Q4 2023 FS KKR Capital Corp Earnings Call

Operator: www.globalonenessproject.org Good morning, ladies and gentlemen, and welcome to FS KKR Capital Corp.'s fourth quarter and full year 2023 earnings conference call. Your lines will be in a listen-only mode during remarks by FSKs from management.

Okay.

Good morning, ladies and gentlemen, and welcome to S. K.

KKR capital Corporation's fourth quarter and full year 2023 earnings conference call. Your lines will be in a listen only mode. During remarks by F. S case from management at the conclusion of the Companys remarks, we will begin the question and answer session at which time I will.

Operator: At the conclusion of the company's remarks, we will begin the question and answer session, at which time I will give you instructions on entering the queue. Please note that this conference is being recorded. At this time, Robert Pawn, head of investor relations, will proceed with an introduction. Mr. Pawnee may begin.

Give you instructions on entering the queue. Please note that this conference is being recorded at this time, Robert <unk> head of Investor Relations will proceed with the introduction.

Mr. Ponton you may begin.

Robert Pawn: Thank you. Good morning, and welcome to FS KKR Capital Corp's fourth quarter and full year 2023 earnings conference. 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 yesterday.

Thank you good morning, and welcome to at that KKR capital Corp's fourth quarter and full year 2023 earnings conference call.

Please note that FX KKR capital Corp, maybe referred to <unk>, 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 our press release.

They issued yesterday.

Robert Pawn: 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 December 31st, 2020. The link to today's webcast and the presentation is available in the investor relations section of the company's website under events and presentations. Please note that this call is the property of FSK. Any unauthorized rebroadcast of this call in any form is strictly prohibited.

In addition, FX Guy has posted on its website a presentation containing supplemental financial information with respect to its portfolio and financial performance for the quarter ended December 31 2023.

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 cat.

Okay.

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

Robert Pawn: Today's conference call includes forward-looking statements that are subject to risks and uncertainty. These could affect FSK or the economy generally. We ask that you refer to FSK's most recent filings with the SEC for important factors and risks that could cause actual results or outcomes to differ materially from the. 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. For such measures, reconciliation to the most directly comparable gap measures can be found in FSK's fourth quarter earnings release that was filed with the SEC on February 26th, 2020. 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.

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

We ask that you refer 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 for such measures reconciliation to the most directly comparable GAAP measures can be found in <unk> fourth quarter earnings release that was filed with the SEC on February 26 2024.

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.

Robert Pawn: 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 FS KKR Capital Corp. Speaking on today's call will be Michael Foreman, Chief Executive Officer and Chair. Sam Pieterzak, Chief Investment Officer and Co-President. Brian Gerson, Co-President.

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, Chief Executive Officer and Chairman.

Dan Pietrzak, Chief investment Officer, and co President.

Brian Gerson co president.

Michael Foreman: Stephen Lilly, Chief Financial Officer. Also joining us in the room are Co-Chief Operating Officers Drew O'Toole and Ryan Williams. I will now turn the call over to you. Thank you, Robert. And good morning, everyone.

And Steven Lilly Chief Financial Officer.

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

I will now turn the call over to Michael.

Thank you Robert and good morning, everyone. Thank you all for joining us for <unk> fourth quarter and full year 2023 earnings conference call.

Michael Foreman: Thank you all for joining us for FSK's fourth quarter and full year 2023 earnings conference call. During 2023, FSK accomplished many key objectives. First, our total investment income grew approximately 12% year over year. Second, our adjusted net investment income per share increased by approximately 6% year over year. Third, for the full year, FSK generated an ROE of 10%. Fourth, we paid $2.95 per share in total distributions in 2023, representing an 11% increase over distributions paid in 2022, equating to a 12% yield on our average net asset value during the year. We continue to optimize our capital structure by amending and upsizing our revolver in October and issuing 400 million of unsecured notes in early November. In terms of our fourth-quarter results, we generated net investment income totaling $0.71 per share and adjusted net investment income totaling $0.75 per share. During the fourth quarter, our investment team originated approximately $680 million in new investments, resulting in net portfolio growth of approximately $162 million. However, our net asset value declined by 1.7% for the quarter, primarily due to specific challenges associated with a few credits, which we will discuss in more detail later in the call.

During 2023 FSA accomplished many key objectives first our total investment income grew approximately 12% year over year.

Second our adjusted net investment income per share increased by approximately 6% year over year.

Third for the full year SK generated an Roe.

10%.

