FSK - Earnings call transcript Q3 2019

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Operator

Good morning, ladies and gentlemen. Welcome to FS/KKR Capital Corporations Third Quarter 2019 Earnings Conference Call. [Operator Instructions]. Please note that this conference call is being recorded. At this time, Robert Paun, Head of Investor Relations, will proceed with the introduction. Mr. begin. may you Paun,

Robert Paun

fund, conference included recorded and morning, call Earnings on to that Conference be release FSK FSK, in the a replay an days. XX November Corp. Good throughout being available Third issued be FS/KKR Capital Quarter may press the as will to for XXXX Call. is X, referred Replay the and Today's you. company FS/KKR the welcome Corp.'s Capital or audio of Thank call. Please call information XXXX. is that note

presentation presentation has supplemental its In on for XX, webcast addition, FSK posted financial the link and information its the to website respect A a ended September today's XXXX. containing Investor of FSK. of with quarter any call performance financial under on note form to portfolio section prohibited. Please Presentations. is available this company's and unauthorized this the call the is that strictly in rebroadcast of Events the is website Any property Relations and

conference its most recent required statements, Today's from FSK undertake FSK's factors the differ for SEC results outcomes refer with do that law. update unless to does and that important you by statements. or call to materially we cause filings forward-looking to actual ask statements these forward-looking could to not includes so

In include non-GAAP certain call addition, will this financial measures.

prepared the considered with a found For related should be such with and measures, November GAAP. Non-GAAP for FSK's or on in third in GAAP be supplemental earnings accordance information reconciliations isolation as directly quarter that not considered can most nature information to filed financial SEC the the X, measures in in release was be substitute comparable should XXXX.

filings, reported To not non-GAAP named please financial visit same other website. SEC the measures obtain companies. In by the company's similarly be latest of addition, FSK's these may as copies measures

of FSK. today's and Executive Officer Investment of Co-President will of Brian Dan and FSK; Co-President Michael Chief Forman, and Officer on Chairman Pietrzak, Gerson, Speaking be call FSK; Chief

also and will are Officer Accounting joined of FSK; over FSK. We Chief turn I to Lilly, now call Chief Financial Goebel, of Bill the by Steven Officer Michael.

Michael Forman

everyone, team some Robert, Conference Thank I FSK a key welcome, to regarding a Call. positioned I addition many well-deserved is upon policy we BDC industry. share the company investors. a call, and also the news Corp.'s the new it some topic has discuss of interest and significant then been touch will Third reasons you, believe XXXX and of for well FS/KKR introduce FSK to in On Earnings promotions, Quarter as work our I leading today's will public as Capital

Following my will remarks, quarter. Dan Pietrzak we open company's for our the will our activity the investment financial Gerson lending Q&A. for call the perspective on and and review current discuss will results for provide third quarter, the the then environment Brian

who in Steve infrastructure, a and Street To in Exchange York Triangle, the and wealth and Barings on I'm the Lilly, for the financial a in company's pleased brings of start, Officer Steven introduce oversaw all XXXX Benefit Steven BDC to corporate led operating New processes Stock XXXX. in that NASDAQ was sold the and the M&A BDC. involving At XXXX, listings built new strategic company the Corporation, Financial Capital Officer today of to served the he Triangle traded most became Chief as FSK. Chief years publicly as XX recently Financial to of experience

As same continue will and served the as CFO, Goebel of Chief with Accounting Officer. who who CFO, will previously partner as many FSK's Bill Steven responsibilities with

also to the Officer. to commitment. and is Co-Presidents Gerson In remain The Dan Investment and their in company's Dan of as partnership Pietrzak are elevating of Brian the will strength due FSK. KKR part between FS we addition, and large Chief leadership

and the will like done but would have job to of CEO Co-Chief continue as of natural we President of team director. and truly will my evolution FSK, and the and Builione as announced our collaborative as I the nature Operating continue of Investment down all Todd part adviser to addition, Drew as O’Toole partnership. these a a Wilson company. Ryan the capacity Ryan of execution contributing step will of superb speak recently a Officers. a the serve initiatives. express key as of to are to Director of I that appointments the and changes the President In leadership Drew as of FS/KKR

participate Now we with of reducing significant marketplace. our improving the diversification are made balance investment our our KKR portfolio, asset concentration leveraging of South we've of the Group venture in -- with Retirement the risk, adding across and credit's of how to Trust turning a order Starting positioned progress pipeline. range investment asset-based investment joint sheet, to robust finance wider side Carolina Systems in investments our

