Q4 2019 Earnings Call
Ladies and gentlemen, please standby your conference call would be good momentarily once again, ladies and gentlemen, please stay on the line.
[music].
Conclusion of the company's remarks, we will begin the question answer session at which time I will give me instructions on into the queue. Please note today's conference is being recorded at the start at this time rubber on head of Investor Relations will proceed with introductions. Mr. Bond you may begin.
Thank you good morning, and welcome to Fs KKR capital Corp's fourth quarter and full year 2019 earnings conference call. Please.
Please note that that's key care capital Corp, maybe referred to as FX K. The fund for the company throughout the call.
Today's conference call is being recorded an audio replay of the call will be available for 30 days.
Replay information is included in a press release that up its K issued on February 27th 2019.
In addition, Apis K is 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 31st 2019.
A link to today's webcast and the presentation is available on the Investor Relations section of the company's website under events and presentations.
Please note that this call it the property of SK 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 referred to of SK. His most recent filings with the FCC for important factors that could cause actual results or outcomes to differ materially from these statements.
I guess K 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 NFS case fourth quarter and full year earnings release, there was filed with the FCC 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 gap.
In addition, these non-GAAP financial measures may not be the same as similarly name measures reported by other companies.
To obtain copies of the company's latest FCC filings. Please visit at best case website.
Speaking on today's call will be Michael Foreman, Chairman and Chief Executive Officer.
Dan Pietrzak, Chief investment Officer, and co President.
Brian Gerson co President and Steven Lily Chief Financial Officer.
Also joining us in the room or co chief operating officers drew O'toole and Ryan Wilson.
I will now turn the call over to Michael.
Thank you Robert and welcome everyone to Fs KKR capital Corp's fourth quarter and full year 2019 earnings conference call.
On today's call I will provide a high level overview of certain key items, and then I'll turn the call over to Dan, Brian and Stephen to provide additional color on the investing market portfolio activity, our quarterly and annual financial results and some forward looking thoughts on 2020.
And then we'll open the call for acuity.
From a strategic standpoint, 2019 was a productive year, perhaps SK.
First over the last 12 months, we've made significant progress rotating our investment portfolio away from older vintage assets toward Fs KKR directly originated assets.
To put some context around this point today, approximately 50% of our investment portfolio is now comprised of assets sourced by the Fs KKR advisor and during 2019, we rotate approximately 37% of our investment portfolio.
With this roughly 75% of total assets in the portfolio had been originated by the KKR credit platform.
Based on the average weight of life of our investments.
We would expect it over the next 24 months over 90% of our assets will be Fs KKR direct originations.
Second during 2019, we made significant progress growing two important investment strategies, which we believe will add long term accretive returns within our investment portfolio.
Our asset base finance investments have increased from less than 6% of our portfolio. Prior to the merger that that's I see at CCT to approximately 10% of our portfolio as of December 31st 2019.
In a similar matter our joint venture with South Carolina retirement Systems Group Trust has increased substantially from $581 billion I've committed and funded investments at yearend 2018 to 1.4 billion a year end 2019.
These strategies provide us with the ability to leverage the KKR credit investment platform and additional ways, which are beyond the reach of many of our peers.
Third during 2019, we took aggressive steps toward optimizing Fs case capital structure in June we closed our first middle market CLL raising over $315 billion of proceeds.
In July of 2019, we issued a 400 million dollar five year unsecured bond and we also closed on the add on issuance of 175 million to our existing may 2022 unsecured bonds.
Additionally, in the fourth quarter last year, we extended the maturity of our revolving credit facility to the end of 2024.
Finally in November we issued 425 million of unsecured bonds.
We believe the extensive work we did on the liability side of our balance sheet further strengthens our capital structure and represents another tangible example of the strength of the fast KKR platform.
Fourth during 2019, we executed 153 million of our 200 million share repurchase program by purchasing Ptwenty 5.2 million shares at a weighted average price of $6, an eight cents per share.
