Company: PRIF-PJ
Filing Date: 2025-03-26
Form Type: N-2
Source: 0001554625-25-000027
Chunk: 22

Company: Priority Income Fund, Inc.
Filing Date: 2025-03-26
Form: N-2
Chunk 22
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 of CLOs have voting rights on the management of the underlying Senior Secured Loan portfolio. The holders of the equity tranches of CLOs typically have the right to approve and/or replace the CLO collateral manager after such CLO manager has triggered a default. The equity tranche of a CLO has the ability to call the debt tranches following a non-call period. Debt tranches of CLOs do not have the right to call the other CLO security tranches.

We believe that the CLO market, including the U.S. Senior Secured Loan markets have represented and continue to represent attractive areas for investment. We believe that investments in the equity securities and junior debt obligations of CLOs provide an efficient mechanism for investing in the U.S. Senior Secured Loan market because investments in CLOs allow for us to invest in a highly diversified and levered pool of assets in a cost efficient manner. We may choose not to invest in Senior Secured Loans directly because our principle investment strategy is to invest in the equity and junior debt tranches of CLOs. We are able to invest in equity securities and junior debt obligations of CLOs that have leveraged exposure without the execution costs of creating such a portfolio. Investments in the more senior debt obligations of CLOs, on the other hand, do not provide the same efficiencies in terms of leverage and do not have the same equity exposure. We believe that while the U.S. Senior Secured Loan market is relatively large, with the Morningstar LSTA US Leveraged Loan Index estimating the total par value outstanding at approximately $1.42 trillion as of February 28, 2025, (1) this market remains largely inaccessible to a significant portion of investors that are not lenders or approved institutions.

An investment in a CLO offers access to a diversified and actively managed or actively monitored portfolio of Senior Secured Loans in a single investment. An investment in the equity class of a CLO provides the potential for enhanced returns generated by the difference between the yield on the underlying assets in the portfolio and the cost of funding the rated debt liabilities.

The most junior classes of all U.S. CLOs (typically referred to as CLO equity classes) have delivered approximately 19% annual average cash yields from January 2003 through December 2024, as shown in the chart below, (2) and, according to Wells Fargo, 98.1% of U.S. CLOs that have been issued since 2000 and redeemed through March