Fourth we paid $2 95 per share in total distributions in 2023, representing an 11% increase over distributions paid in 2022, equating to a 12% yield on our average net asset value during the year.

Jeff we continue to optimizing our capital structure by amending and upsizing, our revolver in October and issuing $400 million of unsecured notes in early November.

In terms of our fourth quarter results, we generated net investment income totaling 71 per share and adjusted net investment income totaling 75 per share.

During the fourth quarter, our investment team originated approximately $680 million of new investments, resulting in net portfolio growth of approximately $162 million.

Our net asset value declined by one 7% for the quarter, primarily due to specific challenges associated with a few credits, which we will discuss in more detail later in the call.

Michael Foreman: From a liquidity perspective, we ended the quarter with approximately $3.9 billion of available liquidity. Based upon our overall operating results, our board has declared a first quarter distribution of 70 cents per share, consisting of our base distribution of 64 cents per share and a supplemental distribution of six cents per share. Also, as we mentioned on our last earnings call in early November, our board declared a special distribution totaling $0.10 per share. This special distribution will be paid in two equal installments of $0.05 per share in the first and second quarters of this year and will be paid in addition to our quarterly base and supplemental distribution.

From a liquidity perspective, we ended the quarter with approximately $3 9 billion of available liquidity.

Based upon our overall operating results. Our board has declared a first quarter distribution of <unk> 70 per share consisting of our base distribution of <unk> 64 per share and a supplemental distribution of <unk> <unk> per share.

Also as we mentioned on our last earnings call in early November our board declared a special distributions totaling <unk> 10 per share the special distribution will be paid in two equal installments of <unk> <unk> per share in the first and second quarters of this year.

We paid in addition to our quarterly base and supplemental distributions.

Dan Peterzak: Based on the continued trajectory of the company's earnings power, coupled with our view that interest rate reductions will be more muted than some market participants expect, we are pleased to provide forward-looking dividend guidance for the full year 2024, as we currently expect our base and supplemental distributions to total at least 70 cents per share per quarter throughout the year. Combining our $0.70 per share of quarterly distributions for the full year with our $0.25 per share of special distributions to be paid during February and May, investors should expect to receive a minimum of $2.90 per share of total distributions in 2024. This equates to an 11.9% yield on our current net asset value and an annualized yield of approximately 14.3% based on our recent share price.

Based on the continued trajectory of the Companys earnings power, coupled with our view that interest rate reductions will be more muted than some market participants expect we're pleased to provide forward looking dividend guidance for the full year 2024, as we currently expect our base in supplemental distributions will total at least 70 cents per share per <unk>.

Quarter throughout the year.

Combining our <unk> 70 per share quarterly distributions for the full year with our two five cents per share special distributions to be paid during February and May investors should expect to receive a minimum of $2.90 per share of total distributions during 2024.

This equates to an 11, 9% yield on our current net asset value and an annualized yield of approximately 14, 3% based on our recent share price.

Dan Peterzak: While Dan will discuss the current market environment in greater detail, we continue to be optimistic about the significant growth trends within the private credit sector, which we believe will provide meaningful benefits for our industry for many years to come. And with that, I'll turn the call over to Dan and the team to provide additional color on the market and the quarter. Thanks, Michael.

While Dan will discuss the current market environment in greater detail, we continue to be optimistic about the significant growth trends within the private credit sector, which we believe will provide meaningful benefits for our industry for many years to come and with that I'll turn the call over to Dan and the team to provide addition.

Color on the market in the quarter.

Thanks, Michael.

Dan Peterzak: Looking back on 2023, I am pleased with the results for FSK, as we produced an ROE of 10%, and we continue to take positive steps in redeploying our investment portfolio. Looking back on the last six years since the establishment of the FS KKR Advisor, I take great pride in the team's accomplishments, as well as the continued growth of the KKR credit platform, which has current assets under management of $22 billion. Within FSK, we have originated over $22 billion of new investments, and we have an annualized depreciation rate, which includes both realized and unrealized amounts, of less than 50 basis points, We expect to see a material increase in private market transaction activity during 2024, which we believe will be weighted towards the second half of the year. As Michael mentioned, private credit continues to be an exceptionally attractive asset class due to its directly negotiated transactions, attractive total returns, and significant issuer diversification.

Looking back on 2023, I am pleased with the results for <unk> as we produced an ROE of 10% and we continue to take positive steps rotating our investment portfolio.

Looking back on the last six years since the establishment of the <unk> K care advisor I take great pride in the team's accomplishments as well as the continued growth of the KKR credit platform, which is current assets under management of $219 billion.