Through February 26, 2020, we have repurchased approximately $171 billion of shares under this program and we continue to believe and the importance of our share repurchase commitment.
Finally, as I mentioned on our last quarterly earnings call. We continued to build out our executive in operating team with strong leader leadership and experience in both private credit and the BDC industry.
As pleased as we are with this strategic and operational progress we achieved during 2019, we recognize we still have work to do.
During the fourth quarter 2019, we experienced realized and unrealized depreciation of course across our investment portfolio totaling 127 billion or 25 cents per share.
The vast majority of this depreciation related to older vintage investments originated prior to the Fs K current adviser, including Borden dairy aren't bad furniture, microfluidics and certain energy positions.
Brian Gerson will discuss this in more detail later on the call.
Our portfolio depreciation associated with older vintage assets underscores our focus is continuing to rotate our investment portfolio toward Fs KKR direct originations.
From a dividend perspective in 2019, we're pleased that we are we over earn the dividend for the full year with net investment income coverage of 104%.
As we move into 2020, we continue to expect our net investment income will be positively impacted due to the incentive fee look back provision in our advisory agreement.
A portion of this benefit flowed through the PML during the fourth quarter of 2019.
We currently expect that benefit to approximate 45 to 50 million or nine to 10 cents per share over the next three quarters.
And with that I'll turn the call over to Dan and the team to discuss these and other items in greater detail.
Thank you Michael I will provide a few comments on what we're saying in the market and then I'll provide an update on our investment activity during the quarter.
During 2019, the leverage loan markets were impacted by several key data points.
First loan fund flows declined by approximately $30 billion during the year.
At the same time, CLL issuance declined by approximately $8 billion or 6.5%.
These factors coupled with a reduction in M&A activity resulted in a roughly 25% decline a new institutional issuance volumes year over year.
This contributed to the meaningful volatility within the broadly syndicated loan market, particularly during the third and fourth quarters of 2019.
Given the size of the care platform, our relationships on the origination side and our ability to make sizable commitments across the capital structure, we were able to take advantage of this volatility to commit meaningful dollars and well structured transactions.
Our size and scale allows us to deliver certainty of execution for our upper middle market borrowers, providing an alternative to volatile and uncertain syndicated markets.
As seen on slide kind of earnings presentation. Our total deployment increased in the fourth quarter to $1.15 billion compared to $698 million in the third quarter of 2019.
Sales and pay downs were $929 million in the fourth quarter compared to $723 million and the third quarter of 2019.
Fourth quarter sales and pay downs included a $376 million of sales to our joint venture.
Including the sales net deployment was $594 million.
What's represents the highest level of quarterly net deployments since Fs KKR began as the investment adviser continuing to highlights the momentum of our platform and our commitment to continue to rotate out of vintage names within the portfolio.
For the full year of 2019, our total deployment was $2.9 billion versus 2.85 billion of sales and pay downs.
Excluding the $732 million or sales through our joint venture net deployments for 2019 were $785 million.
Approximately 77% of total deployment in 2019, Wasnt senior secured investments continuing our focus on that part of the capital structure.
Given the market volatility in our broad origination footprint the care credit platform continues to screen a high level of deal volume.
In the fourth quarter Carecredit evaluated over 300 transactions.
For the full year, they can't get our credit platform evaluated roughly 1400 transactions.
Nonetheless, we remain disciplined and selective as shown by our less than 3% closing rate during the year.
Our focus continues to be on high quality business is good deal structures, including financial covenants financial covenants and amortization on shoring, we feel well protected in terms of downside risk.
This activity is driven by the hard work of our origination team and platform our broad network of financial sponsor on borrower relationships as well as our unique asset base finance investment efforts.
As we have moved into 2020 SK cared Fs K deployment has remained healthy, albeit much of this was committed in the fourth quarter last year and much more volatile markets than we saw at the start of 2020.
Across the F. SK portfolio, we funded approximately $510 million of new transactions in January.
88% was first lien or unitranche loans.
