Q1 2022 FS KKR Capital Corp Earnings Call

May 10, 2022

Good morning, ladies and gentlemen, welcome to the KKR capital Corp's first quarter 2022 earnings conference call.

There will be a listen only mode.

FX played management as includes another company's remarks, we will begin the question and answer session at which time, we will give instructions on entering the queue. Please note that this compensates being recorded at this time, Rob upon head of Investor Relations Officer with the introduction Mr. Upon you may begin.

Thank you good morning, and welcome to App Fs KKR capital Corp's first quarter 2022 earnings Conference call. Please.

Please note that FX KKR capital Corp may be referred to as FX Kay.

On 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 our press release that <unk> issued on May nine 2022.

In addition, SK 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 2022.

A link to todays 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 is the property of S. K.

Unauthorized rebroadcast of this call in any form is strictly prohibited.

Today's conference call includes forward looking statements and are subject to risks and uncertainties that could affect FSA or the economy generally.

We ask that you referred to <unk>, most recent filings with the SEC for important factors and risks that could cause actual results or outcomes to differ materially from these statements.

<unk> 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.

Such measures reconciliations to the most directly comparable GAAP measures can be found in <unk> first quarter earnings release that was filed with the SEC on May nine 2022.

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 <unk> website.

Speaking on today's call will be Michael Forman, Chairman and Chief Executive Officer.

Dan Pietrzak, Chief investment Officer, and co President.

Brian Gerson co president.

And Steven Lilly Chief Financial Officer.

Also joining us in the room today are co chief operating officers drew O'toole and Ryan Wilson.

I'll now turn the call over to Michael.

Thank you Robert and good morning, everyone welcome to Fas KKR capital Corp's first quarter 2022 earnings conference call.

I'd like to start by congratulating, our entire team on delivering another strong quarter of results.

As we continue to execute our strategy of generating organic net investment income growth through new investments and successful portfolio rotation. We are pleased that the positive momentum we created during 2021.

As we move into 2022.

During the first quarter, our investment team originated $2 $1 billion of new investments. In addition, we experienced a 6% increase in our net asset value as we continue to see improvements in both the performance and valuation associated with specific investments as a result of our investing.

Activity in our portfolio's overall performance, we again meaningfully out earned our base 60 cent per share quarterly dividend.

During the first quarter, our net investment income was <unk> 77 per share and our adjusted net investment income was <unk> 72 per share, which was <unk> <unk> per share above our public guidance.

Our outperformance primarily was driven by higher than expected originations and corresponding fee income during the quarter.

From a liquidity liquidity perspective, we ended the quarter with approximately $2 6 billion of available liquidity.

In terms of our $100 million share repurchase program through May six 2022, we have repurchased approximately $25 million of shares under this program.

Based on our strong results. Our board has declared a distribution of <unk> 68 per share for the second quarter.

As many of you know our dividend policy consists of a base quarterly dividend of <unk> 60 per share coupled with additional amounts in excess of <unk> 60 per share during quarters, where additional net investment income is generated.

In summary, our investment team produced another strong quarter of originations in our base business is continuing to produce results, which give us confidence in the future and with that I'll turn the call over to Dan and the team provide additional color on the market in the quarter.

Thanks, Michael from a macro perspective, we like others are focused on the persistence of inflation.

<unk> supply chain challenges and the tragedy of human loss in Ukraine.

We remain hopeful the federal reserve's decision to take a more aggressive stance in terms of raising interest rates will help curb inflation.

As interest rates move higher in response to inflationary pressures, we expect our shareholders will benefit given that 87% of our debt investments are structured as floating rate investments with a weighted average floor of 88 basis points from where rates were on March 31 2022.

All other things being equal every 100 basis point increase in short term rates should increase our annual net investment income by <unk> 19 per share or between <unk> <unk> five per share on a quarterly basis.

Against this backdrop, we continue to focus on investing in larger companies, which we believe maintain at least some degree of pricing power as.

As well as overall portfolio diversification.

The increased volatility in the public markets continues to lead to strong demand for private capital and.

And we believe we are well positioned to capitalize on this opportunity.

Turning to our investment activity during the first quarter, the $2 $1 billion of investments we originated were spread across 14, new high quality companies and nine industries and.

And included two asset based finance transactions, the average EBITDA of the new corporate names and which in which we invested during the quarter was approximately $186 million.