older focus we the credits Our portfolio on vintage as future. team continues to position the for

by strong demonstrated As investing, Credit be to and approach deal we to flow look disciplined we the forward, encouraged platform. KKR by continue

are sources on have we about mark-to-market and a risk facility. we our with focused reduced structure, of As liabilities prior capital, believe we've also positioned and a calls, well credit we capital maturity strong been and on talked best-in-class ladder, revolving diversified

building us against of blocks flexibility All these to our provide plan. execute business

this the as close almost delivered X CCT of positioning actions shareholder-friendly of To have on ago. a focused merger best-in-class remain quantifiable and we FSIC on we FSK end, a specific year the since Finally, BDC.

proceeded our and shares activity In approximately through to million we XXXX program. that January, of purchased significant This X, share program. the is have pleased the report CCT share of addition we December FSIC. began million November executing repurchase I'm in XXX under repurchase merger repurchase $XXX that on to

has XX the November CCT's including since shares past tender, $XXX approximately approximately entity million months, $XXX and post-listing repurchased combined FSK million XXXX. the Over in

another with incentive is added tangible is it look-back provision to net In precisely our was and financial income quarter. had addition, investment third intended. believe the during impact of working our as positive our example as a alignment on proactively in can you see results, the advisory we provision, We the look-back agreement, fee our shareholders

detail discuss the later X Over concept this past $XX of as on million the Brian the look-back in waived in fees approximately incentive call. his quarters, comments during will provision. a more result the adviser

on continue but policy Beyond across not the which the our shareholders, issues to company, on only have FSK we leadership entire benefit BDC public to the potential investors work provide space.

BDC-friendly the managers industry years, fund and now managers, a policy. Over index exchanges with fronts we other led firms, to advancements number on working BDC of have we mutual are advance AFFE and groups,

in continue months take many time, through on the of and to you to you as updating as with of SEC are and and optimistic We to will processes, look many in are both and issues unpredictable. know, which We come. have with listened the carefully issue addressed we work analysts our meetings be often investors progress the forward legislative

sheet. summary, side in of evolution balance I'm of with our the the pleased and our rotational team, progress strengthening In our right position the of our assets

during As environment call the platform, industry's the turn BDC and the investor's activity discuss forward are we and to believe benefits continuing to well to look leadership on Dan? quarter. now industry to largest the the capitalize we our combined provide platform, I positioned market FS/KKR Washington. to over full and portfolio the Dan will we of the in its

Daniel Pietrzak

available and what market, are in our few the outflows volatility, Recent deliver With providing highlights creating funds are while a retail credit ourselves are will heightened only investment the execution us in This our CLO we for opportunities during middle-market a to scale, deploy invest. syndicated alternative and broader see and on to loan to an slower driven of volatility also others. for update weakness and market quarter. syndicated to create of formation, market, such the to markets. you, upper from direct select idiosyncratic to continues seeing activity provide broadly Thank Michael. to volatile few certainty us we portfolio by lenders allows offer larger the opportunities capital I ongoing issuer for borrowers, an on that performance, scale as starting

third our asset-based evaluated, platform rate unique of X% volume quarter. in of highly XXX relationships platform, is The finance with activity our the our as origination high close direct remain selective, we well financial broad level investment sponsor as during over by deal credit KKR see to our quarter by shown driven as continued the efforts. a and This transactions network

and existing the second commitments quarter $XXX million and of deployment total in of paydowns our were borrowers, In $XXX activity, incumbent investment quarter were compared $XXX $XXX XXXX. compared increased third quarter during new the million of first third in $XXX the quarter Sales to to of second first investment to the in of million lender. million terms quarter the $XXX in in third XXXX. the million our million quarter, the quarter $XXX the In to being and million an power representing

$XXX pay and of joint venture. sales quarter Third to downs included sales million our

we this is were highlighting third was adviser, net its example transaction to since The par. combined December for $XXX position see new the end, sales, A.P. highest Plasman, with we level nearly with at during which during was of of repayment million an loan to October, of flow. achieve credit investment the of our the and highlighting been worth activity sponsor an funded momentum rotating is excellent loan continued higher these top Post $XXX of $XXX the repayments. years, position work One lower had of our Excluding experienced FSK. The transactions paydown in the to directly growing the term we deployments versus we outcome. A.P. approximately net outcome. vintage, began volumes, Plasman occurred and company in year-on-year quarter of environment which as risk month robust year, positive in out deployments at origination platform. the set to as older overall mature This million closely Despite loan desired quarter continue deal million, a FS/KKR and strong was of prior private and competitive outstanding and a X X this loan