We also continue to expand and build out the KKR credit team further institutionalizing the business with several hires across the platform, including our origination underwriting and portfolio monitoring teams.
As direct manners members of the investment team, we have added seasoned legal expertise to assist in driving quality deal documentation and structures.
And the current environment. We believe this is important and will help drive better future outcomes.
Now turning to slide nine of the earnings presentation. We thought it would be helpful to review highlights from a few of the larger transactions that occurred during the fourth quarter. Once we think shows the quality of deal flow, we committed to in the quarter.
One interesting trend and we saw was companies exiting the syndicated loan market through refinancings with direct lenders.
For example, as part of a club deal Carecredit was the largest investor and committed $310 million in a 1.2 billion dollar Unitranche facility.
And $450 million revolver and delayed draw term loan for risk strategies, a national insurance broker focused on specialty practices, serving middle and upper middle commercial clients.
Fs K committed $110 million the financing.
While the rest of the BDC platform and other KKR managed accounts committed the remainder.
In addition, as the lead Investor and arranger KKR committed to a 340 million dollar Unitranche facility for Lionbridge technologies, leading language service provider delivering localization digital marketing content management and application testing services to fortune 500 companies worldwide.
Hi.
Fs came at a $99 million the financing while the rest of the BDC platform and other KKR managed accounts committed the remainder.
Both the rest strategies and lionbridge facilities refinanced syndicated market structures with these new loans.
KKR credit was also the lead investor and arranger on a 725 million dollar financing for KBS a provider of janitorial on facilities management services to a range of end markets.
SK committed $179 million of the financing.
This is an example of backing a high quality business and having the size and scale to provide certainty to a borrower and sponsor.
I will now turn the call over to Brian to discuss some of our portfolio highlights.
Thanks, Dan I'll provide a summary of the that's under the investment portfolio as of the ended the year beginning on slide eight of the earnings presentation. At December 30, Onest, our investment portfolio had a fair value of $7.4 billion, consisting of 210 portfolio companies.
At the ended the fourth quarter, our top 10 largest portfolio companies represented 22% of the portfolio in line with the end of the third quarter.
We continue to focus on portfolio diversification, which we view as a key risk mitigation tool.
Additionally, we remain focused on senior secured investments as our portfolio is comprised of 70% senior secured loans as of December 31.
The median EBITDA of our borrowers was 66 million and the meeting leverage was 5.4 times well average EBITDA was 82 million and the average leverage was 5.7 times. This compares to median EBITDA of $58 million in meeting leverage of 5.1 times at September Thirtyth 2000.
The 19, and an average EBITDA of $82 million in an average leverage of 5.3 times.
The weighted average yield on accruing debt investments was 9.7% at December 31, 2019, as compared to 10.1% at September Thirtyth 2019.
The decline in yield was attributable to the decline in LIBOR as well as the repayment of certain higher yielding investments.
At the end of the fourth quarter approximately 2.8% about this case portfolio was on non accrual on a fair value basis, and 5.4% on a cost basis as compared to 1.7% at fair value and 3.7% on a cost basis at September Thirtyth too.
19.
During the fourth quarter, we placed three investments on non accrual.
I'd chronic filtration holdings, and Joe The Corp, and board and dairy.
As Michael mentioned earlier during the fourth quarter, our portfolio depreciation was $127 million and we thought it would be helpful. If you provided some additional color on the specific investments that led to the majority of the decline in value.
As many of you are aware on January says board and dairy filed for chapter 11 protection under the U.S. bankruptcy code. Despite our best efforts to prevent this outcome.
Okay, and $70 million based value I'd be 175 million dollar unitranche loan to Borden, which was originated in 2017.
Our investment in Borden was marked down to 51.7% of cost at year end 2019, resulting in a $24.8 million unrealized loss in the quarter.
Prior to the filing we were working closely with management and the sponsored to negotiate an out of court restructuring.
We believe would have preserved the greatest value for all stakeholders.
Unfortunately, the sponsor and management side its Pergo, our agreed negotiated deal and in our view I necessarily file for bankruptcy protection.