And the average LTV was 47%.

Reflecting both our continued focus on the upper end of the middle market as well as conservative investment structures. We are pursuing our investments during the quarter carried a weighted average yield of eight 4% at approximately 59% of our portfolio activity came from opportunities in companies previously invested in by KKR.

Sure.

Again, illustrating the power of incumbency and our longstanding existing relationships are $2.1 billion of total investments combined with $1 $1 billion of net sales and repayments when factoring in sales to our joint venture equated to a net portfolio increase of 949 million.

During the quarter as.

As we discussed on our last earnings call.

During our 2021 Investor day in September of last year, we presented three primary opportunities, which we believe potentially would enhance our net investment income.

First was rotating out of certain non income producing assets into income producing assets.

Second was operating somewhere closer to the midpoint of our targeted leverage range.

And third while selectively refinancing certain higher cost unsecured debt on our balance sheet at our Investor day, we communicated our view that in total over the next six quarters these opportunities.

Pending on prevailing interest rates rates and other factors could generate up to <unk> 15 per share per quarter of additional net investment income. In addition, we analyzed the remaining legacy portfolios contribution to net investment income, which also totaled <unk> 15 per quarter.

As a reminder, on our fourth quarter 2021 call. We stated that we had achieved approximately <unk> <unk> per share of incremental quarterly run rate adjusted net investment income through two quarters.

As of the end of the first quarter of 2022 before taking into account recent upward moves in interest rates. We have achieved <unk> 12 per share of incremental quarterly run rate adjusted net investment income.

Our progress breaks down as follows.

First at the time of the Investor Day, we identified four cents per share of potential incremental net investment income growth on a quarterly basis.

Assuming we redeployed certain non income producing assets into income producing assets.

At the end of the first quarter, we have achieved <unk> per share of this incremental net investment income growth.

The second opportunity, we identified was operating at our targeted leverage.

Over the last three quarters, we have expanded both our investment portfolio and our joint venture to generate approximately seven cents per share of additional run rate quarterly net investment income.

As compared to a potential of <unk> <unk> per share that we identified at the time of our Investor day the difference between the seven.

<unk> per share of additional run rate net investment income, we have generated and the nine <unk> per share of net investment income we targeted at the time of our 2021 Investor day.

Rates to asset based finance investments and our joint venture.

Since our Investor day, we have originated approximately $200 million.

Of asset base.

<unk> investments, which are and they're ramping phase.

We expect that these investments once fully ramps, we will generate approximately <unk> <unk> per share of additional net investment income.

In addition, we expect that our joint venture now that it is fully ramped will contribute an additional penny per share of dividends during the second half of this year.

The third opportunity, we spoke about related to the right side of our balance sheet.

At the time of our Investor day, we had the opportunity to refinance certain higher cost unsecured notes.

During the fourth quarter of last year and early during the first quarter of this year, we issued $175 billion of unsecured notes at a blended coupon of two 7%.

In April we repaid our 475% $450 million unsecured bond that was due in may of this year.

As a result, beginning with the second quarter of this year, we have achieved approximately <unk> <unk> per share and interest savings.

As a result of these combined activities, we've achieved approximately <unk> 12 per share of incremental quarterly run rate contribution to our adjusted net investment income also as I mentioned once our AB invest ABF investments begin to generate income and our JV begins paying an increased quarterly dividend.

We expect to generate an additional <unk> <unk> per share of additional quarterly net investment income offsetting these positive increases to adjusted net investment income has been the recent increases in interest rates and a slightly elevated average leverage balance during the quarter.

Which combined to impact us by approximately <unk> <unk> per share.

At a lower weighted average portfolio yield of eight 3% as compared to eight 5% at the time of our Investor day. This impacts us by approximately <unk> <unk> per share.

In summary, we are extremely pleased to have made such substantial progress over just three quarters towards the goals, we laid out in September of last year.

And with that I'll turn the call over to Brian .

Thanks, Dan.

As of March 31, 2022, our investment portfolio had a fair value of $16 6 billion.

Consisting of 193 portfolio companies.

This compares to a fair value of $16 $1 billion and 189 portfolio companies.

As of December 31, 2021.

At the end of the first quarter, our 10 largest portfolio companies represented approximately 19% of our portfolio, which is in line with the end of the fourth quarter.

