FS KKR Capital Corp. (FSK)

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FS KKR Capital Corp (FSK)

Q4 2018 Results Earnings Conference Call

February 28, 2019 10:00 AM ET

Company Participants

Robert Paun - Director, Investor Relations

Michael Forman - Chairman and Chief Executive Officer

Dan Pietrzak - Chief Investment Officer, FSK

Brian Gerson - Head of Private Credit, FS Investments

Bill Goebel - Chief Financial Officer, FSK

Craig Larson - Head of Investor Relations, KKR

Conference Call Participants

Fin O’Shea - Wells Fargo Securities

Terry Ma - Barclays

Christopher Testa - National Securities

Casey Alexander - Compass Point

Ryan Lynch - KBW



Good morning, ladies and gentlemen. Welcome to FS KKR Capital Corp.'s Fourth Quarter and Full Year 2018 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.

At this time, Robert Paun, Director of Investor Relations will proceed with the introduction. Mr. Paun, you may begin.

Robert Paun

Thank you, Amanda. Good morning, and welcome to FS KKR Capital Corp.'s Fourth Quarter and Full Year 2018 Earnings Conference Call. Please note that FS KKR Capital Corp. may be referred to as FSK, the fund or the company throughout the call. Today's conference call is being recorded and an audio replay of the call will be available for 30 days. Replay information is included in a press release that FSK issued on February 27, 2019.

In addition, FSK has posted on its website a presentation containing supplemental financial information with respect to its portfolio and financial performance for the quarter and full year ended December 31, 2018. A link to today's webcast and a presentation is available on the Investor Relations section of the company's website under Events and Presentations. Please note that this call is a property of FSK. Any unauthorized rebroadcast of this call in any form is strictly prohibited.

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

In addition, this call will include certain non-GAAP financial measures. For such measures, reconciliations to the most directly comparable GAAP measures can be found in FSK's fourth quarter and full year earnings release that was filed with the SEC on February 27, 2019.

Non-GAAP information should be considered supplemental in nature and should not be considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP.

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

Speaking on today's call will be Michael Forman, Chairman and Chief Executive Officer of FSK; Dan Pietrzak, Chief Investment Officer of FSK; and Brian Gerson, Head of Private Credit for FS Investments. We're also joined by Bill Goebel, Chief Financial Officer of FSK; and Craig Larson, Head of Investor Relations for KKR.

I will now turn the call over to Michael.

Michael Forman

Thank you, Robert, and welcome, everyone, to FS KKR Capital Corp.'s Fourth Quarter and Full Year 2018 Earnings Conference Call, our first following the merger with Corporate Capital Trust.

On today's call, I will update you on the progress over the past year, discuss FSK's current position in the marketplace and share some thoughts regarding our strategy going forward. Following my remarks, Dan Pietrzak will provide our perspective on the current lending environment and review our investment activity for the quarter. Brian Gerson will then discuss our financial results for the fourth quarter.

To begin, I'd like to take a moment to review 2018. It was a transformative year during which we made significant progress positioning the company for long-term success. Some of our key accomplishments include the following. First, we received shareholder approval for the partnership between FS Investments and KKR. The partnership leverages our combined scale, investment acumen, distribution networks, relationships and institutional know-how. We complement each other's strengths and have established an effective operation, which we expect to leverage to deliver strong results to our shareholders.

Second, we advanced our plan to optimize the company's capital structure closing a $2.1 billion revolver as part of a 3.4 billion five year omnibus credit facility that is also used by FSIC II and III. It is largest revolver ever arranged for a BDC franchise and speaks to the importance of scale and the quality of our collective relationships.

Third, we completed the merger between CCT and FSIC, which is an important milestone for the franchise as we seek to run our business more efficiently, reduce risk through greater portfolio diversification and drive sustained value for our shareholders. Finally, we began capitalizing on the full benefits of the combined FS Investments and KKR platforms, generating consistent deal flow, driving origination activity, all through a highly collaborative working relationship between our firms.

As we look to 2019, we remain focused on a handful of key objective: delivering to our shareholders a competitive and stable dividend that is supported by recurring investment earnings; preserving capital; and position the FSK as a best-in-class BDC that's well aligned with our shareholders. While we are not immune to the market volatility experienced in the end of the fourth quarter, we've made progress toward these objectives. We continue to generate deal flow from and expand upon a broad sourcing platform as Dan will cover in a few minutes. This allows us to be selective, and we believe our selectivity is a critical competitive advantage in today's credit environment. We lowered our cost of financing, capturing a projected annual interest expense savings of approximately $10 million, and we've increased scale and further diversified the portfolio.

Read the rest of this transcript on seekingalpha.com