We are disappointed that the company chose the bankruptcy path, which we believe will result in less value being delivered to all stakeholders, including the company's employees.
Nevertheless, we're working to maximize the recovery value of our investment and we will continue to provide updates the situation progress.
Another investment where we experienced depreciation during the quarter was arc band furniture, which was also originated in 2017.
Okay owns $55 million face value I think $170 million Unitranche loan that sits behind an 80 million dollar asset base revolver.
During the fourth quarter loan as Mark down to 31, and a half a percent of cost, resulting in a $14.2 million unrealized loss.
Our van operates value oriented furniture stores and Midwestern states.
The company has been experiencing meaningful same store sales declines throughout the year, which has been reflected in our quarterly value of alone.
We're closely monitoring the company's liquidity position however, our ultimate recovery on this investment will depend on our ongoing negotiations with the company sponsored the ABL provider in other interested parties.
Another been its credit where we experienced unrealized depreciation in the quarter was my chronic filtration, a global designer and manufacturer of inline solid liquid filtration solutions and industrial process applications, which was originated in 2013.
Okay on the entire amounts of 62 million dollar face value Unitranche loan.
During the fourth quarter, the loan as mark down to 61.9% of cost, resulting in a $10.2 million unrealized mark to market loss.
This markdown was due to declining financial performance in the fourth quarter, which led to the suspension of the company's planned sales process and the placement as alone on nonaccrual status.
As Michael highlighted earlier these three names boarding aren't van furniture, micronics as well as certain energy positions accounted for the majority of depreciation in the portfolio in the fourth quarter.
The remainder of the depreciation was spread across the portfolio.
Now turning to the joint venture as seen on slide 14 of the earnings presentation. Our joint ventures investments at fair market value was 1.44 billion at December 31, 2019, as compared to 1.25 billion at September Thirtyth.
As a reminder, our joint venture has $1 billion of equity commitments and as of December 31st. This allocation represented 6% to 9% of our total portfolio and we are targeting up to a 10% allocation.
On prior calls we've spoken about are focused on investing an asset base finance opportunities and how investing in these transactions can provide compelling returns as well as creating additional diversification across our investment portfolio.
Asset base finance investments represented 10% of the portfolio as of December 31, and we are targeting intend to 15% allocation.
Additionally, in terms of long term targets for portfolio allocation, we continue to focus on reducing our equity exposure and rotating out of certain non income producing assets.
However, given the nature of these investments in our minority positions is difficult to predict specific timelines for this strategic initiatives.
At the end of the year equity investments represented approximately 7.8% of our portfolio.
Long term, we are targeting a 3% to 5% allocation and progress here is an important focus for 2020.
Ill now turn the call over to Stephen to discuss our financial results in more detail.
Thanks, Brian.
During this portion of the call I'll provide a summary of our financial results for the fourth quarter and full year 2019, you can find this information starting on slide four and continuing on slide 17, 18 19 of the earnings presentation.
Our total investment income in the fourth quarter was 186 million as compared to $199 million during the third quarter.
Provide a bit of color behind the numbers during the quarter, our investment income breaks into two buckets. The first bucket is recurring interest income and the second bucket is fee income and dividend income.
Within the first bucket despite a robust originations during the fourth quarter, we still experienced a decline in interest income primarily due to timing differences associated with certain repayments, we experienced during the quarter and also late in the third quarter as we mentioned on our last earnings call coupled with originations during the quarter, which were.
More backend weighted in nature.
As one might expect based on Dan's earlier comments the repayments, we experienced carried higher weighted average yields than the new investments we made during the quarter.
We continued decline in LIBOR during the quarter negatively affected our total interest income as well by only our Pik interest income was elevated during the quarter as we reclassified interest relating to one portfolio company, which had been recorded as cash interest earlier in the year and which we reclassified as pik interest during the fourth quarter.
This change reduced cash interest income during the quarter, an elevated pick interest.
From a fee and dividend perspective, our total fee in dividend income totaled 32 million during the fourth quarter as compared to $25 million during the third quarter.
