ECCV - Buy OFS Capital Term Preferred (OCCIN) Sell Eagle Point (ECCF) Term Preferred

2024-02-13 12:15:00 ET

Summary

• OFS Capital and Eagle Point Credit are very similar closed-end funds holding assets of the same type. Both offer safe-term preferred stocks protected by a 50% leverage limit.
• OFS Capital term preferred stock, symbol OCCIN, currently offers a 9.23% yield to maturity (annualized return), clearly the best in the sector.
• On the other hand, Eagle Point Credit’s new term preferred, symbol ECCF, has a YTM of only 7.52%, worst in the sector, trades over par, and has the worst taxation.
• The article compares OCCIN and ECCF to other term preferred stocks and baby bonds in the sector, demonstrating that ECCF is around $1.20 over-priced while OCCIN is undervalued.

OFS Capital & Eagle Point Credit

OFS Capital (OFS) and Eagle Point Credit (ECC) are both closed end funds (CEFs) that invest in CLO equity tranches. The third fund with same profile as ECC and OFS is Oxford Lane Capital (OXLC). As CEFs, they are only allowed to take on leverage of 50%. This keeps their preferred stocks and baby bonds very safe....

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