Within <unk>, we have originated over $22 billion of new investments and we have.

Annualized depreciation rate, which includes both realized and unrealized amounts of less than 50 basis points.

In terms of the current economic and market environment with the U S inflation, beginning to stabilize combined with significant private equity dry powder.

Pent up demand from an M&A perspective.

As well as the desire for private equity fund Lps to see a higher level of return of capital.

We expect to see a material increase in private market transaction activity during 2024.

Which we believe will be weighted towards the second half of the year.

As Michael mentioned private credit continues to be an exceptionally attractive asset class.

Due to its directly negotiated transactions attractive total returns and significant issuer diversification.

Dan Peterzak: As a result, even if the syndicated debt markets become more active during 2024, which we expect they will, we believe private credit structures will continue to be one of the primary avenues for many sponsors, as there is an increasing desire for sponsors to know their lenders. With that said, we are seeing spread compression in the upper end of the middle market with spreads back to January 2022 levels. In addition, still elevated interest rates, supply chain disruptions due to the Middle East crisis, and inventory destocking could potentially lead to a slowdown in economic growth.

As a result, even if the syndicated debt markets become more active during 2024, which we expect they will we believe private credit structures will continue to be one of the primary avenues for many sponsors.

As there is an increasing desire for sponsors to know their lenders.

With that said, we are seeing spread compression and the upper end of the middle market with spreads back to January 2022 levels.

In addition, still elevated interest rates supply chain disruptions due to the middle East crisis, and inventory destocking could potentially lead to a slowdown in economic growth.

Dan Peterzak: These market inputs will require borrowers and lenders to remain cautious during the coming quarters. In terms of our most recent results, this macro backdrop created challenges for a few of our portfolio companies during the fourth quarter. Specifically, Miami Beach Medical Group and Reliant Rehab, two names we have discussed on prior calls, continue to be affected by higher wage pressures and a challenging Medicare reimbursement environment, and while we do not have any meaningful additional exposure to Medicare reimbursement dependent companies, Both of these issuers were placed on non-accrual during the fourth quarter. Additionally, late in the fourth quarter, we received an update from Kellenmeier Bergensen Services, another name we have discussed on prior earnings calls, which showed a material deterioration in the company's forward earnings projection.

These market inputs will require borrowers and lenders to remain cautious during the coming quarters.

In terms of our most recent results. This macro backdrop created challenges for a few of our portfolio companies during the fourth quarter.

Specifically, Miami Beach Medical group and rely on rehab Q&A as we have discussed on prior calls continue to be affected by higher wage pressures and a challenging Medicare reimbursement environment.

And while we do not have any meaningful additional exposure to Medicare reimbursement dependent companies.

Both of these issuers were placed on non accrual during the fourth quarter.

Additionally, late in the fourth quarter, we received an update from Kevin Mayer Bergen and services. Another name we have discussed on prior earnings calls.

Which showed a material deterioration in the company's forward, earning projections.

Dan Peterzak: KBS is a labor-intensive facilities maintenance business, and the impact of higher interest rates, wage inflation, and the loss of certain customers has resulted in restructuring discussions. The first step of the restructuring was completed during the fourth quarter, which resulted in a portion of our investment in KBS being placed on nonaccrual. We expect the full restructuring to occur in the near term. Our workout team has been active under these names for some time.

KBS is a labor intensive facilities maintenance business and the impact of higher interest rates wage inflation and.

The loss of certain customers has resulted in restructuring discussions.

The first step of the restructuring was completed during the fourth quarter, which resulted in a portion of our investment and KBS being placed on non accrual.

We expect a full restructuring to occur in the near term.

Our workout team has been active on these names for some time.

Dan Peterzak: And, as Brian will discuss, they have achieved positive results, including significant principal paydowns at par and meaningful progress towards debt restructuring. Turning to investment activity, during the fourth quarter, we originated $680 million of new investment. Approximately 58% of our new investments were focused on add-on financings to existing portfolio companies and long-term KKR relationships. These new investments, combined with $518 million of net sales and repayments when factoring in sales to our joint venture, equated to a net portfolio increase of $162 million. We are pleased with the quality of our new origination.

And as Brian will discuss they have achieved positive results, including significant principal paydowns at par and meaningful progress towards debt restructurings.

Turning to investment activity during the fourth quarter, we originated $680 million of new investments.

Approximately 58% of our new investments were focused on add on financings to existing portfolio companies and long term care carrier relationships.

