FS KKR Capital (FSK) 7 Nov 232023 Q3 Earnings call transcript

Company Profile

Participants

Robert Paun	executive
Michael Forman	executive
Daniel Pietrzak	executive
Brian Gerson	executive
Steven Lilly	executive
John Hecht	analyst
Casey Alexander	analyst
Kenneth Lee	analyst
Ryan Lynch	analyst
Melissa Wedel	analyst
Robert Dodd	analyst
Bryce Rowe	analyst
Erik Zwick	analyst
Mark Hughes	analyst
Jordan Wathen	analyst

Call transcript

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Operator

Good morning, ladies and gentlemen. Welcome to FS KKR Capital Corp's Third Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. At this time, Robert Paun, Head of Investor Relations, will proceed with the introduction. Mr. Paun, you may begin.

Robert Paun

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

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

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

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

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

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

Michael Forman

Thank you. And good by the East everyone. like I to I'd innocent you, the Robert, lives. tragedy the by acknowledging Like was of and many loss the morning, start so and of many Middle for shocked and in hearts the quarter. To you, invasion Israel. people our impacted family, devastating ones by go of out had now loved to these events, to have turning FSK's friends and tragic results third who the

as and our exceed operating results guidance quarterly strength and and supplemental showed outearned financial distribution. Our we our continued earnings base

income compared During and adjusted share, $X.XX share investment as the third our we net per net $X.XX $X.XX investment public share per and respectively. of guidance to per totaling quarter, income generated totaling approximately $X.XX

Our start the of net value year. asset at of asset quarter equal $XX.XX, our the third share per net value is per which at was end the to the share

approximately X%. Based supplemental distribution base by our our fourth of third a has consisting per asset on Board per share increased distribution $X.XX quarterly declared value and of $X.XX quarter, of regular per operating net During positive per the our of share share. $X.XX a share our results, quarter distribution

series in $X.XX recall, per As of year, totaling payments special of will share. May a you of many this distribution X we declared

next I'll per earnings per $X.XX with totaling X amount paid be the our share. From our installment a forward-looking about In strong our additional currently provide with generate per investments. And increases significant strong additional at in new, growth to positive the credit performance, significant an optimistic over add-on distribution the top basis, be the of environment to portfolio will $X.XX not first take that, and stress on share color XXXX, quarter. seen for this our will share on be outlook, a our provide distributions, sharing coupled we to sector the third total to to our quarters, real-time of and with our the with market special quarterly month. rate second quarters installments The base will investors of earnings $X.XX ample or announce been turn companies on of defaults. FSK that supplemental as general, earnings private advantage liquidity end the perspective, adjusting X continue interest as have our pleased continues credit the and special the which well tailwinds through high-quality we and investments in will call $X.XX and well Dan of of I'm view continue and on equal portfolio Based our share. Consistent paid has to which this for support have as distribution continued in industry. companies to be the corporate in to per existing higher team

Daniel Pietrzak

and continued class interest you, its directly structures to interest wake attractive predominantly inflationary Michael. due and the In rates, higher be private floating asset longer Thank rate an credit for significant issuer pressure of continues negotiated to diversification. transactions,

continuing other increasing attributes, and an these for of result private investors. become allocation is positive to a institutional As credit

increase to in mentioned continues last activity quarter's on as deal we seen ramp. M&A flow we an As have call,

addition, up markets we same of are as the In in signs of are there market At some stabilize, part are that seeing the beginning upper in with spreads pressure that time, utilize end well. picking to recent activity syndicated have on spreads to the $X With trillion the equity continue than quarter. during will more XX solutions holding of credit we by transactions. points powder, believe private to dry finance sponsors middle as funds private market XX the the to tightened basis

activity. investment to Turning

investments. quarter, existing third on investments portfolio originated of long-term KKR the financings XX% add-on million we focused new $XXX During and were our of Over relationships. to companies

to of increase portfolio million. and of net sales joint to million repayments, with a when venture net sales $XXX $XXX in combined investments new factoring Our equated our

recent EUR PayPal's EUR XX approximately in strength agreed XX In exclusively ability a maturity terms a the KKR a new receivables has is of originated partner transaction. investment of of the PayPal. Credit finance opportunities, with to PayPal approximately to testament Europe. X billion with purchase strategic note deployment partnership FSK to has million Having KKR is Credit's work committed of like and towards the consumer business. asset-based

