FSK - Earnings call transcript Q4 2021

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Operator

Good morning, ladies and gentlemen and welcome to FS KKR Capital Corp’s Fourth Quarter 2021 Earnings Conference Call.

Your lines will be in a listen-only mode during the remarks by FSK’s management. At the conclusion of the company's remarks, we will begin the question-and-answer session. At which time I will give you instructions on entering the queue. Please note that this conference is being recorded. Paun, Investor Robert with will time, instructions. the this Head Relations of proceed At Mr. begin. may you Paun,

Robert Paun

press Thank and Please Good to throughout quarter KKR you. morning Corp as XXXX Corp’s KKR Capital or earnings fourth issued FSK, Capital Today’s call. the being information the conference will February available the be call. may be is included call days. is an Replay FSK note and the fund FS welcome recorded call release that in referred to XXXX. XX, a for on conference of audio company that XX FS replay

In on A with website respect its to required the prohibited. FSK’s the and forward-looking link addition, ask ended performance a are information you portfolio and its to to risks could generally. supplemental do filings quarter for FSK materially and unless any recent affect from today’s financial is webcast or so financial its statements does that update posted cause presentation important this these the that FSK to note has includes Please Today’s could by for XXXX. conference subject uncertainties We not risks FSK refer and Relations presentation Any unauthorized SEC XX, or this strictly with to most Investor on call factors economy outcomes and that statements and forward-looking the the statements. rebroadcast containing property results FSK. section December law. that actual to differ undertake Events under company’s of form the of is in available website Presentations. call the is of call to

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

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

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

on Forman, and Officer. Chief Lilly, Chairman Wilson. now Officer; Co-President; Michael the Officer Pietrzak, Brian Executive O’Toole Steven us Dan Investment Drew call to will over Co-President; Operating on Ryan Also Co-Chief and will Chief and today’s Speaking and Gerson, phone joining call be Chief turn the I Officers, Michael. Financial are

Michael Forman

perspective, fourth for and of and FS I XXXX accomplished. Robert, operational Thank good Capital Corp’s team both earnings an to a KKR XXXX you, strategic Welcome morning a the quarter am was momentous call. From what everyone. proud year and conference FSK

we two BDC During single a publicly assets. with transformational companies creating in closed out the over traded a merger billion $XX year, of

XXXX, origination investments in progress the investment in $XX originated new year Our advisor over rotation million FS is assets. team legacy largest KKR since in became on of meaningful the our which resulting

a X.X% above value Our yearend to our value net net term compared per dividends at yield end in at target as increased our on paid to XX.XX% share year X%. in XXXX, asset in $X.XX to XX.XX% long XXXX. yield and XX.X% XXXX of FSK asset equating average

blended average X% contributed X.X% XXXX. approve approximately at debt the activities to $X.XX cost material our our at continue to to compared various unsecured of amendments a bilateral financing X.X% weighted issuing during optimize December of XX, Finally, to XXXX, four structure coupon on billion an December decline XXXX, in by closing of to notes we and attractive terms capital XX, facilities. of These

quarter, illustrating stability the In with of terms to of XXXX fourth business. and the quarter results, conclude pleased positive we're strength another

our approximately investments. billion quarter, fourth $X.X team originated new the During investment of

our $X.XX the $X.XX From $X.X public per $X.XX we investment at of was the ended $X.XX above liquidity adjusted investment was with a billion net which income guidance per and third per end the liquidity. income of quarter of perspective, approximately quarter. our GAAP share share was Our share, available

Additionally, issuing of million in enhancing unsecured and accessed further liquidity funding bonds, profile. public January, $XXX our the X.XX% debt again markets we

late and results, in the Steven $X.XX quarter, of a announced the on will our quarter. repurchased $XXX on XXXX, our executing speak of XX, Through repurchase began our program distribution share quarterly previously the fourth we program. dividend As third quarter more Based later first our in policy we share the have board $XX million dividend for approximately February under declared our per overall about million call. has shares

continue we believe we XXXX, to results. to are positioned strong well forward delivering Looking

we investor continue opportunities team are color to team growth made with our provide XX have on are of quarter. Specifically, call initiatives. progress. on progress will investment introduced positive our our net growth we meaningful summary, the we provide day another the pleased a and to at last months. believe the the during I'm for And analyst discussion turn and Dan detailed and this proud with additional I on of more make as the the September. past In Dan well we to And that, year income extremely accomplishments I'll on and the positioned opportunities strategic over progress market the

Dan Pietrzak

Thanks, Michael.