Our new investments combined with $518 million of net sales and repayments when factoring in sales to our joint venture equated to a net portfolio increase of $162 million.

We are pleased with the quality of our new originations during the fourth quarter, our direct lending investments had a weighted average EBITDA of approximately $250 million.

Dan Peterzak: During the fourth quarter, our direct lending investments had a weighted average EBITDA of approximately $250 million, 5.3 times leverage through our security, and a 60% equity contribution, all with a weighted average coupon of approximately SOFR plus 600. We also continue to see very attractive opportunities in asset-based finance, with our investments this quarter having a weighted average projected IRR of approximately 14%. One asset-based finance investment worth noting is Vehicle Secured Funding Trusts, which is an approximately $7 billion secured portfolio of super-prime RV loans that we purchased from the Bank of Montreal.

Five three times leverage through our security and a 60% equity contribution all with a weighted average coupon of approximately sulfur plus 600.

We also continue to see very attractive opportunities and asset based finance with our investments this quarter, having a weighted average projected IRR of approximately 14%.

One asset based finance investments worth noting is vehicles secured funding trust, which is an approximately $7 billion secured portfolio of Super Prime RV loans that we purchased from the bank of Montreal.

Dan Peterzak: Given the scale of our asset-based finance business and the experience of the team, we were able to acquire this high-quality loan portfolio on attractive terms. While the macro backdrop suggests a continued uncertain economic environment in 2024, we continue to see portfolio company revenue and earnings growth. We remain focused on large, high-quality borrowers with strong operating margins and significant equity cushion.

Given the scale of our asset based finance business and the experience of the team. We will we were able to acquire this high quality loan portfolio on attractive terms.

While the macro backdrop suggests a continued uncertain economic environment in 2024, we continue to see portfolio company revenue and earnings growth.

We remain.

Focused on large high quality borrowers with strong operating margins and significant equity cushions.

Brian Gerson: The weighted average EBITDA of our portfolio companies was $236 million as of December 31, 2023. Additionally, our portfolio companies reported a weighted average year-over-year EBITDA growth rate of approximately 6% across companies in which we have invested since April of 2018. And with that, I'll turn the call over to Brian to discuss our portfolio in more detail. Thanks, Dan.

The weighted average EBITDA of our portfolio companies was $236 million as of December 31, 2023.

Additionally, our portfolio combination reported a weighted average year over year EBITDA growth rate of approximately 6%.

Across companies in which we have invested in since April of 2018.

And with that I'll turn the call over to Brian to discuss our portfolio in more detail.

Thanks, Dan.

Brian Gerson: As of December 31, 2023, our investment portfolio had a fair value of $14.6 billion, consisting of 204, This compares to a Thera value of $14.7 billion. 200 portfolio companies as of September 30th. At the end of the fourth quarter, our 10 largest portfolio companies represented approximately 19% of the fair value of our portfolio, which is consistent with prior. We continue to focus on senior secured investments as our portfolio consists of approximately 58% first lien loans and 66% Senior Secured Debt as of December 31st. In addition, our joint venture represented 9.5% of the fair value of our portfolio. As a result, when investors consider our entire portfolio, looking through to the investments in our joint venture, then first lien loans total approximately 67% of our total portfolio. Senior Secured Investments total approximately 75% of our portfolio as of December. The weighted average yield on occurring debt investments was 12.2% as of December 31, 2023, flat compared to the yield as of September 30.

As of December 31, 2023, our investment portfolio had a fair value of $14 6 billion consisting of 204 portfolio companies. This compares to a fair value of $14 $7 billion and 200 portfolio companies as of September 32023.

At the end of the fourth quarter, our 10 largest portfolio companies represented approximately 19% of the fair value of our portfolio, which consist which is consistent with prior quarters. We.

We continue to focus on senior secured investments as our portfolio consisted of approximately 58% first lien loans and 66% senior secured debt as of December 31.

In addition, our joint venture represented nine 5% of the fair value of our portfolio.

As a result, we're investors consider our entire portfolio looking through to the investments in our joint venture <unk> first lien loan totaled approximately 67% of our total portfolio in senior secured investments totaled approximately 75% of our portfolio as of December 31.

The weighted average yield on accruing debt investments was 12, 2% as of December 31, 2023, which was flat compared to the yield as of September 30th.