scale to in themselves, markets. begin us of positions we XXXX, market and present to look may they size believe as advantage well take we towards especially opportunities volatile As our

adjusters earnings joint We highlights from that be million investor carriers provide a acted committed larger purchase a review services million X $XX Kelso's J.S. financing the loss for to transactions range relating to J.S. Turning as Held few is the to by Slide consulting in that to quarter. on engaged of during cost it FSK would primarily firm presentation. the matters occurred insurance insurance high thought of key of and where third helpful a KKR a to first-lien specialty-consulting $XXX claims. of lead engineering Held,

produces facility Additionally, chronic gallstones. The in KKR first-lien Europe ingredients disease headquartered company fund credit acquisition to treat is pharmaceutical and investor lead a and liver the million in a used Credit €XXX active of was [indiscernible]. to

of such KKR entire platform credit the BDC with Our committing other million to amount. and committed initially managed €XXX facility FSK accounts

Capital's shops. and quarter, Genstar the a collision data provider between that facilitates global original of solutions parts services we dealers the During of and also and sale supported repair software of purchase OEMs, and equipment and OEconnection, distribution

KKR joint investor the million the was facility. lead on second-lien $XXX

We relationships provides have broad we in scale past depth the us as unique well as that our mentioned our the size of think and opportunities.

purchased aggregate commitments. sit This XX As during the Citigroup issuers, compelling an different equity. believe provides venture, loan XX from joint $XXX on example, sponsor-backed we investment a return will secured of our portfolio in representing approximately in positions and from we a quarter, million

with us. direct deal is referred this intended come program, addition, Citi direct In whereby a new be is flow referral to lending will to seeing like lending purchase

of that opportunities scope We first all have on right will fall within program. the the of the refusal

Now I'd more XX venture to discuss in like and joint detail. to our turn Slide

at purchase. market largely XXXX, portfolio XX, at fair XX% June value $X.XX XXXX $XXX from the quarter-over-quarter at million billion investments grew venture's Citigroup driven to joint by September Our XX,

scale look of about opportunities how an investing joint to spoke our finance in transactions to in FSK. in calls, compelling provide across our well as investing target as On additional XX% also returns our to creating venture can will up diversification We prior continue these portfolio. allocation we focus asset-based for and with investment

of two potential and past of specifically in We the few investments, the income KX. assets in and benefits these the quarters, to from have growth see our dividend started Toorak the from growth

We in compared quarter third dividend important million The believe of for the income Dividend asset-based many component a recurring, in two $X.X from our expected flows second it's are joint that the of be and dividend $X.X at and $X.X investments million XXXX. to income meaningful the income in look the in dividends. regular quarter of our paid in the of to be recurring in given first investments nature us contributed million with to assets quarter finance underlying cash venture the the of form as quarter. will

over call quarter. results the Brian I discuss the will now to turn during to our financial

Brian Gerson

the the provide for quarter I'll Dan. of XXXX. Thanks, a of results third summary financial

the presentation. information, this Slide You on can find earnings X starting of

was quarter-over-quarter September XX, look-back of the per impact share, of three provisions on net investment the The income the to driven per investment this net excluding income the $X.XX back, investment largely the net months share said, in in our which impact For income $X.XX ended was XXXX, still incentive covered increase by the That quarter fees. dividend look compares XXXX. second quarter.

additional investment reductions Michael incentive that we million will As would look-back provision the our net component agreement, mentioned Absent in third resulted next the appreciation, the of approximately look-back the earlier, fees quarter. over portfolio in that investment shareholder-friendly is several providing to incentive believe income. advisory anticipate $XX fee a of reduce material which continue we quarters, provision

fee million approximately per of project the share. aggregate X next reductions stable incentive in over quarters performance, Assuming or we $XX underlying approximately currently $X.XX

Net million, million Getting unrealized QX. $X.XX million $XX losses and net resulting share. were $XX per realized back or were of in gains losses to $XX

value activity asset seen as $X.XX of the and of in net XX, be X dividend. and the can benefit the as Slide XXXX, repurchase realized which June and main on Our $X.XX of was per share are at The earnings compared presentation, change share per XXXX. losses, drivers of XX, to the September NAV over-earning the gains unrealized include share

share quarter, $X.XX regular the asset based we representing yield a on During XX, annualized X.X% XXXX, a net paid value. September per dividend,

paid fourth share, on will December about close stockholders XXXX. a the $X.XX of record XXXX, per dividend which declared of X, January be of XX, Directors our of or as of to business Board Our on quarter