our environment credit. of is As remains the the we posture economic that state generally contemplate constructive the for current economy,

witnessed associated you, has chain to well possess as said, which That situation EBITDA is we beginning flow deep have inflationary that bias and on as degree pressures believe we broad pipelines the macro we which performance, pricing potential companies, Ukraine. inflation, impacts a as and of to the are market, more portfolio of with order pent return portfolio perspective, with In From parts we of inventories and can to an quite rates, and normalized pleased spending some geopolitical as demand and origination are we continue attractive to levels. possible, to rates. portfolio return of by dynamics, many risks businesses labor, finance, continue while the in beginning to from cash interest asset-based assess of long credit are both through rising a availability toward a consumers as like at started supply risk, returns. However, in tamper and private larger order provides having mitigate flows investing as quite company the to growth funnel including focus power diversification, risk adjusted least other term sustainable with underwriting up

Turning investment to activity. FSK's

approximately quarter $X.X industries finance the note, across asset originated transactions. fourth the and billion spread based and The average in non-sponsored our reflecting were approximately new product During the on continued investments larger the high well LTV was end was middle and the of broader names credit XX to as the the corporate the million quality acceptance we and the Of private XX% seven companies of investments. certain as focus of of included upper issuers. average $XXX EBITDA quarter, market,

fourth quarter a power of opportunities In of again, yield existing in illustrating by our approximately previously the quarter, the carried originations during average our of relationships. came incumbent from and the KKR X.X%. longstanding weighted investments New XX% and companies invested

a Our our $X.X $X.X in quarter. $XXX with during sales of billion and when equated of total venture sales investments to net billion the portfolio to increase net repayments million joint combined factoring of

primary enhance during earlier, three mentioned opportunities As net potentially and investment presented to our day, our XXXX investor we Michael income. analyst

First is income certain producing out of rotating non-income into assets. assets

additional on is midpoint our refinancing selectively At our quarter view balance debt next up of over we rates the Day, to quarter, to target communicated closer third somewhere range cost and total, operating opportunities, the of leverage unsecured interest per generate certain these our on could that $X.XX higher and sheet. our income. in Investor net factors six is prevailing depending other Second investment

analyze would a to income, we report we quarters like the quarter. to Investor a provide remaining net progress Day. addition, of In totaled portfolios where I legacy per the after contribution $X.XX which backdrop, as that stand With two investment post also

assets. per of growth investment First we redeployed Investor on basis at half income this certain report certain a time assets -- we $X.XX are At the investment of share non-income incremental of incremental the pleased $X.XX share achieved the per Day, producing of net we we income quarter, end the income growth. assuming producing roughly potential net quarterly income or fourth to that have identified into

with debt of we joint portfolio expansion FSK's At investment Day, and growth $X.XX we our per quarterly net income ratio associated was share equity ratio target opportunity the X.XX of at joint second potential X.X At incremental that venture's Investor was per time, was share net times and The was per $X.XX times. share operating which leverage to identified equity our $X.XX of venture. was debt to a the estimated investment associated net our the with

additional our investment last run portfolio the joint we two net investment our have rate quarter $X.XX venture expanded both income. per Over of and to generate approximately quarters,

our few we are of the during quarter in approximately a notes, will our incremental Day, notes, elevated an right By Day, interest Since the the remaining to side are approximately of The $X.XX about repay net sheet. Investor of unsecured quarter share the the to of by opportunity savings year. remaining we we refinance $X.XX year, third the Investor these notes income. we quarter, provide Investor the second the blended X.X%. positioned we have we next per to highlighted this unsecured issued which expense issuing at the Day had during bonds At while our months. achieve time spoke billion unsecured the ourselves be second in the billion $X.XX this $X would a related until And opportunity per of favorable of have share per of during unsecured to of balance investment position to refinance pleased coupon quarterly we

result have $X.XX quarterly share adjusted As incremental net per as rate, achieved a income. investment today, activities of approximately we of run of these

progress pleased across identified. made of to are three have we we Additionally, areas substantial the quite each

through to balance market progress. XXXX, we As update the on we the of will continue our move

years, KKR. seen business the private KKR to Brian, a credit and the over importance several turning growth take the credit as to moment, to business the of like we've credits I'd as Before well to the last in call discuss

And the in private segment KKR the million. approximately fastest of credit from $XX $XX grown growing five to is credit KKR has Over AUM the credit, years, of AUM billion business of $XXX billion last with AUM. within

platform. than execution, invested our With including our leverage KKR's total and business it across In The perspective, From origination, over remains summary, credit I'll Over of that. turn parallel, the key everything to portfolio maintenance same in the for institutionalize period measured we it's focus and monitoring. growing an do, taken important third KKR. we management. is and under and In comprises call Brian. also underwriting. to origination in of the our more large entire time, steps assets one a operational have we've meaningfully structuring, infrastructure and we've team firm grown