Brian Gerson: As a reminder, the calculation of weighted average yield is adjusted to exclude the accretion associated with the merger with FS KKR. Including the effects of our investment activity during the fourth quarter, as of December 31, 2021, approximately 87% of our total investment portfolio, comprised of investments originated either by KKR credit or the FS KKR advisor. From a non-accrual perspective, as of the end of the fourth quarter, our non-accruals represented approximately 8.9% of our portfolio on a cost-based basis and 5.5% of our portfolio on a fair value basis. We believe it is also helpful to provide the market with information based on the assets originated by KKR Credit. As of the end of the fourth quarter, nonaccruals related 87% of our total portfolio has been originated by KKR Credit and the FS KKR Advisor. We're 5.1% on a cost-based, on a fair value.

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

Including the effects of our investment activity during the fourth quarter as of December 31, 2023, approximately 80, 887% of our total investment portfolio is comprised of investments originated either by KKR credit or the Fs KKR adviser.

From a non accrual perspective as of the end of the fourth quarter. Our non accruals represented approximately eight 9% of our portfolio on a cost basis and five 5% of our portfolio on a fair value basis.

We believe it is also helpful to provide the market with information based on the assets originated by KKR credit.

As of the end of the fourth quarter non accruals related to the 87% of our total portfolio, which has been originated by KKR credit and the <unk> K care advisor or five 1% on a cost basis and two 6% on a fair value basis.

Brian Gerson: During the fourth quarter, we placed five investments on non-accrual with a combined cost and fair value of $654 million. $422,000,000 respect. The credit stress we have seen in these names primarily relates to the factors that Dan mentioned earlier, specifically Miami Beach Medical Group and Reliant Rehab, which continue to be affected by higher wage prices and a challenging Medicare reimbursement environment. Miami Beach is the second largest independent provider of capitated primary care services to Medicare Advantage Plans in South Florida.

During the fourth quarter, we placed five investments on non accrual with a combined cost and fair value of $654 million and $422 million respectively.

Credit stress, we have seen in these names primarily relates to the factors that Dan mentioned earlier.

Specifically 90 bps medical group and reliant rehab continue to be affected by higher wage pressures.

And a challenging Medicare reimbursement environment Miami Beach is the second largest independent provider of <unk> primary care services to Medicare advantage plans in South Florida.

Brian Gerson: Reliant is hired by a skilled nursing facility to provide outsourced physical and occupational therapy, and has also been impacted by a post-COVID environment; skilled nursing facilities are more reluctant to bring outside personnel into their facilities. During the fourth quarter, we restructured our Reliant $125 million first lien term loan into a cash pay $62.5 million first out and a $62.5 million second. Please stand on, due to the proactive work of the

Client is higher by skilled nursing facilities to provide outsourced physical and occupational therapy and has also been impacted by a post COVID-19 environment, where skilled nursing facilities are more reluctant to bring outside personnel into their facilities.

During the fourth quarter, we restructured our alliance $125 million first lien term loan into a cash paid of $62 $5 million first out term loan and a $62 $5 million second out term loan which was placed on non accrual.

Due to the proactive work of the KKR workout team.

Brian Gerson: To date, we have received par paydowns of over $100 million in reliance rehabilitation. 75, my KBS is a labor-intensive facilities maintenance company, and the impact of higher interest rates, wage inflation, and the loss of certain customers has resulted in restructuring. The first step of the restructuring was completed during the fourth quarter, resulting in our $366 million first lien loan being restructured into $166 million first out and a $200 million second out, second out investment in KBS being placed on. We expect a full consensual restructuring to occur in the air, which will result in the lenders equitizing a portion of the second out and taking control of the company. Our first lean position in Sleeping Corp of America, the largest outsourced provider of street and parking lot sleeping services in the U.S., placed on non-accrual due to poor integration of out on equity and higher than expected customer churn following price. We are actively negotiating with the sponsor regarding restructuring. Transcribed by https://otter.ai, and the majority of the position is going back. Additionally, our preferred stock position in J.W. Aluminum was placed on non-accrual based on the company's total entry, contributing $215 million of cost and $149 million of fair value to our portfolio. J.W. Aluminum continues to perform well with a strong EVIT diagram.

Date, we have received par paydowns of over $100 million in reliant rehab and $75 million on Miami Beach.

KBS is a labor intensive facilities maintenance business and the impact of higher interest rates wage inflation.

And the loss of certain customers has resulted in restructuring discussions.

First step of the restructuring was completed during the fourth quarter, which resulted in our $366 million first lien loan exposure being restructured into a $166 million first out and a $200 million second out term loan with the second half investment and KBS being placed on non accrual.

We expect a full consensual restructuring to occur in the near term, which will result in the lenders appetizing a portion of the second half and taking control of the company.