One net of a is our recurring to our deliver investment key initiatives by shareholders to dividend competitive income. supported

dividend believe of the that were dividend months to pleased our While we on This through the ability X further we XX cumulative NII the information basis, earnings a has have we presentation. seen can coverage. enhance our of on covered year first be the Slide

on focused represented third assets. approximately investments are nonincome-producing equity we of exposure the portfolio on of At of First, further based fair rotating equity out value. our the end and X.X% reducing quarter, our

a the term. to We allocation long over are X% X% targeting

our finance as investments increase Toorak KX continue Second, and recurring illustrated dividend income in to by the maturation Capital of Aviation. will asset-based investments our

are Asset-based value allocation. targeting of finance portfolio fair XX% of the to XX% based and investments a represented X.X% as on XX, September we

joint our spoke Third, continue as earlier, to venture. will exposure about Dan we increase to our strategic

to And to Our our value, has as portfolio billion look $X targeting and this we allocation venture XX% X.X% we now equity September of commitments. joint represented of XX, X.XXx up allocation. of target returns incremental increase believe continue And total of a fourth, portfolio. fair previous of from X.XXx based We target on actions to diversify X.Xx. are further to to our these all investment well our debt-to-equity regulatory to provide can as Xx our as leverage range

Now the portfolio. turning to

consisting At by the our XX% of the end portfolio the portfolio XX% the of to portfolio billion, $X.X XX the quarter. the fair Slide quarter, fair a of end of earnings portfolio portfolio second top on the presentation. XXX third largest X represented XX, of seen September companies compared had value As our value at investment of At of companies.

We continue tool. diversification, we portfolio as risk to on view a focus which mitigation key

of of of at This a XX, was borrowers were median X.Xx. of as $XX value median investments, by in market, the secured leverage Additionally, we the compares senior the median to financing $XX million, comprised XX% of on Also, XXXX. consistent first-lien the loans secured as focus XX. at with of end and median fair million, June remain upper focused senior EBITDA our is loans, X.Xx with our middle EBITDA XX% and our on leverage borrowers portfolio September

third the of end as in yield the as fair as a the XXXX. on in investments. portfolio on quarter, XXXX. to At debt XX, well accruing of at decline XX, value LIBOR X.X% nonaccrual XXXX, to as As June X.X% to XX.X% investments of attributable compared certain FSK's XX.X% September was average far compared return the profile, approximately portfolio weighted at The on yield was portfolio the basis XX, higher-yielding as June the decline was at repayment

the Acosta the investments quarter Exploration during end Furniture. Bellatrix position exit to the Van negotiations Art on a near During We had at chose gain ongoing value-oriented the in our the placed nonaccrual, Midwestern quarter we quarter on Bellatrix to mark. bankruptcy placed in Canada, is to restructuring X Furniture after quarter, third third Van due expect sale process nonaccrual Acosta, and files this and Art protection we the a to company furniture run retailer. future. the and

a during pay performance the our regarding have nonaccrual does to to cash continued the we it managers company we place us new the concerns sponsor, company The meaningful several value quarter, and of revenue CEO on base are financial to and interest company. we of given the closely the with deteriorating recently working While elected hired footprint, the and a investments. our geographical senior other maximize

balance our sheet. to Turning

value As at at million assets to total $XXX billion. total at $X.X million Total were $X.X at compares billion. XX, cash assets of This June XX, total and value and of XXXX, $X.X XXXX. fair fair was September investments $XXX cash were $X.X of total investments billion total billion,

Moving debt markets. billion, $X.X billion, total with debt committed balance to was side and of the total diversified right-hand of sheet, $X.X across the lenders

Our the XX, to compared was June the net debt-to-equity at at of third XX% end XXXX. as quarter XX%

quarter. rate XX, XXXX, end average was in Our approximately the weighted September the of on with at second debt relatively interest line X.X%

first our As significant X liability X we offerings. bond of have structure our on unsecured further call, through and past the highlighted side progress our during middle sheet quarters, the market balance CLO we in our made capital last strengthening

billion now will I and maturity or of our capacity. undrawn revolving XX% debt the greater, have approximately has turn of XXXX we over call $X.X addition, Michael. the back to of In liabilities

Michael Forman

Thanks, And thank today. Brian. everyone to you time your for

your questions. As With the always, we for that, open appreciate will now call support. we

