Egan-Jones backed Octagon’s call to reject the proposed King Street sub-advisory agreement, while XA Investments had previously cited ISS support for approving the change.
XAI Floating Rate & Alternative Income Trust shareholders now face conflicting proxy recommendations ahead of a July 30, 2026 special meeting on whether to approve a new sub-advisory agreement with Rockford Tower Asset Management, L.L.C., a wholly owned subsidiary of King Street Capital Management, L.P. XA Investments LLC, the fund’s adviser, had urged investors to vote on the WHITE proxy card in favor of the proposal and said Institutional Shareholder Services supports it. Octagon Credit Investors, the terminated sub-adviser, said Egan-Jones Ratings Company has now recommended voting against the plan. Octagon said Egan-Jones rejected the board’s case for replacing it, arguing XFLT’s performance should not be judged against the Morningstar LSTA US Leveraged Loan 100 Index because the fund is levered and heavily exposed to CLOs. Octagon highlighted Egan-Jones’ view that a more tailored composite showed Octagon outperforming in three of the last five years, with only modest recent weakness. Octagon also pointed to Egan-Jones’ criticism of the proposed fee structure, saying the arrangement would increase XA Investments’ share of a fixed fee pool to 48% from about 41% without clearly benefiting shareholders. Egan-Jones further questioned board independence, noting that two of the six trustees who approved the transaction had a current or former direct financial relationship with XA Investments. The dispute follows XA Investments’ earlier campaign against Octagon, in which it said Octagon’s CEO and CIO owned no XFLT shares, blamed the firm for poor performance, and said seven CLO defaults in Octagon-managed vehicles in 2026 wiped out entire classes of investors. Octagon is urging shareholders to vote AGAINST the proposal on its BLUE proxy card, while XAI continues to push for approval on the WHITE card.