Brian Gerson

Dan. Thanks

of companies. portfolio This value As of to December value fair portfolio had the XX% September XX, XX, as end XXX represented a XXXX, our $XX.X the quarter, XXXX. our fair of portfolio compares and portfolio line XXX in portfolio, At billion the is fourth companies our approximately XX with a end consisting investment $XX.X the billion of which quarter. third of of of companies largest of

secured consisted lean focus as secured investments debt our of XX.X% senior and continue We on XX. portfolio senior of loans XX.X% first December to of as

joint financed of In addition, December protection, represented on the investments, investments finance average X.X% of have first weighted the believe X.X% is we comprised XXXX. to represented principle equating meaningful of debt venture based XX.X% accruing investments portfolio as the additional or loans portfolio XX, based was asset lean yield our asset XX.X%, of which an which and predominantly our

yield investments average weighted the approximately XX% either of XXXX, our at December investment the now experienced or of associated comprised merger end compares This to Including to third XXXX. a FS we the quarter of XXXX with KKR the credit December the reminder, effects and KKR during of XX, XX, investment yielding a of FSKR. adjusted fourth as activity originated quarter, XX% the of by advisor. portfolio is XX% accretion is with exclude As the at

progress legacy continuing mentioned As our assets. are of we rate net to and proud Dan income, have made run the we earlier, rotate investment growing our

$XX of $X of million million. experience the quarter, During of the million total the fourth portfolio amount during and we excluding totaled was experienced realized portfolio the we The across and accounting, quarter. net unrealized and unrealized depreciation impact quarter our the merger realized during appreciation depreciation $XXX

the asset a compared increased year, per are quarter we our fourth for to result, net full and $X.XX As that our quarter asset pleased net as very increased the in the share value X.X%. third value

the during non-accrual removed status. brands non-accruals, fourth sequential terms restructured In our largest and non-accrual of from quarter, was

smaller were We [ph] fair partially were value. million offset a loans also non-accrual removed $XX investments, moves placed Micronics the investments collectively lean of during bulk of in These on from handful quarter. by and which totaled first of positive non-accrual. million These fair value which totaled $XXX

declined the fair a value activity As compared X.X% value basis on X.X% a September non-accruals X.X% of cost our quarter's fourth basis a XX, result fair have XX, on approximately XXXX, of and on a as basis of a December portfolio on of and as cost to XXXX. our to X.X% basis

the XXXX, appreciation. KKR earnings have be terms XX metrics investments we on on advisor of In information of as billion presentation updated our for seen our was performance FS $XX.X investing of advisor, originated approximately through formed XX can have which FS of website, follows. Since basis and the experienced the December XX, KKR cumulative Slide is summarized the points new

and be believe rotate manner deliver, to with has to in which We portfolio. performance, investment the the have be the taken of points to measurable able best steps we team pleased investment the data these to continue continued illustration our we been

the two turning to like comment assets. Before to specific Steven, I'd call on

Global into pick the anti new driven the tax stock X% our balance The were company's subordinate subordinate The notes of remained stock. outstanding. [ph] of First, sheet accrued preferred were XX% exchanged quarter. during notes X% Both existing completed existing of preferred contains fourth quarter at of a balance fourth during the its approximately provisions. recapitalization securities Jet a layering whereby portion

you company structural investment our Unrelated capital securities imagine, of and on effective co-investment structure ongoing this sized transaction the actively regarding overall tied with entire changed. it's are age our engaged a partners perspective, not from So the the given and together has position we tax strategy the driven the as seniority to and complexity, business optimization. are can and

close premium performance the of Second, and for have United be first that announced injured a into transactions The had XXXX set consumers February half conditions. to closing on innovator other products around acquired. the agreement [ph], subject customary leading during definitive to high it audio a approval of XX, to world

the depths As our debt you invested the in equity during into to a converted support acquisition. company may and subordinate COVID, we of recall, strategic capital investment highly new

Our our new financial its a I'll a over with close turn the equity more Should be we of Steven last year, the was during also it on FSK terms, we to refinanced dividend event transaction detail. positive the our negotiated position. and on call that, in to received this expect second money quarter for And will year. discuss results

Steven Lilly

Brian. Thanks,

on this of results, our our dividend our the our portion During guidance policy, forward financial focus I'll call, and looking balance sheet.

dividend where of of dividend In value would on to goal normal policy, yield we a provide specific make be sustained the two there ago, with market certain on current a during asset an When a with with participants. value policy, terms of rate of I'll due fluctuations our appears our that over our few a comments to years up almost X% what asset above or our bit investors would with annual a to our instituted clearing a BDCs quarters below net a basis, yield dividend quarter. be confusion the either X% quarter was goal net period time, to understanding quarter in be of

which of announced we We current the we have also variable the would time and on best per our market per quarterly additional investors payments real dividend dividend any higher. quarterly investors the believe told extra announcement to excess of earnings avoid market, to in supplemental. opportunity eight in the $X.XX quarters allow or policy, policy with to have a Since as basis. our share time excess earnings per a think all have is we pay $X.XX dividend in a of us basis. believed a dividend base the share policy, appropriate to confusion with to on dividends, real provide Pursuant or share share that for paid additional it $X.XX certain out levels varied been To as

