FS KKR Capital Corp. (FSK)

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FS KKR Capital Corp. (FSK)

Q1 2019 Earnings Conference Call

May 9, 2019 10:00 AM ET

Company Participants

Robert Paun – Director of Investor Relations

Michael Forman – Chairman and Chief Executive Officer

Dan Pietrzak – Chief Investment Officer

Brian Gerson – Head of Private Credit

Bill Goebel – Chief Financial Officer

Conference Call Participants

Rick Shane – JP Morgan

Casey Alexander – Compass Point

Finian O'Shea – Wells Fargo Securities

Paul Johnson – KBW

Terry Ma – Barclays



Good morning, ladies and gentlemen, and welcome to FS KKR Capital Corp’s First Quarter 2019 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. Good morning, and welcome to FS KKR Capital Corp’s First Quarter 2019 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 May 8, 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 ended March 31, 2019. 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 first quarter earnings release that was filed with the SEC on May 8, 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.

I will now turn the call over to Michael.

Michael Forman

Thank you, Robert, and welcome everyone to FS KKR Capital Corp’s First Quarter 2019 Earnings Conference Call. On today’s call, I will provide an update on our core objectives and discuss some recent developments 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 discuss our financial results for the first quarter and then we’ll open the call for Q&A.

I’d like to begin today’s call by making a few comments on the progress we’ve made since our strategic partnership closed a little over a year ago. We’ve accomplished a great deal collectively and have made significant strides in integrating our teams and transitioning our investment portfolio. With our new combined scale, we’ve made progress on several of our key portfolio construction objectives, including increased focus on directly originated credit and a reduction in equity exposure. We’ve closed on a number of large capital commitments, and from a liability perspective, closed on a $2.1 billion revolving credit facility, which significantly reduced FSK’s cost of financing. We believe we have built a strong base for long-term success. We have generated consistent deal flow through a robust origination pipeline as seen by the increased deal volume and capital deployment we’ve reported in the last four quarters.

And as a result of the merger of FSIC and CCT, we are operating our business more efficiently and we have reduced risk through greater portfolio diversification. While we are proud of our accomplishments and progress, we recognize we still have work to do and we’re focused on our long-term core objectives, which include delivering to our shareholders a competitive and stable dividend that is supported by recurring investment earnings, preserving capital and positioning FSK as a best-in-class BDC that is well aligned with shareholders.

For 2019, we continue to focus on several key initiatives that will drive near and long-term value for our shareholders and deliver on our core objectives. First, we remain disciplined in our underwriting approach and selectively allocating capital. We are focused on the upper end of the middle market and secured risks and we continue to generate deal flow from our broad sourcing platform, as well as generating opportunities from existing portfolio. Quality deal flow is critical as is selectivity, both of which enhance our competitive advantage in today’s lending environment.

Second and related, we are focused on credit quality and performance. We believe the portfolio today is better positioned than it was a year ago with increased diversification. We continue to work on our challenge credits doing all we can do to maximize value and stabilize NAV.

Read the rest of this transcript on seekingalpha.com