The increase quarter over quarter related to higher fee income given the higher originations during the quarter that Dan discussed earlier as well as meaningful prepayment activity that we experienced during the quarter.
For the three months ended December 31, 2019, our net investment income was 20 cents per share, which compares to 22 cents per share in the third quarter of 2019, and 19 cents per share in the fourth quarter of 2018.
The decline in net investment income quarter over quarter was largely due to the repayment of certain higher yielding assets across our portfolio lower floating rate portfolio yields due to a decline in LIBOR nonaccrual activity and the impact of excise taxes.
The quarterly increase in net investment income year over year was driven predominantly by lower incentive fees during the fourth quarter of 2019.
Adjusted net investment income in the fourth quarter was 21 cents per share.
This excludes the impact of excise taxes.
In terms of details with regard to our incentive fee look back provision the contractual agreement resulted in approximately $20 million of incentive fee reductions in the fourth quarter of 2019.
This is an addition to the $16 million reductions we experienced during the third quarter of 2019.
In line with what we stated during our third quarter 2019 earnings call. We anticipate that the look back provision will continue to reduce incentive fees over the next three quarters.
Providing additional net investment income of approximately $45 million to $50 million or nine to 10 cents per share.
Turning back to our results.
Net realized and unrealized losses on investments were $127 million during the quarter or 25 cents per share.
As Michael and Brian discussed earlier, the majority of the portfolio depreciation during the quarter was related to certain vintage assets across our investment portfolio.
In terms of full year results, our net investment income for 2019 was 79 cents per share.
Compared to our full year dividend of 76 cents per share and our net investment income of 82 cents per share during 2018.
Our net asset value was $7.64 per share as of December 31, 2019, as compared to $7.86 per share at September 32019, and $7, an 84 cents per share as of December 31 2018.
The main drivers of the change in net asset value can be seen on slide six of the earnings presentation, which include realized and unrealized losses, the benefit of the share repurchase activity and net investment income in excess of the dividend.
In terms of dividends during the fourth quarter, we paid our regular 19 cents per share dividend.
Our board of Directors has declared a first quarter dividend of 19 cents per share, which will be paid on April 2nd 2020 to stockholders of record as of the close of business on March 18 2020.
This dividend is consistent with the regular quarterly per share dividend paid throughout 2019.
Turning to our balance sheet as of December 31, 2019 total investments at fair value were 7.4 billion total cash was 106 million and total assets were 8.2 billion.
This compares to total investments at fair value of 7.2 billion.
Total cash of 126 million and total assets of 7.8 billion as of September 32019.
As Michael highlighted earlier, we have made significant progress on the liability side of our balance sheet. During the past year further strengthening our capital structure by adding longer dated maturity fixed rate debt.
We will continue to focus on our capital structure during 2020, as we seek to improve and diversify our funding sources.
At December 31, 2019 total outstanding debt was 4.2 billion with total committed debt a 4.8 billion.
Unsecured debt represented approximately 37% of our drawn debt as of December 31, 2019.
Our net debt to equity at the end of the fourth quarter was 89% as compared to 78% at the end of third quarter and is calculated by excluding cash on our balance sheet as well as the $657 million in receivables representing sales to our joint venture.
Our effective weighted average interest rate on debt was approximately 4.0% at December 31, 2019, as compared to 4.3% at the end of the third quarter of 2019.
This rate represents a meaningful reduction from our weighted average interest rate on debt a 4.6% at the end of 2018.
And with that ill turn the call back to Michael for a few closing comments.
Thanks Steven.
In closing.
While we are pleased with our progress across several several strategic initiatives over the past year, including rotating out of older vintage assets.
Optimizing our capital structure.
And building out our leadership team. We also recognize that there there is continued work to be dot.
We look forward to updating you on our progress over the next year.
Thank you to everyone for your time today as always we appreciate your support with that we will now open the call for questions.