median the the In of of interest portfolio quarter, coverage, X.Xx. third of terms a coverage had at companies our interest end

as to align calculation XXXX, this clarity, uses base June For of rates financials. portfolio company XX, with

anticipated. many environment overall companies, has certain the performance be market continues rate observers While credit to impacted stronger higher than

in portfolio environment, company credit navigating have increases average market cushions. remain We our ability revenue EBITDA their their earnings of continue of million large, to see private The costs. Despite September and end other was pass along margins focused as high-quality As on the deep and equity portfolio demonstrated strong the XX, the price of to macro weighted borrowers we $XXX labor growth. larger input with and challenging companies operating companies while simultaneously XXXX.

discuss with X% Additionally, our we growth our in a invested EBITDA call over Brian more portfolio to companies of approximately companies to April the reported since have weighted I'll portfolio in across turn detail. that, XXXX. And year-over-year rate which in average of

Brian Gerson

Dan. Thanks,

XXX to a portfolio this $XX.X value XXXX, a XX, billion of value and companies consisting our XXX portfolio of portfolio billion, $XX.X fair fair of had investment As September compares of our which third of approximately XXXX. At as of value of portfolio, quarters. of portfolio companies June end XX, largest the the with consistent quarter, the XX.X% prior represented fair XX our is companies,

XX% first of approximately to secured as our investments focus lien as on senior XX% consisted and portfolio continue We September debts senior XX. secured of loans

the of portfolio. X.X% our represented venture fair joint our value addition, In of

portfolio a of and our when secured venture our portfolio, total total compared total portfolio looking September As senior yield investments our our weighted on investments was then September accruing XX.X% the XX% to June investors XX, of joint lien XX. XX. The to as as first investments approximately as result, average approximately loans of XXXX, XX% entire XX.X% of consider debt through in of

As weighted associated FSKR. during average quarter merger adjusted to quarters, accretion associated yield with primarily third yield recent the the to weighted the increase the average exclude is continued a approximately Credit calculation September the third our as our is either in rise total portfolio originated with investment the rates, the quarter reminder, with investment activity Similar FS/KKR was Advisor. in XXXX, investments or our of of the KKR by of including effects of base XX, XX% of comprised during the

During the of we investments third merger accounting, of $XX approximately excluding the quarter, appreciation portfolio impact experienced on million. net

of and it value has loan smaller September million During placed on the of has largest $XX position X the first Bowery is as businesses X The the a as investment and is in Farming, the of vertical company million of $XX fair our in Bowery XX. quarter, portfolio lien basis U.S. a we farming named cost nonaccrual. debt

We pay the par also during at million a received quarter. $XX down

X.X% on basis KKR compared as June and of market cost helpful basis XX, the value to our assets by represented information value on to on XX, fair a a X.X% September provide the of it cost X.X% As on We X.X% basis XXXX. a portfolio XXXX, is of fair believe on Credit. and nonaccruals a basis originated with based

of FS/KKR Advisor been and basis. As of portfolio, the and on which quarter, originated basis our X.X% value the nonaccruals the a to total fair the were a on related KKR third has XX% end by of Credit cost X.X%

experienced originated call the over almost cost annualized the of Steven $XX Additionally, basis with the rates less an FS/KKR financial through go and X advisor to since our billion of Advisor the than over investments turn start I'll has that, of X%. And to ago, results. has nonaccrual years

Steven Lilly

Brian. Thanks,

components total a Total investment we was $XXX fees $X mentioned our investment an $XXX $XX primary the quarter-over-quarter total income dividends. asset quarter. Dividend million by million of onetime million million in $X $X increase decrease million. fee as in increased driven million $XXX totaled by joint of were our income primarily million, income million, of $X interest venture income experienced sales approximately as quarter-over-quarter quarter-over-quarter, and the Our The during and to follows: last quarter

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

totaled $X from XXX% net interest at due XX equity XXX% XX. the in debt September at million, $XXX of expense Our to a decline million to decrease to June quarter-over-quarter