We continue to focus on senior secured investments as our portfolio consisted of 59, 9% of first lien loans and 69, 2% senior secured as of March 31.

In addition, our joint venture represented eight 9% of the portfolio.

In asset based finance investments represented 13, 2% of the portfolio.

Equating to an additional 22, 1%.

Which is comprised predominantly of first lien loans, our asset based finance investments, which we believe had meaningful principal protection.

During the first quarter, our new originations consisted of approximately 55% in first lien loans, 2% in second lien, 21% in asset based finance investments.

4% in the joint venture, 16% in preferred equity and 2% in equity and other investments.

The weighted average yield on <unk> debt investments was eight 3%.

As of March 31, 2022, compared to eight 4% at year end 2021.

As a reminder, the weighted average yield is adjusted to exclude the accretion associated with the merger with <unk>.

Including the effects of the investment activity, we experienced during the first quarter as of March 31 2022.

Approximately 88% of our yielding investment portfolio is now comprised of investments originated either by KKR credit or the Fas KKR adviser.

This compares to 86% at the end of the fourth quarter 2021 and.

79% at December 31, 2020.

We are proud of the progress we have made continuing to rotate legacy assets and we remain focused on taking a disciplined approach to positioning our portfolio and growing our run rate net investment income.

During the first quarter, excluding the impact of merger accounting, we experience net portfolio appreciation on investments of $9 million.

In terms of non accruals during the quarter, we exited our investment in Borden dairy.

In addition, our legacy investment in sequel use was successfully restructured during the quarter into certainty securities and equity interests.

As of March 31, 2022.

Our non accruals declined to approximately three 2% of our portfolio on a cost basis, and one 5% on a fair value basis compared to three 9% on a cost basis and one 9% on a fair value basis as of December 31, 2021.

With regard to the legacy portion of our portfolio. We continue to work with both the Investor Group and the management team of global jet to adjust and enhance their business on a go forward basis.

During the first quarter, we received an approximate $23 million repayment of principal at par on our mezzanine investment.

As a result.

During the first quarter, we adjusted our accrual rate on the security from 9% during the fourth quarter to its contractual rate of 15%.

Additionally, we adjusted the accrual rate on our preferred equity to four 5% during the first quarter.

Its prior level of 9%.

We took similar action with our legacy investment in GW aluminum as we reduced our rate of accrual on our preferred stock investment from 12, 5% to 6.25%.

While GW continues to perform in line with its budget, we believe the reduced accrual rate will more accurately reflect an appropriate indication of value for the company on a go forward basis.

Before handing the call to Steve I'd like to highlight two significant items during the quarter.

First we invested in approximately $300 million.

Preferred equity is.

<unk> health.

Support Hellman, <unk> Friedman Bain capital's acquisition of the company.

Athena health as a provider of electronic Health Records and revenue cycle management software and services small group physician practices and other ambulatory providers.

<unk> health was a form of a former successful second lien and preferred equity investment of <unk> K.

And as such we were very familiar with the credit and well positioned to support the new sponsor group.

Second we are pleased to announce that during the month of April the sale of <unk> United LLC.

Obviously known as D I closed.

As of March 31, 2020 to our common stock was valued at $167 8 million.

Versus $77 5 million as of December 31, 2021.

As many of you may recall during the depths of Covid, we converted our subordinated debt into equity and invested new capital in the company to support a strategic acquisition.

We believe that this positive outcome is a prime example of our internal workout and governance group, creating value for our shareholders.

That I will turn the call over to Steven.

Thanks, Brian during this portion of the call I'll focus on our financial results are forward looking guidance and our balance sheet.

In terms of our financial results for the quarter, our total investment income increased by $32 million quarter over quarter.

Largely driven by portfolio growth due to the positive investment activity about which Dan and Brian spoke.

The primary components of our total investment income are as follows.

Interest income increased by $22 million quarter over quarter.

Including an approximate $8 million, one time benefit predominantly due to our investment in Micronics and which we recorded additional income coupled with our successful exit of the investment in February .

Our fee and dividend income totaled $92 million during the first quarter, an increase of $10 million compared to the fourth quarter of 2021.

Our fee and dividend income during the first quarter is summarized as follows.

$44 million of dividend income from our joint venture.