$X.XX dividend per dividend a for base a has an as And per supplemental $X.XX we example, declared $X.XX the $X.XX investment to of fourth in XXXX, net the addition per first per board quarter dividend adjusted share our quarter, share. using reported So income. share of share

note as subject are before have our of we board restrictions. Finally, of future full all discretion you that many heard the and applicable dividends to legal

follows. financial our largely income for as total income total by are by about our the our to quarter, spoke. quarter, income and million quarter components Interest $X driven $X by fourth the results growth increased over activity Turning over due of increased primary to investment investment million quarter. which Dan portfolio The investment quarter positive Brian

the income, over during dividend million quarter and quarter. of $XX million fee Our $X quarter, decline a total

higher last that during during quarter, our our based on of originations As level on we experienced discussed was we third call, the expected the repayments elevated income fee than quarter. and

follows. fee Our million companies in dividends and joint fourth $XX and the of dividend fee approximately summarized of approximately income as income portfolio of other our $XX during quarter is dividend million. income from $XX million various venture, from

amount average increased of fees fees net interest gross our over due was of were million prior of million higher Incentive quarter waiver. during the which the to compared the increase fourth million cost of totalled the $XX quarter. Our $X average to Management an $X quarter assets by is quarter fee incentive weighted quarter million, over million quarter $XX debt expense X%. in and $XX quarter, the

share per quarters, on over fees a on related the As on just incentive basis The earn the discussed asset of follows. announced, our bridge in as accretion FSKR. previously of as $XX any not a associated the acquisition waive earnings FSK's third million began spread is detailed with value we And fee quarter merger does advisor net an advisor evenly quarter in quarter will the as of prior six XXXX. our over which incentive of reminder, calls,

$XX.XX XQ per our of decrease investment was of $X.XX by net asset by increased a overall was XXXX per portfolio. income share per value value Our share, and investment due of in the $X.XX share, GAAP to net decreased starting

Our by repurchases. the was our net and by per due asset value reduced share per $X.XX share was increased paid share during quarter, share per $X.XX dividend per

our So approximate Detailed $X.XX share investment to we as asset share is some per forward guidance approximate we XXXX and of in adjusted GAAP income these a guidance value net December share. investment looking quarter results From to our expect per per of follows. perspective, $XX.XX. activities $X.XX net XX, net XXXX our first quarter expect income first

on approximate $XXX is income a million. basis expected interest GAAP to recurring Our

We joint associated approximate dividend income expect recurring million. with to our venture $XX

fee dividend We during expect approximate million fees and to other we first From an income expense expect million. approximate our the to $XX quarter. management $XX standpoint,

fees $XX waiver to of incentive quarterly expect We net million $XX the million. approximate

to of our approximate affected. difference between as shared due net key to quarter, to Day of we GAAP adjusted the million. per not expect Investor other our our $XX net The share the affects interest the are and of expected expenses our run spoke We last $X.XX income XXXX from of recurring and categories our expect with in an year, income rate, net Other to September accretion income adjusted quarterly our the In our investment accounting. are quarter inputs, follows. effort million, revenues $XX first link the per $X.XX merger guidance, time relates interest during which investments income. about Dan our approximate to investment difference expense of G&A expenses investment and This

therefore we at fee by that one per fewer days. to $X.XX share, net with due And Day first guidance approximately we add are that the to the then to of of Investor provided number begin which net quarterly that the income $X.XX adjustments $X.XX compared $X.XX in per we share adjusted investment penny quarter as another equates investment net due has by share during lower reduction guidance. share. the our to penny quarter a adjusted we per our share per and fact first that share. We per per first per $X.XX adjusted in one income expecting First, income of number, income the result to of lower quarter These share first and quarter investment two

debt right of XXX% quarter. of the were debt and XX% XXX% our $X.X the side as of sheet, was our unsecured compares comprised net gross committed of to and and debt of average respectively of XX, net December drawn equity our end third debt At our equity balance XX% of XXX% balance balance available In and levels to sheet overall billion. respectively X%. and of was and liquidity year approximately our gross terms at XX, sheet of This to our effective At was XXXX. the end, XXX% December cost

the remarks call XXXX, we issued of enhancing And January a before position. $XXX I'll unsecured XXXX, X.XX% to in open Michael liquidity sheet further million for maturing Additionally that, turn for with and balance few notes of back questions. our we in closing call the