Ladies and gentlemen, if you have a question or comment at this time. Please press the star than the one key on your touched on telephone. If your question has been answered you were saying we're still from the Q. Please press the pound.
Our first question comes from Rich things JP Morgan.
Hey, guys. Thanks for taking my questions. This morning.
First one of your big investments during the quarter was in truck light I.
I am curious given that business.
You had conversations with them about any supply chain disruptions related to current of IRS.
Yes.
Hey, Rick Thanks for that.
All right I think the corona points, probably a little bit broader to be honest right.
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We spent a lot of time when the terrorists.
Where an issue of kind of gone company by company thinking about what the impacts where I think that.
That was really the start of of I think the discussion around the current a virus as that originated out of Asia, We've clearly gone broader than that in the past few days. We're continuing this drop of the portfolio in the supply chain sort of points.
As of the last few days to be honest across the portfolio not just that name we have not heard kind of challenges on supply chain, but it won't surprise me if that sort of changes or evolves.
In the coming kind of weak specially with what we saw it of Apple and sort of others. So clear focus across obviously the situations fairly fluid that Alex.
Got it okay.
And then when we total up the new non accruals at somewhere between on a cost basis about $175 million to $180 million.
What we think about how that runs through the piano animal on in Eni basis does that equate to about 3% to 4% of Eni.
Yes, hi.
Yes, Stephen it's and I think it's a little bit put into sort of dollar terms is probably a better way. We think there's about a $5 million sort of impact to that for this quarter, Yes, Thats right Rick.
So its 5 million per quarter.
Correct.
Okay, great. Thank you very much.
Thanks next question comes from John Hecht with Jefferies.
Morning, guys and thanks for taking my questions on you guys talked about it I think about an 18 month.
Got you plan to complete the rotation in the portfolio.
What should we think about kind of the NIM.
And the characteristics of the portfolio and Thats completed relative to where it is now.
Thanks, John it's good question.
We didn't get some stats.
As it related to originations during the quarter origination since the start of this advisor like we were happy with the deal volume we saw in Q4.
I think you'll see some of that flow into Q1 as well as we discussed a lot of that just being driven by the volatility and.
And the syndicated markets, we saw that abate quite frankly, as we get beginning of Q1, but I think it's.
I think in some ways, it's probably on its way back I think we we will have 12 to 24 months to I think continue to rotate this and get system.
90% sort of plus threshold for.
Overall, KKR originations I will clearly clearly be higher.
And then even the 50% that we should have talked about just from when this advisor started I think in terms of portfolio construction.
I don't think our percentages are that far off from what we're laying out on page five.
With probably a couple of caveats right. One we do want the joint venture to be higher we're probably thinking around 10% there as a target that's been accretive I think if you can see the dividends going up I think we expect the dividends to be.
Higher in Q1 as well.
The equity bucket is too high.
Got it needs to come down to more of a three to three sort of a three to maybe.
3% to 5% sort of number of that needs to go down and then I'm just a risk perspective.
Obviously, you've got a pretty couple fluid leaks and the rest marketable are pretty defensive so as you can see what weve, putting on new deals has been more on the top of the capital structures I think you expect the.
The subordinated debt number to go down but that that portfolio construction is generally in in that.
I think the pass or the way. We're headed is what you should expect going forward.
Okay. Thanks for that color and then just thinking about company level or portfolio level trends.
Any commentary on EBITDA, our revenue trend within the portfolio I know you guys get the kind of that high level average EBITDA, but what do you guys sitting at the company level in terms either down revenue trends.
Yes.
Good question as well I mean, we yeah. We go through the entire portfolio, we think about it quite frankly, even more broadly than just what's inside of that fast Kay.
For the last several quarters of of 19.
We were still seeing growth as it related to.
Revenue and EBITDA I think that growth, though generally has just been more muted.
Which I think you probably would expect I think it's a trend we're seeing.
Generally across the entire credit portfolio.
I think we have seen some budgets missed and some names I think in some ways those budgets are not necessarily relevant to our underwriting but at least relevant to what was sort of put forward there.