Other dividends from various portfolio companies of approximately $19 million.

Fee income of approximately $29 million.

Our fee income was higher than expected during the first quarter based on the elevated level of originations and repayments we experienced.

Our interest expense totaled $77 million, an increase of $4 million quarter over quarter due to the fact that we were operating at target leverage throughout the quarter.

Our weighted average cost of debt was three 1%.

Management fees were $62 million, an increase of $2 million quarter over quarter due to the higher amount of average gross assets during the quarter compared to the prior quarter.

Incentive fees totaled $25 million during the first quarter.

Which is net of the $15 million incentive fee waiver.

As previously announced as part of the S. K S. K R merger, which closed in June of 2021.

The adviser will waive $90 million of incentive fees spread evenly over six quarters, which began during the third quarter of 2021.

And just as a reminder, as we discussed on our prior earnings calls the advisor does not earn an incentive fee on any of the merger related accretion associated with <unk> acquisition of <unk>.

The detailed bridge and our net asset value per share on a quarter over quarter basis is as follows our ending <unk> 2021, net asset value per share of $27 17.

Was increased by GAAP net investment income of <unk> 77 per share.

It was increased by <unk> <unk> per share due to an increase in the overall value of our investment portfolio.

Our net asset value per share was reduced by <unk> 63 per share dividend paid during the quarter.

Some of these activities results in our March 31, 2022, net asset value per share of $27.

33.

From a forward looking guidance perspective, we expect.

Second quarter 2022, GAAP net investment income to approximate 70 per share.

And we expect our adjusted net investment income to approximate 65 per share which is in line with our run rate adjusted net investment income about which Dan spoke earlier on the call.

Detailed second quarter guidance is as follows.

Our recurring interest income on a GAAP basis is expected to approximate $298 million, which is relatively flat compared to the first quarter. Excluding the onetime interest income item, we experienced during the first quarter that I mentioned earlier.

We expect recurring dividend income associated with our joint venture to approximate $47 million based.

Based on the overall growth of the joint venture.

We expect other fee and dividend income to approximate $28 million during the second quarter.

The decline in our second quarter guidance versus our first quarter results and other fee and dividend income is primarily related to our expectation of lower origination activity during the second quarter.

From an expense standpoint, we expect our management fees to approximate $61 million, we expect incentive fees net of the $15 million quarterly waiver to approximate $21 million.

We expect our interest expense to approximate $82 million and.

And we expect our other G&A expenses to approximate $10 million.

As a reminder.

<unk> per share difference between our GAAP net investment income and our adjusted net investment income.

Relates to the expected accretion of our investments during the quarter due to merger accounting.

This difference effects, our recurring interest income.

Other categories of our revenues and expenses are not affected.

In an effort to link the 12 cents per share of quarterly run rate adjusted net investment income about which Dan spoke earlier from the time of our Investor day in September of last year and compared to our <unk> 2022 guidance. The key inputs are as follows.

First we begin with a <unk> 61 per share of adjusted net investment income we provided as guidance at our Investor day, and add 12 per share to that number.

Which equates to a quarterly adjusted net investment income of approximately <unk> 73 per share.

We then lowered that number by <unk> <unk> per share due to the recent increases in interest rates.

Lower by <unk> <unk> per share due to a lower weighted average portfolio yield of eight 3% as compared to eight 5% at the time of our Investor day.

And we lower.

Another <unk> <unk> per share to reflect a decline in fee income associated with our expectation for lower origination activity during the second quarter.

These adjustments result in our current run rate adjusted net investment income.

<unk> 65 per share, which equals our second quarter guidance of 65 per share.

This detailed bridge also can be seen on slide 11 of our earnings presentation on our website.

In terms of the right side of our balance sheet, our gross and net debt to equity levels were 127% and 112% respectively. As of March 31 2022.

This compares to gross and net debt to equity of 119% and 107% respectively. At the end of the fourth quarter of 2021.

At March 31, our available liquidity was $2 6 billion.

At the end of the first quarter, approximately 53% of our drawn balance sheet and 46% of our committed balance sheet.

It was comprised of unsecured debt and our overall effective average cost of debt was three 1%.

As Dan discussed with regard to our investment results and our positive momentum.

Since our Investor Day. We also were pleased with the success, we have had with our balance sheet activities over the last 18 to 24 months as we not only have merged two companies balance sheets together, but we simultaneously have lowered our cost of capital while we have extended our maturities.