Michael Forman

long by steps close that portfolio positioned. we how our and the continuing I'll position Steven. investment we are success take to to Thanks, appropriate term for is with saying us pleased are

taken deliver experience strong our advantage to of sheet shareholders. KKR balance scale have management results for our We and credit financial platform the attractive team, our

our We economic various originate ability and demonstrated underwrite through have backdrops. to

their support. to three beyond our We coming build believe with is executing And and investment I'd would have like on progress that thank our forward for investors to them promising. to the we've to current open for on guidance provides for continuing like outlook which Additionally, as key FSK's operator, generate of look incremental for we quarters. and and XXXX defined opportunities sight always, questions. line continued to call the we net meaningful income, been

Operator

Jefferies. from [Operator with question comes instructions] Your first John Hecht

Your open line is

John Hecht

Good for lot achieving you Analyst question Thanks months set on a and the few just a goals the back. guys. of taking Day morning, forth and congratulations my

wondering but to nature. this, bit about like would EBITDA ratios portfolio. of things that, maybe distinguish what rising And addition that do, internal to then done in if rates but can, First give of I'm those, with particular component coverage thinking of what little and the of any maybe inflation any you've question, if you details does on a you guys talked analysis both

Steven Lilly

of I'm last of that and Yeah. for we'll quarters. inflation several start to part that been, we've John, focused take sort maybe the the Obviously morning. with on it. good happy

relation I we're think inflation, it's seeing that so costs, to we've chain kind of it's wage the whether portfolio. supply it's in commodities, it's seen across I whether issues, think the whether portfolio, whether freight

in the upper market. the think performance able They're on push think good is pricing been increases and of I right. those which end have the middle offsetting companies of We good, able companies really is news been this also price of let's call on financial those things, just we to they've focused have through power. we've seen to, the revenue side sort

I So, this and that prepared across the see I and this we're we think, rates for a portfolio, all my think said reduce starting comments, environment credit. but being said probably growth good in is EBITDA still to

the two maybe in pieces, think point, of I sort that I on put right. rate

it these I have Almost think long of low don't all rate been time. worries a as think have have increases. the a I loans we in relates floors. portfolio, lot to for of Rates terms

across coverage in portfolio interest is X.X our think of I times. the excess

rates and today, popped number's the even that points, times. XXX, So so in excess that two if still XXX of basis

we side feel that between are, rest where and will benefit good. lag the investors rates rate we'll So are where floors of call floating book, a the I sort the or Obviously the of portfolio pretty with on having like the be, think here from with the floating market debt. we can some we

the those will do if as from time, rates So do but period extended rising rates. believe, we benefit up I much go think, as portfolio an of over

John Hecht

of bit Thanks. guys of versus deal unsponsored happens the there kind perspective? to very helpful. do outlook then versus second activity a your That's their environment, pipeline in how rate change mix forward And Is you level is activity just sponsored higher any the the little activity? think a of rate about what new in refi question, Okay. from given type

Steven Lilly

grown we both Yeah. times couple non-sponsored an excess been at as the years in how lot looked we I as make to That's think the the, mean, is origination plus sponsor different our where would've on year. possible. last I deals A three team, goal just the over of funnel side. and we've has maybe there, think in of points big perspective, just two to been Well, ago. that Right? a XXXX the I from

come on I with think a going more I a bit mindful. what side. that's are the an expecting if And Obviously pretty could rates, we'd rates, with, we're that think little with well. Because that of perspective activity that that's M&A I we that, in -- something on, active but us, bit together, Ukraine into rate, put really to did year. from that of tailwind have fixed was sort as That I I origination you was probably rather hard think all be what's muted sort in back push floating. do we'd I convert door behind on both but a XXXX think in the to been think when

forecasted That been thus 'XX far muted. a bit said the to always year. team's this we think more busy would've be I

John Hecht

very Wonderful. Thanks much.

Dan Pietrzak

John. you, Thank

Operator

comes Hovde. next Your with question from Bryce Rowe

Bryce Rowe

Good competition hoping the about in kind of you was, morning was Dan to ask Thanks. maybe market.

was know Russia half over I'd quarter in curious February. figured that's on a markets that's, the it's how points trended percent, early how a, Ukraine And the have the just I last figured I'd the of relative relative but January to know changed, of early might I might the couple kind terms You one, tough highlighted to a that? have ask. situation, but seven kind average any data and and new then over fourth in months that investments and -- weighted yield

Dan Pietrzak

all that's all, that's No, fair.

for credit. a of I of, fair terms amount of there's mean, in raised fair think for been I a competition, private sure or money a lot

there. we've in are definitely there players ourselves positioned said of that the market think end where while I middle

in, side. I think there's less kind of players there than smaller are in the there

the somewhat the private it. seen a we've And want we've I More more by the muted and same I borrowers, the lot it's to fact more for acceptance while competition players. use that probably think more of of that is think sponsors of products. So competition the, seen sure it's credit and

of amount these we tranches. the seen, letter than markets those, dub more billion were or You've them, deals think a participated We've mega XX in dollars. fair unit a I seen that either,

how have market I raised for So acceptance just when coupled you middle that think equity. been private with much money's

kind almost I of supply deals think the the weighing of is there. out is, the, demand

