Sound Point Meridian Capital, Inc. (SPMC) Q2 2027 Earnings Report

The call was mixed. Management highlighted portfolio diversification, active trading, liability refinancing savings, improving monthly NII, stable distributions and potentially improving loan-spread dynamics. However, these positives were offset by NII remaining below distributions, a material NAV decline, a quarterly GAAP net loss, weak CLO equity market conditions, squeezed arbitrage, elevated leverage relative to the 200% threshold and continued macro and sector-specific uncertainty.

Management announced monthly distributions for calendar Q1 2027 of $0.13 per share, unchanged from Q4 2026, and said the 6-month fee waiver ending on December 31, 2026, reduces the annual base management fee from 1.75% to 1.5% and the annual incentive fee from 20% to 15% of pre-incentive net investment income; any extension will be evaluated with the Board at its next meeting in January, with “no specific plan” currently. Management said it is “working hard to continue to improve” NII toward covering the dividend, with monthly NII rising from around $0.08 per share to just above $0.09, then about $0.11, and “almost there” relative to $0.13; loan spreads have moved from 300 basis points to 302 basis points, though “that’s a long road in front of us.” It expects “at this point to see -- to start to see some improvement” in loan spreads, said conditions for CLO issuance look “constructive, heading into the fourth quarter,” and remains focused on the 200% leverage requirement, using portfolio trading, paydowns, resets and refinancings to manage it.