And with that I'll turn the call back to Michael for a few closing remarks before we open the call for questions.

Thanks, Steven in closing I'm excited about the company's outlook based on the team's execution of our strategic initiatives.

Which was clearly reflected in our strong first quarter results.

We look forward to continuing to build on our current progress and growth opportunities as always I'd like to thank our investors for their continued support and with that operator, we'd like to open the call for questions.

Thank you, ladies and gentlemen, if you like to ask a question. Please press Star then one on your Touchtone telephone again, if he would like to ask a question. Please.

I then want.

One other player.

Our first question comes from Kenneth Lee of RBC capital markets. Your line is open.

Hi, Thanks for taking my question.

One about leverage given that you've reached your target in the current market backdrop, how do you how do you expect the leverage to annual.

Over the near term thanks.

Good morning.

Didn't hear the last part of the questions that are perfectly, but I think again, just how do we expect leverage to kind of evolve over the near term.

That's it yes.

Yes.

I think youre right were kind of inside our target range almost smack in the middle of it. So I think we're happy about that.

I mean, no change in our mind to that range of where we expect our leverage to be if anything I think we're probably going to look to remain sort of at and around this level.

Considering what some of that market volatility is out there I think we've been pretty happy.

What's the amount of unsecured debt issuance that we did.

Especially to get into the market and the <unk>.

First month of this year and we've talked about those numbers in the script.

Kind of real size instead of a good rate I think has been a great thing for our liability structure, which is now 53% of the funded debt is it unsecured bonds.

Right and just one follow up if I may you talked about the preferred equity investment recently I'm wondering if you could just talk a little bit more about your current appetite for any kind of investment low on the capital structure, either equity related or otherwise.

Yes, no happy to do that.

I think with what's going on kind of market was the bar for anything that would be subordinate.

The quite high Youre, referring to the Athena has sort of held for investment.

I think that falls into a bit of a sweet spot for us.

We did.

Did.

The last sort of buyout that was done I think the deal closed in February of 2019, we did second lien and sort of perhaps there that was repaid after two years, we got to know the company and the management team quite well sort of.

Part of that.

This new opportunity presented itself the company has grown tremendously sort of over time, but.

A large company now roughly $1 billion of EBITDA, roughly 55, LTV deal with kind of $6 billion in capital below us.

These larger companies we want to go beyond that we think are really good investments in EMEA part up again for a name that we're in.

Have real history with us where our prior levels.

Great very helpful. Thanks again.

Thanks, Kevin.

Thank you. Our next question comes from Melissa Wedel of JP Morgan Your line is open.

Thanks for taking my question.

I wanted to clarify.

Hey, Stephen This is one of your comments on adjusted NII Walk that you provided is really helpful.

Im not sure if I heard you correctly, but I thought you might have said that.

<unk>.

The higher rate.

That adjusted NII.

Well in my four cents per share and I wanted to dig into that a little bit because I would think with the asset sensitivity.

The high earnings would have been a benefit.

Melissa Hi, Thanks for the question, yes, what we were trying to outline the areas and I think we've talked about this on the fourth quarter call as well as rates have increased we like some other bdcs.

The first move in rates, because we have LIBOR floors.

Very high percentage of our investments obviously on the asset side of the balance sheet. It takes it takes a period of time with an increase in rates before your peers through those floors and so now as at the end of the quarter with I guess three months LIBOR was just under one it was about 96 or something so for every 100 basis points.

The increase in rates going forward.

We believe we will generate an incremental on an annual basis 19 cents a share of net investment income on a quarterly basis, therefore between four and five.

But it's really that timing difference in them for your modeling purposes, Melissa and others on the call.

Given that most of our borrowers are under.

Typically off of a three month LIBOR contract it will take a little bit of time before we will see the benefit there. So for modeling purposes, I would think more third quarter fourth quarter in the second quarter, which so those thoughts are incumbent in our guidance.

That guidance as detailed on page 11 of our earnings supplement as well.

For you to have after the call.

Got it.

Sure.

Yes.

Definitely your points about having reached a certain level of leverage.

And.

Being quite satisfied.

Wow.

Levels going forward.

Particularly with the volatility.

I'm curious.

Your outlook.