Operator

[Operator Instructions].

comes with Rick JPMorgan. Shane question first from Our

Richard Shane

Thank one love the that's developments there? hear been I Hilding update you seems to Anders largest on to while on new for the to well that sheet the like updates as nonaccruals. would on the a and just get a the quick balance for be

Daniel Pietrzak

Rick. Sure. the It's Thanks question, for Dan.

senior done seen about an there. we I debt. support. we've were they amount positive think out of That developments market think to got talked some calls, the with Number in good this prior their on one, I with a amendment

company cost and then side, So that raw And the seen on gives of performance. some better materials also runway. the additional input we've the

So the than financial that been happy we're prior, to amendment And got we're performance better has over the done. last quarter happy see and that.

Richard Shane

saw lower And Is modest costs? of the raw improved because the is the that the margins there Or I there. was structure with because it. Got markup that of reflection of a a better material refinancing?

Daniel Pietrzak

performance. financial The

Operator

Our next with Compass Point. question from Casey comes Alexander

Casey Alexander

of timing the think Could a at sale given over might bit the balance of you were time these the the assets little for dividends of that least of portion JV discuss on the quarter. sheet and fact time, during more from some we how developing assets, into the JV

so we to And about impact sheet as from the just dividends sort balance of to contouring opposed income how JV? general interest think of the

Daniel Pietrzak

a of question, Casey. things. Good Maybe couple

back of of the also lot base the sales were I driven quarter. the of quarter. those the up back inside think, JV half portfolio asset one, -- was has the the that a Citi half have And then would assets been

JV and will income that the be next increased spits So NIM there quarter I assets out. we in perspective, effective that higher expectation should think dividend with the expect these from

with I So that. been we've happy think

about for the talked as us. an tool think important JV I we've

quarter-on-quarter less quite it Obviously, kind in had to seen we're And Carolina. bit South up quarter growth. higher should with on little to last the from all all, growth a move we than you've the the that to But happy clean think quarter. there. I following of be you because it's expect

Casey Alexander

Okay.

income with, since balance the better of a shouldn't from half and interest to right, you still JV? lot dividend was the all be sacrificing could we back the expect activity hearing through quarter income -- I'm if coming So some sheet of that begin were as these

Daniel Pietrzak

should the number then that JV. this right. when think And the expect we that's was I income from quarter. dividend think Yes, better mean, you net deployment quite I obviously, about positive

effectively of side. have good the of I the interest We'll replacing as that So think sheet would sort been be spot well. We're regular balance in those sold. a income assets

Casey Alexander

Yes.

Okay, great.

the of that CLOs. questions. loan some appreciate the -- of advantage up opened single comments you short-term think that way do other about B Secondly, in the Do the has opportunity? that while? some and last and then that sort I'll of see taking legs people you some is the for leveraged is ask let might pocket Or that, and get I the weakness and out from as a a market

Daniel Pietrzak

probably for the Yes. mean, in volatility say I term. to medium to is markets It's that the do there tough be going long, the how we believe

You've in got things lot of on the world. a going

technical like CLO your You've had some matters point. of almost with these

I that just think loan and the around those or you've credits seen and get a fair to market amount of or losers" "winners of our story divergence more kind done. them harder have for in noise

continues. So volatility that the I think

I think what that of to that. like BDC take sort that clearly, to, but term, is and can flow, volatility can of think, and platforms advantage beneficial we us look Capital, capital we and to do will like it I ebb medium

Operator

with Our next O'Shea from Securities. Fargo Wells question Fin comes

Finian O'Shea

welcome you're aboard And Mr. Lilly, there. if

new question curious Co-CEOs, understanding be if The day-to-day will the the day-to-day? senior there's just what these were I management shift shift you each Is in already Co-President, all of any on in you place, promotions. responsibility, -- and mean, in first a there work doing X

Daniel Pietrzak

Fin, I'll The short answer, that. it's no. take Dan.

and all changes was evolution time but and sort probably structure, this it think putting the of all in a heavily kind of of been is -- that I having sort better and just of spent from day-to-day. natural seen formalized something as involved, no you've with you us the more is

Finian O'Shea

your understand LCD talk game and at Capital was Dan, on while reports then, to I Markets while And title you. the KKR OEC have left nuanced. new But want investments there, was a lead KKR lien, the be reported connection, Okay. can the of to -- second I rare lead the the I be Credit out the the investor. about looking one affiliate, bit

can solve solution. us, you which high or for of first, to this entities, as how So provide you lead give up clubbed two mechanics one those lien of sort level the second to