XXXX totaled in fees debt quarter, expenses Other totaled decrease asset a totaled $XX.XX overall share per $X.XX basis per Management detailed $XX due was quarter-over-quarter portfolio. September bridge asset per million increased net ending $XX share of the $X in X.X% million, of of XQ unchanged GAAP increased the million an income value value a to cost net share by is by million. The of follows: on $X.XX investment average weighted XX. Our quarter-over-quarter. during share was as of net our and both fees value Our $XX investment increase of our incentive and as third was per

fourth as million. follows: income sum Our Our expect $X.XX $X.XX reduced per distribution quarter income XXXX, value per $X.XX quarterly expect XXXX the our basis investment GAAP per guidance per special $XX.XX. From approximate net approximate our these September we activities The GAAP was quarter we net share of adjusted share. Detailed recurring approximate perspective, to results forward-looking interest share per by in XX, and value to share $XXX a distribution. net of share, is per investment our asset fourth asset $X.XX expected a on income is to share net guidance and

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

course $XX to normal million fees expect expect the incrementally finance We fourth standpoint, million. as $XX dividends asset-based an we we to expense and fee approximate quarter. From to expect other management our in approximate be income lower dividend

incentive million. to $XX expect fees We approximate

$XXX G&A million. expense $XX approximate interest expenses to approximate our to expect other million, expect and our We we

During fourth excise million. will expect the we quarter, approximate $XX taxes our

We fourth be projected expect why income excise to investment our is net per quarter of partially merger due by the accretion accounting, our adjusted the investment net GAAP anticipated taxes income. offset is investments $X.XX of which to net effect below share our

we liquidity was Our amendment of among was gross sheet and XXXX. senior unsecured an balance facility. amendment September June XX, of XXXX. debt the and enhanced other commitments with the and things, maintain for committed it XXX% our net amendment XX% September provides as XXX% both call before very we of in an date closing and We a XXXX, investment XX, October, debt the credit to XX, maturity few $X.X I'll to the and at long-term our fourth the of billion well fortunate turn of an The of call extension at to XX% closing are back for, to revolving as debt. In drawn our questions. $X.XX we Michael platform our FSK were profile billion. remarks compared XXX% further the pleased total of our relationships secured Approximately complete sheet to liquidity increase the community. And to balance to XXX%, to comprised open and this is by strength At respectively, equity levels quarter with the maturity for reflective as that, available were

Michael Forman

In Steven. at year-to-date pleased are as end we was results to the quarter value third performance of Thanks, closing, and asset our net our with the the the start of quarter year. our flat compared third

net adjusted well both as exceeded dividend. quarter total public income as investment Our in the our guidance our

to for behalf new invest operator, your and support. And portfolio from a market. the team, companies into a are with to open underlying Our we of like have all we'd balance we attractive of we we you questions. capital available credit are the well for On and strong and sheet, deployed compelling in billion performing call opportunities $X.X capital perspective, the transactions. With ample for thank that, the call seeing joining risk-adjusted in continued liquidity

Operator

Our Instructions] Jefferies. John comes first [Operator question Hecht with from

John Hecht

the X competition maybe relative X you pipeline? where and around I'm you you what's kind all shifting can well? activity if activity. I'm about can I the characterize time as that at kind pipeline? the in some Is sources talked the of to describe pipeline activity as guys heard of wondering we've I M&A the I -- that And -- to think of you of, talked again, some mean, wondering, it's last second months One, guess, LBO of increase then kind increasing. the

Daniel Pietrzak

it put couple terms into in I'd different of buckets a John. the activity. pipeline of sort of

sales probably sort amount market, albeit One certain the either call gearing get companies a we been, that's maybe 'XX. up shoots it processes, it, level of normalized we'll call to we'll any not further of it's into in has sort some know there. And process reads of just live it, early you for would still then we that green of also or that of been, a of kind are but expect as

to on the activity last So to said several this kind closed terms today, us quarters my QX of see where actually of call, I fund. But the things it will going and think, through you're -- of the sense take, is for system and flow. I we -- see the kind majority of of think in QX actual you'll of where kind sitting majority the or funded kind probably least additional at through that deal in of we're 'XX get

who's deals. of means competition, market of terms funding competitive think do of In I'm decently that now. the I kind right assuming the kind is

a some of companies, to of sort earn a people percent the of I and opportunity. of those target XL, of of the the ability We and large funded or just bit and hasn't leverage kind sort good, to sized equity get quality very think their stay constructive on been checks. deals the numbers. But do having still think kind market technical, deals little that's and kind of quite for with risk I lot them deployment feel on XX-plus want to remains high of there good