For potential new investments.

Yes, it does.

Risks.

Is pricing a bit higher.

Yes, I think we would sure.

That view in terms of how risk is pricing.

It's only the beginning of may, but it's been a pretty adventurous here so far.

We all start off the year with a lot of money, having sat on the sidelines coming out.

Pretty aggressive the move in rates has been real conversations around inflation a bit real.

The news out of Europe with the Ukraine has been.

The troubling so.

I think.

I think we're expecting.

Last deal volume as we go through the rest of the year I think a lot of people are in a wait and see approach I think us included.

And I think.

We're getting the benefit because most of this portfolio today and on a go forward basis will be.

Loading rate assets, but I think the <unk>.

Overall returns for reservoir will go up.

Thank you.

Our next question will come from Paul Johnson of <unk>. Your line is open.

Yes, good morning, guys. Thanks for taking the questions.

You touched on this a little bit earlier with Ken's question, but.

Just curious obviously rates have moved quite a bit higher since you last issued back in January .

Is that effectively kind of at least maybe it's more temporary but close the window for refinancing.

<unk> higher cost debt.

Maybe more of a wait and paused approach to continuing to lower the cost of debt or two markets still remain pretty conducive to two.

Executing on that.

I think youre, a wait and see that statement is probably the right. One I don't think that would just be for us, but probably any set of issuer.

Into this market.

The rate moves a bit material like I said, I think we're pretty pretty thankful that we got into the market in Q1 of this year pretty happy with what we did at the end of.

2021, obviously with the use of proceeds.

Was to pay off.

Our 475% of the deal.

But I think wait and see as kind of the right.

The right sort of thought or sort of outlook to the way. We think about that now I think we feel good about our overall position though.

Evolver is worth.

Great group of partner banks, it's got real duration attached to it.

And we'll be focused on keeping that duration.

Thanks, I appreciate that.

Then on.

Just more specifically your leasing in your asset backed finance.

What are your portfolio.

Just wondering if you could talk about how.

<unk>.

I guess, how that's affected by the current environment does that tend to benefit from a rising rate environment, the underlying assets potentially longer outstanding balances are outstanding leases.

Any sort of effect from the environment that plays through to that part of your portfolio.

No. Good question Fair question, I think we've been happy to grow that part of our.

Portfolio here I think is roughly sort of 13%.

We focus a lot on downside protection you on those deals as we do have actual product collateral available to us and I think theres a lot of good.

Probably benefits when we think about inflation because a fair amount of this is.

Either sort of real asset backed.

Had single family rental exposure or aviation sort of leasing exposure. So are you getting kind of an inflation sort of a pickup from that or at least sort of a backdrop.

I think I think where are we probably worry a little bit in the market as it relates to <unk>.

Overall asset based finance effort is whats the impact of this on the consumer.

You've had obviously a big move in rates you got expense.

Expensive sort of prices at the pump.

We're very light, though on any consumer exposure, we have done that.

Sort of a purpose not necessarily thinking that the rate moves.

The shops will be as large as they are but these are really kind of hard asset backed deals, which does occupies most of the portfolio now so I think we feel pretty good about it.

Thanks, I appreciate that as well.

<unk>.

One real quick one on the just the repurchases you repurchased.

Some shares on the buyback this quarter.

The sector is obviously pulling back quite a bit here.

First quarter end.

Kind of taking that in conjunction where your where your stock currently trades on a price to book basis.

The leverage on the Bdc's balance sheet, or where you stand from a leverage standpoint today are you expecting to be pretty active and this is kind of a sell off in the market.

Are you taking more of a measured approach with just trying to prioritize balance sheet leverage.

Any color there would be helpful.

Yes.

I mean, I think if you recall, we have been very active set of all buybacks over the last several years I think between FSA or something its predecessor entities.

We bought back over probably $500 million.

Of stock.

This plan has been active we do expect this plant.

To continue to buy under a <unk> one program and we do expect it to get filled I think we have historically thought about that trying to skew maybe a bit more where there hasnt been sort of a market volatility but no.

No change to I think that the.

This out but the fact is going to buy under <unk>, one and like I said.

Philips.

Got it.

Thats all from me congratulations.

Improving NII from in the last Investor day, and as well as credit and I. Appreciate you taking my questions.

Thank you for that.