Daniel Pietrzak

to. happy I'm Yes.

limits and in as again, I our as clients can there the those our feel markets talked As and And benefit have, we we we've help view that we want about the to, solutions -- and will to you past, certain can it folks definitely to of hold come We how deals ourselves can sort like provider. are come to solutions has and be may holistic times think know, rest. be in, either of sponsor trying us team when I that and provider. position borrowers a try this, where capital much to in we distribute

get That's The as always that not is of from we client sort important accounts our Wherever our BDC full dollars, a thing And lack of happens. effectively kind to as the BDC would under eat markets for note, commit platform. skim demands, well better of first. coupled word, something our with the we platform though, capital paid circumstances no full fees.

you what to filled want get to you filled. get So

arrange up deal rest the the club. they the was day, this the role bit helping KCM club end to few together and this different married a of people, put here a a was more that Here, where of of just with at

Finian O'Shea

their to Is the Sure, they they'll you do there you part. to that's whether collaborate club effort or any present do when firm services best a have or commitment? helpful. as And guideline

Daniel Pietrzak

situation I potentially as is fee for as are situations they that mean, whole the example, an you certain of are here $XXX Yes. situation this million. tranche use think I where every about specific, no sort And This doing well. think right? is there I because

of got think There's need club But again, together. asked circumstances. to to of help it's situational. put a someone I handful with other effectively kind deal that others, but up we

more to a transaction Staples to about Some the sort committed went we out because a was are one-stop go There we solution, I of prepared and sell did as mean, we if year important was back That rest. the on as franchise than them risk of for that to other we've much talked think some non-EPC ago funds. you we commit were was full Canada, providing to Capital for points there Markets of which down your borrower. that the publicly.

Finian O'Shea

small question. private? a manner It was dividend a or I'm portfolio there curious was looks maybe basis home another the the like Was on in nature, partners reduced you bit. a understanding that Then cost sold? just if if just reduction

Daniel Pietrzak

really No, up to detail. of a some pick that good question. that's And

you. thank So

day, end that of venture. portion was, joint I was the was think -- at the the to all it sold the was investment a of

in left portion overall that JV. and was obviously, before, system kind talk As sure heard sold a the we there, you've think about there. of the diversification of kind between about us to using a portfolio bucket, nothing FSK that make And non-EPC we're maximizing of the

Operator

comes Jefferies. John Our with next Hect from question

John Hecht

Most within describe But spreads pipeline? rate economic How pipeline you guess, the my asked changing the within the, would I guess, pipeline, in thinking of answered. and, changing and the opportunities I questions modestly terms been about environment. I'm and already wondering have the just given environment

Daniel Pietrzak

to Yes. wants maybe I mean, and add I'll to start Brian it. then

in right? think mean, some as don't amount I move prepared well deal I our the flown been that think flow into seen I that through think remarks But M&A a we tremendous of has the spreads. opportunity. I overall pipelines in seen think of with we've pretty good, as the activity both in Q&A., about, talked I you've some good early volatility market. less

we the last reaching basis I and finding But we lend are for focused money on think think the I if right We're the you've heard there. are with XX opportunities points prior us calls, more partner to not want much and here. company on to. that

lag although there's I October. see a of clearly, little we what that to about think a talked But that. our you in even can QX numbers, in bit for

competitive So market, That towards and/or I a situated maybe In think and exploit market's to I'd today. we we have. what need we that feel good ways, to the think some relationships advantages us. a said, with like where coming we it's bit are

Brian Gerson

is Brian, this and John. Yes,

to thing or land, I some in syndicated particularly that markets seeing that. solution the the we're only think unitranche at is in probably opportunities, that volatility add to given that looking I'd as debt an alternative larger private

billion in becoming we're available $XXX that market So are the unitranche seeing.