Our first lien position and sweeping Corp of America, which is the largest outsource provider of street and parking lot sleeping services in the U S was placed on non accrual due to poor integration of add on acquisitions and higher than expected customer churn following price increases.

We're actively negotiating with our sponsor regarding restructuring, which would result in the sponsor investing a meaningful amount of equity into the company and the majority of the position going back on accrual.

Additionally, our preferred stock position in J W. Aluminum was placed on non accrual based on the company's total enterprise value contributing $215 million of cost and a $149 million of fair value to our portfolio.

J W. Aluminum continues to perform well with strong EBITDA growth.

Stephen Lilly: However, given our preferred equity, our current view of enterprise value does not support continuing to accrue on. In terms of one other portfolio update, Solera, a borrower would switch to pick accrual from cash accrual to quarters, return to cash accrual as expected during the fourth quarter. This change accounted for the majority of the reduction in our peak interest income recognized during the year. And with that, I'll turn the call over to Stephen to go through our list. Thanks, Brian. Our total investment income decreased by $18 million quarter over quarter to $447 million, primarily due to the specific portfolio company results Dan and Brian mentioned, as well as lower quarterly asset-based finance dividends. The primary components of our total investment income during the quarter were as follows. Total interest income was $368 million, a decrease of $6 million quarter over quarter. Dividend and fee income totaled $79 million, a decrease of $12 million quarter over quarter.

Over given our preferred equity position, our current view of enterprise value does not support continuing to accrue on the name.

In terms of one other portfolio update solera bar with switch to pick accrual from cash accrual two quarters ago returned to cash accrual as expected during the fourth quarter.

This change accounted for the majority of the reduction in our interest income recognized during the quarter and with that I'll turn the call over to Stephen to go through our financial results.

Thanks, Brian.

Our total investment income decreased by $18 million quarter over quarter to $447 million.

Primarily due to the specific portfolio company results abandoned Brian mentioned as well as lower quarterly asset based finance dividends.

The primary components of our total investment income during the quarter were as follows.

Total interest income was $368 million.

Decrease of $6 million quarter over quarter.

And fee income totaled $79 million.

A decrease of $12 million quarter over quarter.

Stephen Lilly: Our total dividend and fee income during the quarter is summarized as follows: $51 million of recurring dividend income from our joint venture, other dividends from various portfolio companies totaling approximately $16 million during the quarter, and fee income totaling approximately $12 million during the quarter. Our interest expense totaled $118 million, an increase of $1 million quarter over quarter, and our weighted average cost of debt was 5.4% as of December 31st. Management fees totaled $56 million, unchanged quarter over quarter, and incentive fees totaled $41 million, a decrease of $6 million quarter over quarter. Other expenses totaled $10 million during the fourth quarter, a decrease of $1 million.

Our total dividend and fee income during the quarter is summarized as follows 50.

$51 million of recurring dividend income from our joint venture.

Other dividends from various portfolio companies totaling approximately $16 million during the quarter.

And fee income totaling approximately $12 million during the quarter.

Our interest expense totaled $118 million, an increase of $1 million quarter over quarter, and our weighted average cost of debt was five 4% as of December 31st.

Management fees totaled $56 million unchanged quarter over quarter and incentive fees totaled $41 million.

A decrease of $6 million quarter over quarter.

Other expenses totaled $10 million during the fourth quarter, a decrease of $1 million.

Stephen Lilly: The detailed breakdown in our net asset value per share on a quarter over quarter basis is as follows: our ending 3Q2023 net asset value per share of $24.89 was increased by GAAP net investment income of $0.71 per share and was decreased by $0.39 per share due to a decrease in the overall value of our investment portfolio. Our net asset value per share was reduced by our $0.70 per share quarterly distribution and the $0.05 per share special distribution. Some of these activities resulted in our December 31, 2023 net asset value per share of $24.46. From a forward-looking guidance perspective, we expect first quarter 2024 GAAP net investment income to approximate 73 cents per share, and we expect our adjusted net investment income to approximate 71 cents per share.

The detailed bridge and our net asset value per share on a quarter over quarter basis is as follows.

Our ending <unk> 2023, net asset value per share of $24 89.

Was increased by GAAP net investment income of <unk> 71 per share and was decreased by 39 per share due to a decrease in the overall value of our investment portfolio.

Our net asset value per share was reduced by <unk> 17 per share quarterly distribution.

And the <unk> <unk> per share special distribution.