Thank you again, ladies and gentlemen, if you'd like to ask a question. Please press Star then one on your Touchtone telephone.

One moment please.

Our next question comes from Casey Alexander Compass point your line is open.

Yes. Good morning, he got a lot of my questions are right right on the button, but ill ask two real quick ones do you know when can you refinance the COVID-19 bond.

Without paying a big penalty on that because that seems to be an area, where you could clearly cut some of your.

Debt service cost.

Yeah, Good morning Casey.

I think it is available to repay.

So now I think the.

Any form of prepayment penalties would start to drop pretty materially over the.

The coming sort of orders.

Orders for the coming year.

I think we will reevaluate that sort of at that time I.

I think youre right.

And an opportunity to.

Do some of those sort of interest costs.

But I think we'll think about that in the coming quarters are coming here.

Thank you and secondly can you.

Tell us what.

<unk> been working this down all along what are what are legacy investments as a percentage of the total portfolio down to at this point in time.

12% is kind of the number we've been sort of talking about that.

Obviously move down kind of meaningfully.

Over the last several years I think we were very happy with what we've done with.

With regards to our portfolio.

Rotation perspective.

<unk> percent number as a percentage of all of the assets that are yielding in the portfolio.

And would you.

Figure that that gets down to single digits by the end of the year would that be your view.

It's probably trending towards that I mean.

There is a handful of larger sort of names in there that really sort of make that up.

Several of those were not necessarily either the controlling shareholder.

Or has the sole voice on how we sort of exit that but yes.

That's active in all the names.

With a view of definitely in China.

Resolve those are generating the best possible in the coming quarters.

But it's probably not perfectly linear.

In terms of.

How it will wind down.

Alright, great. Thank you for taking my questions I appreciate it.

Thank you Casey.

Thank you. Our next question comes from Bryce Rowe.

Your line is open.

Thanks, Thanks, good morning.

Let's see.

I think I'd like to ask about some of the gain and loss activity in the quarter.

Obviously, you've got some moving parts, but from a realized gain perspective.

Unrealized perspective, nice to see NAV up here here again in the quarter, but maybe maybe you could try to characterize what's going on within the investment portfolio company specific events versus.

Maybe more market market, driven credit spread widening affecting the marks on the portfolio.

Yes, I mean, maybe a couple of points.

And I think Brian can add to this I think we.

Very happy with the result that we got outside of the United We had mentioned that sort of activity on the prior call.

Maybe certain offsets.

To that including a pretty material move sort of down as it relates to hilding.

So it's sort of a European business pretty impacted by what's happening in Europe and into Russia, and Ukraine, but hey, Brian when you add anything else to that.

Just given the fact that spreads widened out during the quarter.

If you look across the <unk>.

Portfolio about two thirds as investments were probably down slightly.

And then about a third were up.

And that was really spread driven.

Surprised a little bit of individuals of the name activity and then obviously the volatility.

The overall market, but I think we're pretty happy to be up on NAV and this.

Gordon.

Yes.

That's it for me my other questions were asked.

Great. Thank you.

Thank you I'm showing no further questions at this time I'd like to turn the call back over to Dan Pietrzak for any closing remarks.

Well. Thank you everyone for your time today, we really appreciate it.

Any follow up points or other questions. Please do not hesitate to reach out to anyone on the team. Thanks again.

Ladies and gentlemen, this does conclude today's conference. Thank you all participating you may now disconnect have a great day.

Okay.

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Sure.

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Good morning, ladies and gentlemen, welcome to the KKR capital Corp's first quarter 2022 earnings conference call. Your lines will be able to listen only mode. Mark by F. S Cave management I think who's now that the company's remarks, we will begin a question and that's exactly at which probably will give instructions on entering the queue. Please note that this call, but they've been recorded.

Rob upon head of Investor Relations Officer with introduction based upon you may begin.

Thank you good morning, and welcome to Fs KKR capital Corp's first quarter 2022 earnings conference call.

Please note that Fs KKR capital Corp may be referred to as S. K.

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 our press release that <unk> issued on May nine 2022.

In addition, <unk> 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 2022.

A link to todays 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 is the property of F. S K.

Any unauthorized rebroadcast of this call in any form is strictly prohibited.

Today's conference call includes forward looking statements and are subject to risks and uncertainties that could affect <unk> or the economy generally.