So to that for or positive. the expected like had just were in that I mention, during that outperformed said some would COVID certain pushed like you a to from bit think a there companies transaction of I 'XX, some was owner did slower, deals that's COVID be been I, we and 'XX That do. maybe like, business

your happens in little to bit Ukraine. on with what terms we're it's early with I a seeing and of think point probably Russia what

I product, probably trans playing, you most, to most in on others XX the saw points. think call think, prevalent where are are reduced, where playing, XX we're let's basis product for spreads which yields XXXX, I is it the probably

say that your XXX think to let's average deal on was regular XXX. I Lior[ph] was way plus XXX, range probably

you've I call let's of that think it bottom sort seen out.

back what credit bit Europe think market. other you'll probably way of we're see It of with illiquid see just into I in trend on become and little the a seeing the takes markets a do sort which the probably think bleed that syndicated you'll time. I they softer, of private back

Bryce Rowe

QX, right. appreciate I'll, in jump Okay, I'll the All back answer.

Dan Pietrzak

Thank All you. right.

Operator

from comes KBW. question with Ryan next Your Lynch

Ryan Lynch

curious, the good agreement sound XXXX? you questions. about investment million. second that first equity for $XX.X or had to Would just bought currently was you mention entered market sometime the taking of my two, morning. guys I your an be I just Hey, half Thanks have one. first guys United

price. said value would upside would if guys think of, exited proposed be that I it an you mean signing What for of United? there exit were

Dan Pietrzak

expect our them it in, did The, well. sign middle subject existing that conditions, sort was an convert signed. wanted The, creative. make Company of customary the We just if that It's to we speaker into did is in prepared sponsor this the They is do company's recall, to dollars high great. sure our QX. equity COVID. a, inside darker the M&A during remarks. the in We position million the upside transaction a a noted but end Ryan. I you we the of to allow fairly business. did in Their We $XX we'd a, deal products really morning, of new month. this think think excess and good Yeah, on inject was, done days to estimates, position of to alongside our deal are

Ryan Lynch

Okay.

you marked? one where million have upside $XX currently So on

Dan Pietrzak

Yes.

Ryan Lynch

meaningfully. deals on And, rates. reasons activity; of the activity? then in That In cost question second mortgage curious guess one like that had, materials velocity kind I with just Have any then just I that pretty in tour on down, I increase with kind well, noticed number was went kind of may and the higher two, the side confused so sold seen rack, is and broadly with in addition down going in that just looked that was sell slow-down slow-down of your rates of that the to that the that down part business other one the I I in that's to there, quarter, business? of as quarter? what update business it you position think a would why the position helpful. And Okay. the guys you some just; just

Dan Pietrzak

I happy we grow the Yeah, venture that, sold JV. was think to position down as the do the not joint to into continue

in no the deal. other party So leave it system. there's didn't that

I but think It's the down was point. venture. a, it an a good joint it's pickup, to just sold important

Volumes think up a their, material inside there there product bit lending. was do of I think course of have I fair And actually core also bridge or was their the, slow-down delays. lot amount A during the extremely picked the obviously of COVID. main the is 'XX, a back on the Company well. of continues of XXXX to

think job of Company did kind excellent I that. an navigating the

in I exceeded same would volumes expect 'XX. in their 'XX, budgets the So

Ryan Lynch

investement I the and the Thanks Again, tour. for appreciate clarification that where today. Appreciate on color time went. Okay. the

Dan Pietrzak

Thank you, Ryan.

Operator

Thank you.

Your next comes Casey question with from Compass Alexander Point

Casey Alexander

how morning, it ABL QX. and I off-topic, a different little the so, compliment the and ABL[ph] in may lender during that have that noted purchased Hi KKR does in if invested be the a and, lender other this that made? investments place BDCs BDC but a ABL and Does

Dan Pietrzak

about are Yeah. merchants? morning, Casey, talking And, good you

Casey Alexander

Yes.