I think it revenue trends still sort of but but just more muted than we were seeing in prior quarters.
Okay. Thanks, and then.
Last question as you.
The obviously, we all see the equity markets have been disrupted with the concerns about the Corona viruses are you seeing anything with respect to your pipeline, whether its ability to kind of work through the funnel or.
You are what's happening in the spreads in the current environment.
Probably a little bit too fast from.
The crown virus sort of direct.
That said I think the high level points are you had and just maybe even flow through for the last.
More 14 months 2019 started off quite aggressive and the syndicated markets I think that did flow into.
The private credit market just in terms of market feeling dynamics.
That changed meaningfully kind of post labor day, I think thats, what youre seeing our origination numbers like that so you will see flowing through our origination numbers at and sort of Q1, what we've talked about in our prepared remarks.
You then move back.
Market was pretty darn hot.
The start of this year, clearly everybody's and wait and see mode. I think it's going to be a couple of interesting days and weeks for for deals that are either were being sort of market. It is sort of talked about I suspect that volatility will be positive for us.
And we're keeping a close eye on it.
Great. Thanks, very much guys.
Our next question comes from Casey Alexander with Compass point.
Hi.
A couple of questions can can you tell us how much was reclassified from interest income into Pik income in the quarter. You said it was for a full years of income from.
That particular loan how much was it just so that we can kind of gauge what what sort of the go forward take rate is.
Sure This is Stephen.
The breakdown Casey is it's about $7 million, it's rough numbers, a little less than two more you to quarter.
And we realize this it's an instrument that compounds once a year, we realized in the fourth quarter.
So yes pick I think it in the earnings presentation on page 17, it goes from.
11 million in the third quarter to 21, there's a little bit a rounding there, it's actually technically 20.6 or something like that.
So 7 million of the differences related to that one then.
Okay.
All right secondly.
Over the last three months since your last earnings call.
To a $171 million on the share repurchase program over the last three months you purchased 35 million give or take a couple Bucks you have 29 million left which is less than three months can you give us some sense of of yours or the board's Kemper in terms of really.
Noting the share repurchase program.
Yes. This is Michael form and thank you for the question and Euro your numbers are correct. My whatever side of the same numbers, we've always been big believers in share repurchase plans under the right circumstances, we've always follow through on our promises.
As you said, we still at $27 million left in the program.
Before we fully execute that program and then we will revisit.
Hi, Nymex with avoided we do recognize the accretive impact of these programs.
The current levels.
Okay. Thank you and lastly.
Dan you are mentioning the dividend income and actually on a quarter over quarter basis, the dividend income actually declined a little bit.
Okay, I'm, assuming and maybe I'm wrong that the.
The waterfall down into the JV of 300 plus million dollars worth of loans was is lot did that occurred late in the quarter is that something that we should expect to have a greater impact on Q1.
Yes. Thanks.
I think case it exactly right I mean, as I think we've got the JV dividend income up quarter over quarter like that timing difference that you talk exactly about as there I think we have.
You know.
You should have an expectation that that number will continue to go up.
Inside of Q1, and the other sort of smaller movers in there.
Some of the asset base and adds investments that continue to pay dividends were just sort of nominally smaller amounts what sort of impacted the overall total for the quarter. Okay. All right. Thank you for taking my questions.
Our next question comes from met Jain with Raymond James.
Hi, guys good morning.
Quick question on portfolio company leverage so or medium leverage I should say so up to 5.4 from 5.1.
Things specifically top of mind, you can give us in terms of color as to why that increased.
Yeah, Hey, Matt Stampede is like.
Nothing specific I mean are choosing that median right.
I think we've we've been very focused on backing out of the right companies and.
Thinking about ensuring from a risk perspective that.
We are in those sectors and companies, where we think theres real downside I think some of those those positions will just end up having leverage that was higher than the meeting what should have ticked up individual names and then I wouldn't read anything specific into the number.
Okay, Great and then secondly, just any general update on helping Anders.