John Hecht

is you've And -- been Okay. the could particularly second then the just as an Partners. the financed in this That's question pocket Credit give wonder, asset-based maybe or finance, on you is that helpful. I us persisting? I I as busy asset-based pool update well year. and know Opportunities just particularly activity

Daniel Pietrzak

been of mean very I time Yes. us busy asset-based finance kind the it side, on so for has there. a

play to with structure, over meaningfully up that kind the is is us. our AUM people dedicated capital platform a nice fair ability real We've think of advantage and and to to think which a dedicated space. competitive amount of the I the build space down got XX I out for

We I think market $X estimated trillion about on way $X a space. today, we of that lot sort having it's always as trillion. think of sort of white its to

taken step regional going acquire void of in with real allowing us banks to asset essentially So on either what's that's been But that, where back. positive. the of the been they've a or portfolios a has sort from tailwind fill quite to sort

been with So I think seen we've what there. we've quite happy

venture, think of job of on the of has think continue terms team sort a seeing assets. done that I the joint I in to grow good -- in

strong got of I quite there. we've structure a think sort liability

I of stand-alone not our joint But here. basis, that be we still maybe think I on we sort size think, were being put just returns just a is might of like BDC sort be, the joint we'd if that venture. of or number venture. sort and from And of my real that seventh largest it the perfect off has

we have well. think like we scale as size So the I and there

Operator

Our with Alexander Compass Casey from Trading. comes & next Point question Research

Casey Alexander

Yes.

maybe second is quarters, pick we've to question, reverted now picking was that How quarter for into the the doing? to Has company how and X. cash moved fourth that X X Just to in Solera quarter. back supposed And pay? X was position that now

Daniel Pietrzak

Casey, but the back end numbers. impact come did of the that it, see you to cash call has kind of It QX, won't the we'll at pay. position reverted the through really,

income So second have sort was that's elevated the pick why would quarter. been in in the it quarter of as the

performance that it'll You of will -- entirely pick almost sort of is sort pay and the of think, sort amount see cash XX% of that was our total mind. and odd or I to strong the move in company

Casey Alexander

Good, okay. Yes, great.

can to Or Secondly, you but on-balance you JV can exposure? to quarters exposure little last mean grow some Do the go sheet overall you've have the still are portfolio? a add bit, to add the this The on-balance XX%, you addressed you JV. JV? has I and the at the sheet the maybe to where you all to some most of several about gone that now over exposure? willing added is

Daniel Pietrzak

No.

as number grow to of on balance expect the sheet should you think sort well. see I

$XXX think venture don't to I we joint Just the sort this last did of quarter. quarter. went anything joint I to add the think million venture

our leverage happy sort we're inside in we're number of with terms kind of well think the at including I target dry of the extended. think revolver pretty in entity, powder what we FSK, I see

balance So target on I think of continuing add we while still sort forward. you of should that to move to as inside kind sort FSK's range, assets us expect see, of with sheet

Operator

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

Kenneth Lee

what the of a segment, In more about terms whether change or could seeing you're and you're terms of some talk covenants terms little for seeing if market investments upper-middle you the more recent in bit there? trends of wondering around any just

Daniel Pietrzak

lender-friendly going source, that for of off come market syndicated market. The doing and a debt about away. I to companies town. financing and of end mentioned bit seeing in that term, drawn sort access think recent sort sort that of think, of compression. That pretty sort think probably of amount started think of of financing. only the more been I being folks, is think said, go has certainty upper sort broad But quarters, more broadly and probably to think more definition, talking of it's of we of I in and market sort especially really right? a it, game a of million the are beyond to has versus sort But I extremely, of to that we've we're we'll to think an I I this even been, middle do they're syndicated folks as syndicated in the as loan never $XXX just as the has continue looking EBITDA. market million think environment, broadly think private a private I I shut times spread call that's $XXX of gone debt the certain in market, lot a year we the I volatility

sort become debt private of of equal peer kind there. think I an just

So good I very think we're structures. seeing still

of I syndicated it in little mentioned may a amount think that we bit remarks. of market pricing, but to has in the the seen sort market, the weaknesses had discipline have prepared documentation, some our just relates as a good tighter on as broadly of we

Kenneth Lee

then if Got follow-up, I helpful may. very That's you. there. And X

confidence you sight supplementals year? if wondering distributions, around initial and supplemental could some the of share of the thoughts terms line on just potential next for visibility, In