But some of these activities results in our December 31, 2023, net asset value per share of $24 46.

From a forward looking guidance perspective, we expect first quarter 2024, GAAP net investment income to approximate <unk> 73 per share and we expect our adjusted net investment income.

Approximate <unk> 71 per share deep.

Stephen Lilly: Detailed first quarter guidance is as follows. Our recurring interest income on a gap basis is expected to approximate $348 million. We expect recurring dividend income associated with our joint venture to approximate $51 million. We expect other fee and dividend income to approximate $30 million during the first quarter. From an expense standpoint, we expect our management fees to approximate $55 million. We expect incentive fees to approximate $42 million.

Detailed first quarter guidance is as follows.

Our recurring interest income on a GAAP basis is expected to approximate $348 million.

We expect recurring dividend income associated with our joint venture with <unk>.

Approximate $51 billion.

We expect other fee and dividend income to approximate $30 million during the first quarter.

From an expense standpoint, we expect our management fees to approximate $55 million, we expect incentive fees to approximate $42 million.

Stephen Lilly: We expect our interest expense to approximate $117 million, and we expect other G&A expenses to approximate $10 million. And, as Michael indicated during his remarks, we currently expect our distributions during the year will total at least $2.90 per share, comprised of $2.80 per share of quarterly distributions and $0.10 per share of special distributions during the first half of the year. Our gross and net debt to equity levels were 120% and 113%, respectively, at December 31, 2023, compared to 115% and 110% as of September 30, 2023. At December 31, our available liquidity was $3.9 billion, and approximately 63% of our drawn balance sheet and 44% of our committed balance sheet was comprised of unsecured debt.

We expect our interest expense to approximate $117 million and we expect other G&A expenses to approximate $10 million.

And as Michael indicated during his remarks, we currently expect our distributions during the year will total at least $2 90 per share comprised of $2 80 per share of quarterly distributions and <unk> per share of special distributions during the first half of the year.

Our gross and net debt to equity levels were 120% and 113% respectively. At December 31, 2023, compared to 115% and 110% as of September 32023.

At December 31, our available liquidity was $3 9 billion.

And approximately 63% of our drawn balance sheet and 44% of our committed balance sheet that's comprised of unsecured debt.

Stephen Lilly: Additionally, in November, we issued $400 million of 7.875% unsecured notes through 2029, further enhancing our balance sheet and liquidity position and extending our maturity line. And with that, I'll turn the call back to Michael for a few closing remarks before we open the call for questions. Thanks, Stephen.

Additionally in November we issued $400 million of 787, 5% unsecured notes due 2029 further enhancing our balance sheet and liquidity position and extending our maturity ladder.

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.

Michael Foreman: In 2023, FSK shareholders earned a total return of over 30%. And from a forward-looking perspective, given our earnings prospect for the year, we believe it will continue to provide shareholders with an attractive distribution and total return in 2024. And while we were disappointed with the challenge credits during the fourth quarter, the temporary loss in revenue associated with these companies does not alter the long-term view of our ability to continue to provide investors with an above-average dividend yield going forward. On behalf of our team, we thank you all for joining the call and for your continued support.

2023 S. K shareholders earned a total return of over 30%.

From a forward looking perspective, giving our earnings prospect for the year. We believe we will continue to provide shareholders with an attractive distribution and total return in 2024.

And while we were disappointed with the challenged credits during the fourth quarter.

Temporary loss of revenue associated with these companies does not all through the long term view of our ability to continue to provide investors with an above average dividend yield going forward.

On behalf of our team we thank you all for joining the call and for your continued support.

Operator: And with that, operator, we'd like to open the call for questions. All right. Ladies and gentlemen, if you do have a question at this time, please press star 11 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 11 again.

And with that operator, we'd like to open the call for questions.

Certainly ladies and gentlemen, if you do have a question at this time. Please press star one on your telephone. If your question has been answered and you'd like to remove yourself from the queue simply press star one again.

Operator: One moment for our first question, and our first question comes from the line of John Heck from Jefferies. Your question, please. Hey guys, good morning.

One moment for our first question and our first question comes from the line of John Hecht from Jefferies. Your question. Please.

Hey, guys. Good morning, Thanks for taking my questions.

John Heck: Thanks for taking my question. Just on credit, maybe you could just give us an update on GlobalJet and then maybe talk about, you know, kind of the pipeline of credit as you see other companies within the portfolio that, you know, are exposed to either wage pressures or interest rate pressures, and given that, you know, inflation and rates are now stabilizing, are those, you know, types of issues starting to stabilize? Yeah, good morning, John. Maybe we could start with GlobalJet.