I think the couple of things, we can say there was a new CEO announced.
The started the year.
Very excited about that appointment I think he comes from a a really interesting background and can add real value to that business I think we've seen some some green shoots in other parts of that including on the raw materials sort of cost side.
Yes, so I think certain.
So the key positive items that we acknowledge there so a lot of work to do that.
Okay. All right. That's all for me thanks, guys.
Our next question comes from Finian O'shea with Wells Fargo.
Hi, Good morning, Thanks for taking my question just first on.
First dairy.
The.
Appreciating that its this.
Probably mostly confidential, but my last three is the company was granted 30 days.
Central cash use and that should have just approximately expired can you give us color on the tone of your current negotiations and how that is baked into the 12 31 Mark.
Hey, Venice Dan.
I think there's a lot on this names in the public domain right. I think you can find a lot of the recent dialogues.
No that we filed.
In response to this but as we said in the prepared remarks, we were pretty disappointed with this outcome.
You can go to our initial filings and see the agreed upon sort of deal that was there I think there's probably not going to comment on.
Beyond what's kind of out there right now.
Well, we we took a lot of things into play while we thought about.
That sort of Q4 market. This thing will play out meaningfully over the next handful of weeks and months and we're focused on on maximizing the outsource.
Okay. Thank you and.
On.
On hiring I think you mentioned a few more people on on portfolio and monitoring.
Can you give us any more outlook as to.
The pathway in terms of where you are in staffing and what.
Capacities those were in a little more color.
Yeah happy too.
I think we've we've been.
No well at the overall powerful platform level.
I do by by the opportunity here, we've we've added staff.
We've added starting to that just in direct relation to us becoming involved in the partnership hearing with this BDC platform I think we're we're very proud I love. The last handful of years, we've really institutionalize the business, we've gotten more originators, who are driving I think outcomes.
I think you can see that in the numbers, we've built up a lot of of resources, including very experienced hires on what I will call a structuring and underwriting side.
We build a portfolio of portfolio monitoring units to really work with the investment teams.
Dr.
You know early looks into portfolio performance, just see what you'd imagine a real resource for a book of this size.
I mentioned the legal expertise that we added I do have a belief I think we all do that in this market we need to be very focused on the downside being on top of of key terms and conditions and documents is important. So we've we've added I think.
I think we will continue to do that where we see sort of necessary.
I think it's been important for us to build out the platform like we've done today.
Okay. Thank you and then just.
Final question on sort of the legacy or vintage names.
That has.
Say, probably got answered on accrual or underperformed is there any.
Steve here across these businesses.
Is it is it.
Underperformance and approaching maturity type situation is that want off or is it is parsed part of this you.
<unk> platform being more aggressive trying to manage out of down and that kind of forcing.
A lot of these situations to come to ahead.
Yes.
Yeah.
Hi, there a couple of like so there's definitely situations that I think we've been proactively trying to get out of which which may include us.
Selling physicians at below kind of face value, we're sort of par.
I think this our names that we've just.
Very happy to get that cash back and get repaid I give us situations like we talked about last quarter, where a b plasman, which was the largest portfolio name NFS K fairly high yielding physician God repaid at par we were quite happy about that.
I was just not a sector, we wanted to be in at sort of that leverage us in a number like the names we talked about today.
Probably.
One of them was a a called light sort of loan that is probably in a sector that should not be called light.
Meaning a furniture retailer and I think both of those but larger names.
Borden and art van or hit by someone secular changes at retail in the consumption of of mill, but I'm looking at Bryant guys and I don't know said, yes, I mean look I think you're right with board and art than those Secularly challenged businesses I think macronix is now.
Video business, not something or focusing on going forward.
Energy was little bit of a drag this quarter again, not something we're focusing on going forward.
Okay. That's all for me thanks, so much.
I'm not showing any further questions at this time.
Great well, thanks, everybody for their time today.
We look forward to talk into next quarter. Thanks.
Ladies and gentlemen, does conclude todays presentation you may now disconnect and have a wonderful day.
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