Daniel Pietrzak

to in might want XXXX. supplemental, we've we and of Yes, and Steven base of had special I'll the start sort Lilly add this, the had and for the it. Obviously, $X.XX to to then

were as that, is mind. think our I of by were that sort additional pay in FSK. story We've sort earnings to sort going of good the a told of they we earned market

for attractive the the I will That's sort focus to sort quite put think for was think extend of of and the ours. We big obviously feel confident special. year, paid roughly $X.XX which remarks. I that our at of in that investors for total prepared is a $X.XX that mentioned dividends

think and supplemental by definition, feel about should And think that I coming the in kind confident near remain expect we you the supplemental means quarters. the of as well to I the in term. base

Operator

Our question next with KBW. Lynch Ryan from comes

Ryan Lynch

of the PayPal the had I interesting. but kind transaction consumer several transaction, questions kind of it's with definitely on it's know small a loans. I

small off, sheet? those first like going placed loans some saw guess, are I entity? $X your investment SPV equity sheet? Or your be to are I on balance in placed be to directly they a sort loans of but So going on how are million, those being of balance

Daniel Pietrzak

actually us that Obviously, to over mean, point transaction think, talk a small PayPal. don't the strategic we're going of, think to. and it for investment, that. years. Yes. And out fair about was buy kind to was coming of this of Ryan, I I And we public XX considering billion I happy there's a can for sort amount there a both statements EUR

That The EUR said, that's script deal of of the but EUR the mentioned fully in initial the providing short, turn accounts going to overall the the you remainder financing was FSK FSK deal was essentially million should $XX expect which and $X the will capital. billion XX is number [ and certain ] SPV, of quarters. there's why year. then into sort over XX share receivables ramp the it KKR are banks is the are the other that high. coming Xx funding, kind does an seem million probably providing that (sic) to just are The I per billion piece and book of the receivables credit SPV that think

Ryan Lynch

maybe And kind over was was million -- going Or to the of do time? kind And over these I that's how early return so then what sounds these with talking of loans? the to we expected a you -- then turns sort which of for like Okay. Is grow would it's view that sort your the too smallish. of guess tell. And types about, to overall lot, it the should that I $XX to also, it FSK, exposure expect of make sense. loans? are What expectation

Daniel Pietrzak

target Yes. least you the number sort should medium expect program grow be of to to I from that as sort term. well there take continues the off. the near of It of sort very think mean for might I at

versus do kind this and to it, view inside book, just enhancing return it protection from we're most about at receivables, think basis, regular I let's short-duration downside attractive way a bucket, extremely either think confidence downside things from, like are or great repayment these in call secured our we we that strategy generally a corporate we'll the credit But sort of direct the plus, lending. profile. in well of diversification we finance when a trying as mid-teens because effectively we them asset-based think it, have to receivables call amount as right? So view great deals protected of,

Ryan Lynch

that loans of loans these of not these fit of these going mentioned to the I that fill then that but of in were X types it's it. kind have on so regional been the that relevant, to -- these is stepping you know financing where bank, consumer were I'm going... slowdown KKR type thinking like maybe loans or sort last into kind earlier previously reason And of Okay. lending. would loans regional that X void it's banks previously is sort of Europe, Are the this that Are

Daniel Pietrzak

same banking don't that That have in you this. have for Yes. the a have transaction model I the regional case Europe mean the U.S. wouldn't in like you been

talked same. before that the generally about sheet of So all was sort is of balance this on funded not PayPal on bunch deal. the sort concept This was side. This PayPal's a

Ryan Lynch

you. Okay. outside discussion. the Got And question had I then PayPal X of just

sort curious, high from a you of these think high steady that about come that sort to fruition just of Just quarter now could companies sort that's what environment a in incubate current deals these do sort of kind just fruition? the base good assumptions know sort is of level, enough to XXXX. I'm and of of differently, have And or in to up the talked environment level. deals the Or deals to I rates? these of every stabilizing deals to said deal specific, order and take is just you think maybe rate are are but for rates of on do companies that it gearing lot in will stays dependent cuts making a You stays these beyond if stable, where with transact? while sort stay maybe they second and come it are,