Dan Pietrzak

Yeah.

lending So, estate good a act just actually asset had think team. merchants is that's when about an platform and another from on perspective, bridge real looks, just class the and around product side. time. usually with a really that to receivables to, to merchants continue that's inventory ABL, the sort clarify, merchants of we relationship I some business to, like like a Ryan's going question plus of years. back for sort been to They've management been We known XX for that's

have a, of place was a We have country that So a does part the we and a had lot see so basis. forward of that, an it and from on exposure, the, geographical you that perspective. a bit a go FSK there, will of didn't a as of and of side angle little

Casey Alexander

you. appreciate Thank Right. Great. only question. That's it. my I

Dan Pietrzak

right. you. All Thank

Operator

Raymond Your Dodd next from with question Robert James comes

Bryce Rowe

structured burn quarter. a guys. credit. Hi it the on questions about Couple on on Congratulations back we Congratulations sequential call. getting as on Go.

think non-accrual. then five for on previous new, as looks it the now $XX a we've the me, I at mean million been looking I've On right. on accrual total, five on back non-small, but to recognized the in I back non-accruals, names, having and structured

So is else is are non-accrual there again, anything workout watch about we the anything -- maybe that how, or… of after for, should out how once past in some these, any small concerns in, been any assets back is there the being has on, process or before, restructured that, there else,

Dan Pietrzak

that the happy Yeah. and job result sequential. for I'm excellent generate did there Go through go No, and words that team to the thanks did. on ahead. to The the, we an

the the the have. we're I the then that we team think, in think to that is strength outcome seeing to Quite due bigger and on perspective, frankly, all sound of put sequential, I outcome and united. just

probably handful about there sort this them non-accrual there's sort names why a common of but no there kind was I than XXXX that I pre theme originated the they're five, quarter. on very you specific think ended did did we of reasons on of other them on back all putting up of think was go during mention them accrual

a other extremely example, performing chain a back looking there. fair materially, impacted timed then at which supply of had we exits well was on go side that COVID were NBG an sort non-accrual, real on, of pretty, name felt pretty but appropriate exit. to shoots green the are of COVID Hence and As we home -- of frankly, sort challenges [indiscernible] potentially amount of it's on it quite sort is supply chain

sort of from happy down you're fair X.X% some we've the I quarter-over-quarter. of reduction million So seen those from we're XX of to catalysts market there, were beyond think value fair it's, on pretty that. value. correct, think that And but, with but And I nothing really $XX

Bryce Rowe

it's, rather that On, capital, the the the, us remember, appreciate I do, mean, thank anything any where which any commercial Pietrzak, I to you tended parked you. business cetera. or than mean I right? the, those For et for can global just well. I I do but mean. jet is I is anti-layering I the, business example, jets provisions, any, understand restructure which are? quite on or of or, risk give factor, portfolio airport? its jets at a color that to, sanctions If not Muscow

Dan Pietrzak

historical on a the they finance a right. But not our have mean, vanilla[ph] been put perspective. pretty was would and I leads camp, here do entire Western you themselves They book on has and perspective and, question. Not, use very risk predominantly a U.S that capital to a the, geographies. I that geographical Europe. like good in the from places markets U.S business it to focused the a view. from just factor focused not it's and Yeah, developed are

tailwinds, think jet business been sort are correct. jet private I the intended for space. you no of pun or have there

I been able proud what to sort think do of period. team's the quite during this of we've management been

that talked sort about that prior nature the challenge we've in is business of the competitive think on I the of that calls just market.

competitors. harder to It's those deposit banks top from are, You for institutions. cost of are look or sort of of been are, funds them Most at perspective. taking a their sort of

something pretty mindful about. we're that's So

Bryce Rowe

Thank Understood. you. Okay.

Dan Pietrzak

you. Thank

Operator

And your Fargo. comes with Wells next from Finian question O'Shea

Finian O'Shea

any so you that FS provide on, Good are, is and racing morning. Hey market. The, side set or pioneer and could a credit everyone. forth. Wanted BDC non-traded to the platforms thoughts private to these obviously the major up gather on newer

any color and the for you how on opportunity So, the the view platform? BDC advisor

Dan Pietrzak

Yeah. Fin. Good morning,

things I on, think of on this like one, things, pretty we're to of and on remarks. Michael our of and able couple we've and out laid during I prepared some this pleased accomplish have said existing course been number been what his with think year. bunch think focused FSK, the we've calls, prior I we platform a

about take in it's, sort I we being ago, said, three there, day out quarters. that effectively of down it the we'll that are started versus the seeing one the and happy think investor see we how obviously coming we've most think years getting all pretty six I think I it coming been And where that I name of think something the sort that's those things of is in, that levers we we're done invest on post we at are considering, of been thing traded publicly that three what's with. forward sort to mindful important months

statement to continues a credit and on for yield the of there's with, hunt you're I bit the side investors think more in expected is from perspective, little think in be volume think of as I a a accepted but way of that it a private think I how a or about good seeing investor I see continued the there. because sort deal you're out seeing well community,

for I on So on FSK. been spot a making sure. said, really have on we're But focused in mind like our sure good

Finian O'Shea

much. Sure. That's Thanks so helpful.

Dan Pietrzak

Thanks.