John Hecht

debt-to-equity interesting. you then your to plans guys but and what I -- are get restate it, timing there? or the And maybe you did on your helpful. Okay, and call I thoughts think That's kind misheard leverage of and target

Daniel Pietrzak

we've restated. think Yes, I don't

think in I that talked there. We was on think, XX-month that in we've to about we the clock a certain we're I path essentially just talked sort of add always think now, that. that's a as We XX revolver which about about our probably get circumstances, starting of did X.XX number, process. Xx extend I quite X.XX. months, to for slides. we're sort another about type just happy We is And talked believe

I think -- do got we a have best-in-class revolver. we

we're on path So get a to I think there.

no I be what into we we're will really we of opportunities, thinking think we to think terms lean that there but targets. market go change if will above where can in conditions

John Hecht

as team within your in Lilly. the then Steve thoughts for Steve, And final Okay. kind there. you're are what I've on with of the room and -- question assuming your there, integrated of kind is, joining plans just the Steve wondering team worked welcome, before. get the you

Steven Lilly

franchise. an may end have of on be the look or others I'm question, you Brian been your math, adviser, I you've here. the thank judgment leading done team on this executing change of thank be and years learning what little of standpoint analysis, that with welcome. feels reserve in as individual at balance done on -- way of the the phone back I actually what it's since capital are credit rotated again, think create them. me. time you warm to I with has that the question, the your sure with And fortunate team a this would you And things portfolio. forward marry guess, been to with welcome. somewhere for certainly the the and XX% his forefront But BDC -- team you least I'm join, I working a strong with of to looking but then delighted portfolio certainly to has architected at so quick for at a impressed Certainly that happy and warm a closely to say, when And structural and and certainly the the and the FS it a but of probably at of really John, looking time compare the over how my here from rest to percentage standpoint, Dan turned they're from certainly, of KKR have around from from that analysis

Daniel Pietrzak

is And reiterate Michael And continue sort I management John, just to we what very in start, as the bolster the Steve happy here. team. that mean, we're said of to

to to forward So and we Steve. forward look move with continuing that get going

Operator

[Operator Instructions].

Our Ryan next from question comes with Lynch KBW.

Ryan Lynch

give saw -- quarter, marked I a welcome on comment status, your First, you another on back on quarter? Steve, now BDC to negative the into just accrual wanted and update drove was this is what give took just Belk this space. paying still an XX% to then you Dan, really could if that income could in -- mark interest also I And mark maybe, if investment you

Daniel Pietrzak

Yes.

I news here. think good actually there's been

sort the extend, time the The trade you've gotten done. first-lien completed and that's think actually I up amend seen first-lien of from

given some sit we available company flow sweep It have time. of productive a dividends second, think positive a or the of in kind of removed been not forced for cash I a of otherwise. pretty that extended it's lot open where sort us, that an for It's might baskets just has for generates amendment runway and has cash. it

structure all meaningfully. improved the a in from all, structure perspective, has think I So

the no first-lien And we to amendment retired it. there's change debt feel large is generator position, how kind so cash about I free of think this down bought flow. And They've historically a positive. of still and

pop you out saw the that post. of L X of the obviously, of down, market X back sort off seen think, that the L you've X -- with but with I I think the think L can we that, I L up there, and X sort

Ryan Lynch

Okay, that of assets spreads had, that are regarding portfolio flow, of you industries deals they balance then go also, like, give then that's structures, in. look they with helpful a Citi. what relationship? just commentary. Can what us flavor maybe forward, that sort of you funded deals on were going your those And the And those also also on mostly the relationship Could some JV? will those put based deal deals Or you be that into can the expect those from sheet?

Daniel Pietrzak

We've Citi of that has and relationship get fair work happy transaction. to were done. site our with to pretty the question. a done hard to great got team, be a lot No, We Yes. that execute able

as would of kind classify of itself, terms first-lien, roughly The purchase I unlevered. did kind it X-ish come percent with In financing. of portfolio portfolio the generally

in been it physicians that portfolio think maybe think JV bit an million to point, end, in $XX we quarter the we've positive sold, we the very little number sale $XX certain And I that a is data ROE that was So inside its of the think, conviction ways sold of we because a roughly just like since and do has attractive. many less of had about mark. that at a million

think the has for I been good. So that process

JV terms would the kind sort sheet, program, into balance for not be In funnel the way referral of available of that and BDC of way, the our go direct. regular regular

Ryan Lynch

makes Okay. last And That then sense. one one.

a unrealized about Partners. You Toorak Home in a gain record the and $XX guys about million had quarter $X in gain million in smaller, recorded a

going gain right just Can equity in And hot in entities that have just acquisitions. collect of those in There's particularly, future is about be space portfolio unrealized the been companies unrealized really million operating that income gain know to monetizing gains? quarter. realizing Now $XX will the you your these approximately now. have in and drove Toorak actually the any some Are each do this you from? intention you these investments basically those I these an positions. talk what of our

Daniel Pietrzak

kind mean, to, based bridge that a Yes. an entity we mortgage Toorak maybe good of mean, sometimes residential on or or to flip. the fixed acquirer United we is provide I market all in capital No. That States very refresh for what I call. what Jersey. is call and calls the just question. of an the -- It's in loans New somewhere

book points that important. value to are grow Ryan, One, that I of They business. continues a there, ramp to think Toorak couple investment our in a even perspective. in continue there's from

$X.X I loans. think they've billion, north of billion of acquired $X.X

of is We are loans -- nine are portfolio, realizing ways, year that sort the share. FSK of this some in They've constantly months already the roughly to loan. been themselves. just type half not repaid These overall of that's But one sort in though.