Daniel Pietrzak

question. fair a it's No,

allow sort we'll that market enough just to done. call to of or it, catalyst a think conditions of I will get stable be,

kind buyer. seller you've think the time for of some the of between valuation sort mismatches had now I and

we'll call have, those think it to started I narrow.

there a the And In growing private of amount realizations under view will stay 'XX. these get maybe and we'll then sort into think point type will so think We'll I for community, to powder sort that and dry of the of as become, we think going is it's deals control. think, don't is lot hard. think rates think get have And there, which come I we'll we're be at more get we a money the of a manageable of market why environment also there's lot obviously of I -- other to there. of of is macro, do if could it equity for call sort in you a sort just out LPs. least pressure sidelines, I stay be to an be returned think on that story I right? So sitting of done. I the I catalyst longer. And it, call But done, sort we but that's inflation on, through our kind much a is stable that the in higher

Operator

Our Melissa next with question comes from JPMorgan. Wedel

Melissa Wedel

hoping finance. made, One, little asset-based mentioned into to that prepared then bit. I believe, speaking XQ. that the up the in set a we was in a couple expecting lower the on opportunity comments of Steven hoping remarks. I finance also I was during to dig dividend the follow think asset-based strength I were could of income But just

Daniel Pietrzak

a good the would probably X just and second. It's fair X Yes. I separate for question.

I market opportunity quite or kind this that a sort that think the very systematic investing we opportunity call we've place focused and been on. is it's believe it, we'll in of, lot strong, the of

of think different. I little each is deals bit a the

Sometimes pay get to the have before scale dividend. to they deployed can when a to deals start

we of mismatch dividend that might which think So of of you kind of will a the restart process call can be point sort in or I'd And then of slower. where of more have a timing call permanent side. liability it about to, on that it, we'll there's things a dividends sort looking positive the that mismatch. are sort side, if on timing a financing But deals certain, handful do we'll certain it, terms

Melissa Wedel

to they marked like helpful. It hoping I just removed Was there? on was on hoping par detail could touch X in that. give was That's was Could us Do looks Gracent some restructuring? the and list could Got company. current. we -- portfolio it. a we nonaccrual back that was up get believe XQ. also you I it I previously. on touch

Daniel Pietrzak

to capital this some challenges. a that. we This nonaccrual a Yes. relates list, triggered of shrunk think sort it's as kind sort sort of The of there quarter as of And which but pretty add I this had to restructuring reached a of think business into the and over position going I of we've has might multipronged kind point. next position meaningful phase put sort that I sort materially. that small XX off of mean probably it at this. it additional it want probably well, to was advisor of Brian amount last call the But months been of legacy a it's was what

Operator

comes question Dodd Raymond Robert James. from next Our with

Robert Dodd

] estate down market, that. a dividends still Or very and we QX. the to estate these number indirectly finance can just The Is quarter. there lower, it's it going Toorak things whatever issues relatively dividend obviously asset-backed to the the to of from went there. the and the in there have real QX, or income to I connected normally something the the mean back side call ABS, Going that's point then any for real the exposure dividend healthy, of days. Obviously, seasonal this [ your like But obviously, something plan? is back timing is effect else spreads

Daniel Pietrzak

points But me financing, because a of of generally has on mean And the hear that. see asset loans. couple I I'll gone of of been example out we've was Toorak, so the sort to in classes let has on it where cost fall Toorak, more to answer there to And a I strong. been X that I happy question, lot the something, than it sort missed but up now, think of know bit quite if yields underlying underlying mean think little mean the of loan like on I would there. hard of the I performance the right sort a I

some there. They revolve. deals frequent or having those having sort income call the that of, it, have net -- do ROE sort stress So we'll has of a been and on ability of benefit had very issuer the put to

Melissa's repay, to entities So forward sort think I period for we in think financing of add the they cash of bit can time. continue as goes as trap those kind kind to of longer of some loans a those. of this structures about might little But question a to

of seasonal. it. not But try so out that as it's say mindful risk book I'd of kind of from sort can So term We point perspective. as amount to that there sort or rates of sort refinancing be run we some there'll a to neutral be of of

Robert Dodd

spread back stretch. does you market seems spreads puts question the for aggressively, your comes more showing obviously, in not that next -- long side. syndicated mean answer market risk thoughts private the all bit compression of the life, -- to I there's now. be me. call yet over some The more way XX a the And that Understood. conceptual a by On about, X little talked signs more, of that risk private what credit the there over it. meaningful are a spread Is syndicated in back months, market the compression credit the if

maybe a base compression are high. where spread syndicated risk handled -- the you a rates is back elevated without could that if market base dynamic obviously can be the Given high, rates problem. comes very are so while create that Does