Operator

Lee Your next question comes from Markets. RBC Capital Kenneth with

Kenneth Lee

good Thanks question. Hi, taking morning. my for

power? one this shares view confidence all Thanks. the, the Just side. also lever into, into that the so they've should The or plus in additional achievements in, on we earnings Should, a the of as as the of given portfolio achieving far the dividend policy per $X.XX NII supplemental terms thinking on base dividend? the the, sustainable in on, dividend visibility terms growth FSK the of access range has and the, achieved or, of

Dan Pietrzak

words. to sort I let this. appreciate I Steven the of I'll add mean, Yeah.

that I pretty with think for of we those but happy there, about three path. the I do of we those, investor start more that levers sort have to think day sort clear a been talked

the of idea good of, market variable policy. in the the some feedback dividend I on think we've gotten very

some QX I was market amount about we XX, and into going quarter were of if think reading the perceived sort a the XX, though next it, if be got we also to questions that. fair at

a were on there? the trying was that figure time we to page. sort to to base of out Steven, just that supplemental to, Steven sure market anything the make clear think the So we're make spent all out. sure in that participants But way to add I think I crisp focus the and laid But same main some on

Steven Lilly

The question. that out mindful of dividends with of and come supplemental years your things appreciate only have BDCs about base then their the thing Ken, is we No, two were did time that at for was when that one add did the a policy with ago, I at time. would we structure

some services One of the about, the only cetera the talked would supplemental. not the that issues base track dividends who that track of people and Companies

overage more the as that track was a as And would in that number so of we're the and renouncing in paying and, good very would it just spot accurately. much quarter incumbent earnings we our services thinking put then and can us and if every a with of

you, people market down said, well, going certain bit. little the up and who in a you're alludes to Dan As there were

And there we you of base? a And XX. kind say, to people as and yeah, so talk well, of is think it

appreciate if And on of clear think the sure no, So it's, no were kind line the sight, pleased we more since that, we it's balance do XXXX that just the investor we're day really closing than of toward complicated that. people of, the and you with wanted certainly. but to But be words. will, accomplishments

Kenneth Lee

opportunities if asset you based there. Great. just comment the terms just Very seeing of I follow on what finance up, within side? if could Thanks. in just And one may current helpful wondering you're

Dan Pietrzak

an of cash to staring noise sort rates we're and access of if attractive. be early get area loaded sort I of essentially you happy that macro to think we flows. quite wise inflation are at can find take some, front collateral that of continues that to that mean, I you where about things sort we Yeah. to think rising sort access

we two sort quite things attractive. of think find I those

did raised. space a XX Things we've toric[ph], got has and investment have we platform single of called not attractive. family good up a home a result think America. that. XXXX scales a on like I found partners during it's sale where really rental the with have focused of really we capital professionals

in one and deals of the, there have quarter another home. pivoted was, the we're called new that was backing of We my community platform the sort

remains asset or environment we've not think overall scaled for in sort capital we of quite So active things players global jet there. scaled a got I private of, with been advantage music I investing that think done think we certain a based of, like in, think of you, you lot of of attractive. finance some outside IP, We've the other And I we've as said, couple jet, could the a, space. nice in in are and assets sort but esoteric and a like competitive

Kenneth Lee

Very again. Great. helpful. Gotcha. Thanks

Dan Pietrzak

Thank you.

Operator

with JP Melissa question Wedel comes next your Morgan. And

Melissa Wedel

portfolio Appreciate what's and morning. you split elevated do taking Good yield think it's, questions to of increase. of those? it attribution or you quarter-over-quarter, repayments or activity I how the the in at is the sort of I'm Is you it, curious pickup Was and attributable do looking the some on non-accruals reduction my that in was sort that it between by today. driven

Dan Pietrzak

versus simple, of so Yeah, a the I that, of assets went some right? them no. of just morning, that the think were little I, of of repay certain got back It's that lower sort those And then on sort yielding non-accrual, attribution's of came assets the Melissa. versus and bit fair assets Good, certain good where some move summary question. the couple that accrual. things, assets did the, on a some the of to new of

was really So it one eight to the eight handful the four. the changed from of just those the, the levers

Melissa Wedel

Thanks, on yield Okay. And that's could quarter was it during and you remind me? the us the what the exited investments for

Steven Lilly

the nine. I on was Steven, it It's around seven Melissa. exited, think

Melissa Wedel

it. so Got much. Thanks

Dan Pietrzak

Sure.

Operator

his back final to concludes you. for will the And session. this remarks. I our call Pietrzak Thank Dan turn Q&A

Dan Pietrzak

time everyone Well, today. with us you thank for spending

well going with pleased positioned believe are we're and our results XXXX We into XXXX.

hesitate additional reach If not do good please a out, you day. do have any questions, have to

Operator

and ladies program. And you that disconnect. we today's Thank you may participation. gentlemen, And for now your with concludes

FS KKR Capital (FSK) 1 Mar 222021 Q4 Earnings call transcript