about $81 billion of net loan supply to the market. Loan repricings continued in Q3, albeit at a slower pace than Q1 and Q2, with $101 billion of activity. On a year-to-date basis, loan issuers have lowered the spread on $511 billion of term loans by over 50 basis points on average.
Said another way, about 38% of all outstanding loans have reduced their borrowing costs over the course of 2024. Turning to CLOs, demand for new issue CLOs remained strong in Q3. New CLO issuance volume was $41 billion during the quarter, compared to $53 billion in the second quarter. Despite the lower sequential total, new CLO issuance of $142 billion year- to- date through September 30th remains on pace to eclipse 2021's record-setting year of $187 billion. CLO new issue liability costs continued to tighten in Q3 as well due to strong investor demand. Furthermore, refinancing and reset activity saw continued momentum throughout the quarter. Year- to- date through September 30th, refinancing and reset activities stood at $60 billion and $143 billion respectively.
Both figures are ahead of 2023's year-to-date totals as the compression of CLO liability costs has created an opportunity for CLO managers to improve liability costs and lengthen reinvestment periods of existing CLO deals. The reset and refinancing activity is a welcome development, as the reduction in liability costs helps to offset the reduction in yields from loan repricings, thereby increasing the excess cash flow available to CLO equity holders, which is what we commonly refer to as CLO's arbitrage. Furthermore, an extension of the CLO reinvestment period provides a longer runway for CLO managers to optimize the underlying loan portfolios during times of volatility, which can further provide upside to CLO equity returns. We saw this upside materialize in our own NAV for the month of October, with SPMC NAV up 5% for the month.
With the Federal Reserve beginning its rate cut cycle in September, we expect there to be a modest decrease on CLO equity yields, which we view as a short-term technical headwind. While it's true that lower base rates mean slightly less cash flow available to CLO equity, it is the spread between loan yields and the CLO's liability costs, coupled with the CLO's structural leverage, that determines the bulk of CLO equity returns. In the medium term, we view rate cuts as a net positive for CLO equity as interest costs decrease for floating rate issuers may be a catalyst for lower corporate default rates. As of September 30th, the trailing 12-month default rate stood at 0.8%, remaining well below the historical average of 2.63%.
We continue to monitor the Fed closely to observe its appetite for further cuts, but it appears that the fears of a significant spike in loan defaults due to high rates are alleviating, which is certainly a positive for CLO equity. We continue to be bullish on CLO equity as an effective and attractive way to invest in senior secured corporate loans. Our investment philosophy remains unchanged, centering on active portfolio management and emphasizing capital preservation while pursuing attractive risk-adjusted returns for our shareholders. In summary, we are pleased with the performance this quarter and remain excited about the abundant opportunities in the CLO market. We will continue to leverage our disciplined investment approach, the Sound Point brand, and the expertise of our team to drive attractive risk-adjusted returns for our shareholders.
With that, we thank you for your time today and would like to open up the call for Q&A. Operator?
Thank you, Mr. Desai. Ladies and gentlemen, if you would like to ask a question, please press the star and one on your telephone keypad. You may remove yourself from the queue at any time by pressing star and two. Once again, ladies and gentlemen, that is star and one to ask a question, and we'll pause for a moment to assemble our roster. We'll hear first today from Matthew Howlett at B. Riley.
Oh, hey, guys. Thanks for taking my question. Congrats on a fresh report.
Thanks, Matt.
Yeah. My question is for the pace of. You got this line outstanding, and obviously you just did the Series A. What's the pace of portfolio growth you can envision really looking at the next several quarters here? How quickly can you get up to your target here?
Yeah, sure. As I said earlier, we invested $160 million in new CLO equity in the last quarter. That's really the pace we think we can deploy capital at going forward. As I said, the loan market continues to be very active, so there's a lot of loan issuance, a lot of CLO issuance. With the preferred and the remaining capacity on the CIBC revolver, that's not that much capital to put to work. So we think within a quarter, we should be able to deploy all that capital.
Okay. The targets are in the 30s, right? In debt to assets?
Yes, that's correct.
Okay. I guess the obvious question is, the NII that you're doing really without the leverage. You're 8% at the end of September, and you're up to 15% in October. It's just $0.60. It seems like that has a lot of room to improve as you continue to deploy and grow the portfolio. My first question is, can we really expect this NII to continue to track up as you grow portfolio and draw on the credit line? The second question is, on the credit line, that is repricing down, right? It's SOFR-based, and how much savings could you get if the Fed does cut one more time this year and four times next year? Is that going to be a big tailwind for you guys if that happens, given it's floating rate?
I think those are all great observations. First one, in terms of our income generation capability, clearly we're not fully levered yet, and we're still able to meet the dividends. We feel that, as we lever the structure, we should be able to generate additional income. We're also generating income, as you saw, from two main sources. One is the yield on the portfolio investments, but also a lot of income through loan warehouses, which is obviously a great benefit to us as well. Because of that, we increased our dividends to $0.24 a share. We'll continue to monitor that and see if there is capacity for further increases. But we feel very comfortable being able to meet or beat those dividend payouts. Then on the second question on the senior facility, yes, you're right.
It is floating rate, so it's SOFR plus 375 basis points coupon. With SOFR going down, our cost of that financing facility is coming down. If rates were to go down by 50- 100 basis points, then that would have a one-to-one effect on the financing cost as well, which obviously is beneficial for us. We think that's a great facility, and it being floating rate right now is certainly a tailwind for us.
Yeah. Seems like you got a number of tailwinds here behind your back. Last question on the recent refi activity. You have done a great job with the portfolio. Is there more to do on that when you look at the next quarter or so? Is there any more low-hanging fruit, deals that can get refied or reset? Just curious on what is left.
Yeah, absolutely. I think there is certainly a lot more reset activity left. If you recall, this portfolio, we have been putting it together since early 2022 before Meridian went public. So the portfolio has a lot of transactions done in 2022 and 2023. Those deals have a two-year non-call period. So a lot of the 2022 deals, the non-call period ended this year, and we were able to reset those, and you saw that in our October numbers. There is a lot of uplift from resets that happened in October. Typically, most of them happen on payment dates for CLOs, which is October. The next one is in January. There will be a set of deals in our portfolio that will come up for refinancing in January, and then you are going to have more in the following quarter.
Assuming that liability costs stay where they are or tighten from here, which is a possibility, a lot more of the deals in the portfolio will become reset eligible. We expect if the market stays where it is, to continue to do these resets, and that obviously helps cut our costs going forward for the CLO equity positions and provides significant boost to the NAV of the portfolio.
Yeah. You said the book value is, what, is it $20.60 at the end of October?
Yes.
Was that big from the end of September?
Yes. Yep. That is right.
Incredible.
About 5% in the month. Yeah.
Look, incredible performance. Look, we look forward to putting that capital to work and then seeing the growth in NII. Really appreciate you two both. Thank you so much.
Great. Thanks, Matt.
Ladies and gentlemen, another opportunity to press star and one if you have a question. We have no further questions from our audience this morning. Mr. Desai, I am happy to turn it back to you for additional or closing remarks, sir.
Great. Well, thanks everyone for participating on the call today, and we thank you for your support. We will see everyone again on our next call in February. Bye for now.
Ladies and gentlemen, this does conclude today's conference, and we thank you all for your participation. You may now disconnect your lines.