Daniel Pietrzak

so. I so for Yes. it's don't a reasons. fair of couple think don't I a I very mean, But think question.

well bit I of level very there's a get to. sort market where think floor a of might this to

of think is capital market. of that between going private by part and here invest have a driven of bunch might I sort of amount levered you're a of a pools, market be to debt the certain gap sort pools syndicated the of but that the Now always

about I on some this think talked we've prior calls.

beginning you were the the of kind deals ] average. think XXX market kind probably 'XX, of spread looked I that [ of at on if was done,

almost that think was out and average. And benchmark year of have on that probably also XXX-plus deals. basis in big that's the jumped that considering floor I basis beginning versus a move the number that's gapped XXX would comparing ] the of this something kind points to the [ pretty just point in part

looking I that those going to are deals kind the that's and somewhat maybe of to today down generally think I So probably think to be there. And back -- deploy subject [ I now get think capital quickly. But XXX. are to to sort it that's looking excess bound for volumes, that I ] desire at deal think people X of you're deployed be capital to there's range you're in been raise will

Operator

Our next comes Riley. Rowe with question from B. Bryce

Bryce Rowe

on wanted bucket I some specific of the some and to the just nonaccrual with nonaccruals. start questions

NBG at nonaccrual you of on list, think an update perspective, X you as you those either process. and about within nonaccrual and provide fair quarter, look bankruptcy category. restructuring from or I a value much last cost going Can us that through a at talked change the in Wittur least the not those kind of

Daniel Pietrzak

agreement a to, add the to reached well. the side, on might restructuring, Wittur But think I Brian to take of happy call, as to we announced want processes last Bryce, those time. Yes, as relates and it on this these kind

I in of QX, happy what think think that we the do company of some we've expect with would point of we've to along think But expect, sort we been performance at I QX. get sort stable progressing early done, that's terms seen hopefully, as and I level. in at

NBG I complete. think want to pretty the But add, much process is Brian? anything you

Brian Gerson

Yes. a we of NBG, going has through business, historically working really On sorts the on team with within relatively That's costs, basis investment portfolio. our their through restructured their which been strong working forward, fixtures around optimizing closely the management of that all performer things. business results, those sales, lighting working

So sort restructuring. the of that's gone through

now we're the side, to going down Now on it's other to come and execution.

Bryce Rowe

Okay.

maybe more nonaccruals. Okay. dominates nonaccrual That's Jet Global I helpful. And list. then X the the mean on

you back high update accrual a I value think of take to provide at there? status? I mean, what can of it's would kind it marked XX%. that Any to nonaccruals relatively account to XX% fair XX% get the plus Dan,

Daniel Pietrzak

on on, the cost mean talked value. think I think XX% it's XX% couple a the different of of about it you're I is market Yes, your and of calls. numbers. name the We've number the I fair spot on points

nice has job. management the done inside a the think company team very I

jets of in a side amount there I but has it's on leasing larger the And -- net high the of think of pun some asset underlying both the fair are of corporates well. COVID. business mainly, intended, also other had as business but tailwinds, kind a a worth, remember, obligors lending no Their the class, private world.

actually company, been quite dividends over fair amount last been, a We've and has think, capital of performance So of the handful quarters. out of that's of cash strong. a return taken the I the

that's more book 'XX. right think forward a the has for I But I now. likely the it probably think delinquency path don't in

they been. So get to that done competition and where are business really -- has harder -- what I But I just the been job good a or who again, the has the been today. the their think has available maybe they've question think to ROE for thing

Brian Gerson

book. ago, add, way just I digits, I'd to better, single it we're was their And it's of a pleased to high little specifically, come certainly ROE the has performance and Yes. sort low the Still single digits. significantly. think be it's the but like long would see in bit Several it improved now years a of

Operator

Group. the Erik with comes question next from Zwick Our Hovde

Erik Zwick

First question for me.

with about yield I is for we in spreads average realize of peak thoughts about compression little seen, opportunity are I'm of for the we you some kind this lower there. the Or and general outlook of Just range originations if weighted the lower bit guess, as portfolio curious for on kind for just more this your yields near going rates and just curious given new, any cycle? the and interest have to with there is forward, comments replace out -- spread them your kind on vintages thoughts some a older here new roll stay