So repayment and XX% paying Toorak origination grows, volume then the the actually a volume grows, annualized have dividend. we roughly

So kudos it's we've seen. think there. actually the markets. something securitization. grow. think bank new with they like owned have, duration amount of considering what the did management that I assets, The they've look company and will job you're to really They've, is that continue Toorak company. getting not and that excellent portfolio financing big third it's an The their access of a portfolio And asset It's quarter. of been we've repaid. to that. we're success -- that deserves X lines continuing for this, results tremendous. returns are is their the done last in are of were to loans deep, a loans obviously an They short financed. class I our this the that of been We're with inside that done loans happy a the the doing team then has now in of third we, they've lot to hopefully, for capital a really point The driving operating happy And market entity That's we've addition

that other hope points. was nothing So than But kind of I particular those helpful.

Operator

with Raymond And our next question comes from James. Matt Tjaden

Robert Dodd

from And have the CFO I'm a -- just told income But always of I some certain this. of a -- during in quarter, call of level I'm then like million used over had covered this recurring, quarter, looks so OID of on I you acceleration cover nonrecurring if and used you probably level to another the normal income. as trying $X kind It BDC what hopped BDCs million that Robert. a of look actually the handle is. OID certain every $X nonrecurring baseline -- me quarter It's of might nonrecurring, that have to a number recognition. I your about get

Or baseline mix you I level, then nonrecurring a lot mean, also that? just us what's prepay and that? indication did obviously, the any So kind of recurring any to a income a with of you prepayments? on trying a can occurring, And get dividend on the side, of kind get of... but the give of

Daniel Pietrzak

a great question. It's

a of tried lot do income. remarks we We we in little that bit as about of. our view dividend this -- start think prepared the on a I talk recurring with nature. because a I'll on to -- do that the lot view

$XX of JV. million that for third I the think you $XX see quarter. million We the from -- is

quarter, asset lot as to the the second think portfolio so benefit the or number the quarter half full that. JV sales a of up I of were we Citi to the go in expect of a back-weighted they JV the get didn't

a $XX and is from JV there up be event quarterly the the scheduled to should million. be sitting So as going

handful because view same if in about, that of our we've which up leasing we way. we a that's some Toorak, seen sort consistency just which running asset-based actually I sort the set and is is dividends position. think XX% pay to talked aviation of in available a investments, of cash finance an dividend KX,

a has to ways, many lot we in So that would And we of up quarters expect it. recurring that to 'XX our as go feel characteristics 'XX progress.

Michael Forman

I'd there And And was prepayment $X say side, of fee about income. half million Yes. the of fee about premium. that was on

Operator

Fargo Securities. from follow-up a is with question O'Shea Wells Fin next our And

Finian O'Shea

a program. private I lot of a with behalf a you you see the appetite let's lot of Citigroup? Can loan. and ton there's a lenders it of the of, well, why just as of on from Citi here, had a expand amount for seat Just fair follow-on on my money thinking say,

like anyone get sounds it from would to Citi. referrals So love

be a helpful. their to would terms of Just side? perspective? ability them, the it you to what origination bringing in So perspective, there are any context on commitment Or the fee to behalf the on research is to is add there

Daniel Pietrzak

good fair there. try a It's to partner be couple going No. things, would question. love bring I we're to Yes, a to right? think We a of

I referral. we'll the, fee scale speak it, get type bigger size think ticket. a has that through someone for call and some just definitely who able are speak they're the it its whole would not of if for looking to to could they think ability But way the their would are of do for to agreement. for probably deals or the who if paid I as they it, solution do able at find they're Obviously, clients, referral looking it make for it. one then They

partnership. intended that to dialogue constructive have and with happy One think a to them. it's I just we're be So

Operator

for gentlemen, this Thank and participating. call. you Thank concludes you. conference today's Ladies

now may disconnect. You

FS KKR Capital (FSK) 9 Nov 192019 Q3 Earnings call transcript