Daniel Pietrzak

Yes. sure, not Erik. I'm

kind terms a wrong peak. of entirely in is of instinct being probably Your near

at probably SOFR a it, of spot bit reset of days. loans might kind call and some at of kind if spot that of, upside, these June XX just further I SOFR of like XX quarter-on-quarter, be have kind little X/XX there's think and you we'll periods sort kind a of of

a to So while little system. the it it for go through takes

I think inside do once stuff think environment of performing. But I maybe positive, for refinanced to longer. that of on think in maybe that, we're you that see was sort maybe some be sort -- of the other highly side on of this the of could higher put of the or I it to repayment, gets the then yielding of lower the some for rates start confines that do the we companies book on are lower-yielding

sort tailwind to quite but about, great a from here got rates. upticks call which it, that's expecting, think of we're not meaningful I of income for kind happy relates for short-term it I'm as SOFR FSK, we'll

Erik Zwick

current X last I in helpful. And That's update the have for us X and me, position? remarks. you prepared then spillover missed on it Can may your

Daniel Pietrzak

take want you do Steven, Yes. that? to

Steven Lilly

of we least X that during which at just continue on X that, earnings north with obviously, is worth in And another during -- XXXX. sort for -- we that the this X.X we've started quarters' which distribution dividends, to of special in quarters of year of prior we Erik, for the of earlier said target, XXXX. Yes, announced that impetus continuing half calls, will we're first was hit our be conjunction

to share then met have So that nice a think of we have sort pleased of excess a with that shareholders. to It's and target. asset as another

Operator

Our Hughes next Mark from with Truist. question comes

Mark Hughes

to the in the Just the Any material market change question. prospects up. generate once X loosens fee income

here? be loans and presumably, income sensitive that the is longer, of would the fees you And How everyone through the time stream passage holding lower. else. been correspondingly prepayment You've

Daniel Pietrzak

lower, I sort I clearly, was an for is Xx us mean I income the think numbers And see. and one, fee have or Mark. origination interesting ago, point, it you of sort back see been that industry you of I that think, kind right? your it's But if in of the think a X.Xx do volumes, size I year look quarter can income fee today. of you where the to same think the broadly

new if think amount the the of repayments, exit do even of And a fee certain of kind of then will million was could on was think loan generate, depending certain a nice, it, income. see think generate of that's -- natural as fees, let's put we when amount on, amount deal I I well. but call don't repayments a current I quarter the So those do deals new $XX fees a certain --

that's lower and of normal than think I of sort kind average. any historical

a balance there there. of So bit is

I point. good think it's very a

Operator

Wathen Jordan Securities. Our with next from comes Fargo Wells question

Jordan Wathen

exiting been about It keep like some XX might by to Can decision on informed lien position accrual at Fishing you Pure us loss. have June looks on discussions some just a mark the that last that give quarter? second context

Daniel Pietrzak

end. just Jordan, can because And at out you faded the question a the repeat you bit

Jordan Wathen

kept that position that sponsor like about looks It a at exited been accrual. discussions at on Fishing loss. may by second you lien Last and with informed loss a quarter, the exiting you quarter, XX that have mark at this Pure June

there just that did I'm last basically, curious, keep Is you accrual quarter? asset why any... So on

Daniel Pietrzak

of sort there's think X I points there.

So most importantly, that exited number position. have we Probably correct. one, you are

a of result testament bit book. how to outcome I day. at we think of of of a ways, a good end was I or that And a the think manage in sort many the risk the good kind

of were we business sort to prospects asset cash. we'll continued the -- think think I that pay do long-term of the call will be, I positive. it,

brands it's got think real it. of to some kind of attached sort I

think of kind and prudent the exited sale drivers of those were then I it's position kind the drivers the was now. of management. the just accrual of points risk in But

Operator

to no time. to showing turn remarks. questions now like at I'd this closing it further Dan I'm back Pietrzak for

Daniel Pietrzak

join time we and Well, follow-up thank the everyone, Thanks any for as the taking today. available and holiday needed, wish to again. families healthy and happy call you, season. for We're points you your a

Operator

today's conference. program. your for the concludes This you Thank in participation

disconnect. now may You

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