Just on credit maybe could you just give us an update on global jet and then maybe talk about.

The pipeline of credit as you see other companies within the portfolio.

Are exposed to either wage pressures or interest rate pressures and given that inflation and rates are now stabilizing or those types of issues starting to stabilize as well.

Yes, good morning, John.

Maybe starting with global jet.

Dan Peterzak: You know, it's a fair question. It is a decent-sized position. It is a name that is on non-accrual. I think it's just north of 2% of the non-accrual balance.

It's a fair question it is a decent size position.

It is a name that is on nonaccrual I think it's just north of 2% of the nonaccrual balance I think on the positive side of the story, though the business continues to perform quite well.

Dan Peterzak: I think on the, you know, the positive side of the story, though, the business continues to perform quite well. I think there's actually not a delinquent sort of line item in their entire leasing or sort of loan book. So, you know, the management team there is doing a very good job.

I think there is actually not a even delinquent.

Is that a line item in their entire leasing our set of loan book. So the management team. There has done a very good job of that market has held up quite well as you recall that's more of a person who does a lot of leasing to the private jet space, which has had.

Dan Peterzak: That market has held up sort of quite well. As you recall, that's more of a FinCo who does, you know, loan and leasing to the private jet space, which has had, you know, no pun intended, a good sort of tailwind behind it for the last several years. I think on the credit side... You know, it obviously is sort of a tough quarter with some of these names. I mean, you've got some sector issues with the Medicare reimbursement space, you've got kind of wage inflation, a bit of a common theme, you know; we haven't necessarily seen that update yet. You know, I think we are kind of cautious on kind of macro, so that generally, I think the rates for sort of higher will continue to put kind of free cash flow stress on companies. I think those who have a big wage footprint could be a challenge.

Yes, no pun intended.

So the tailwind behind us in the last sort of several years.

I think on the credit side.

<unk>.

Yes.

Obviously, you sort of a tough quarter with some of these names I mean, you've got some sector issues with.

The Medicare reimbursement space, you've got kind of wage inflation a bit of a common theme.

Haven't necessarily seen that abate yet.

<unk>.

I think we are kind of cautious on kind of a macro sort of generally.

I think the rates for our sort of hire will continue to put us on a free cash flow stress on companies I think those who have the big wage footprint could be a challenge, but I think we are seeing revenue growth across the portfolio.

Dan Peterzak: But I think, you know, we are seeing revenue growth across the portfolio. I think, you know, there's always going to be a watch list and a credit business of sorts with names on it, but there's not really much on the near-term sort of watch list that probably has us sort of focused other than the names that we're sort of talking about sort of here on the call today. So, yeah, I guess just a quick summary. Global Jet Comp feels in a pretty good spot from just an overall credit perspective and is kind of mindful about risk, but, you know, the rest of the portfolio feels okay, and helpful. And then just thinking about 2024, I guess, kind of balancing your cautious outlook along with the other side of the story, which is that there's the deal environment, which looks like it's improving over the course of the year, given the, I guess, private equity framework out there. Kind of maybe balance your, your, your perspectives on. The leverage that you're willing to put on the book relative to where you are now, and then maybe thinking about interest rates, your willingness or your appetite to use the revolver to fund growth relative to other sources.

Theres always going to be a watch list and credit business.

Names on it but there's not really much in the near term sort of watch list that probably has us set of focused other than the names that were sort of talking about sort of here on the call today.

So I guess just a quick summary, global desktop goes on a pretty good spot from just an overall credit perspective kind of mindful about risk.

The rest of the portfolio feels okay.

Okay.

That's helpful and then just thinking about 2024.

Kind of balancing your cautious outlook along with the other side of the story, which is that there is to get the deal environment. It looks like it's improving over the course of the year given the I guess the.

But equity framework out there.

Kind of maybe balance sheet.

Your perspectives on that.

The leverage that you're willing to put on the book relative to where you are now and then maybe thinking about interest rates.

Of your willingness or your appetite to use the revolver to fund growth relative to other sources of capital.

Dan Peterzak: Yeah, I mean, there are a couple of questions in there. I mean, first and foremost, you know, we're not going to change our leverage target, right? I think we feel comfortable with inside the range we talked about. You know, I think, you know, kind of 113 sort of to 118 to the 12 feels like a good number.

Yes, I mean, a couple a couple of questions in there.

I guess first and foremost we're not going to change I think instead of our leverage target right. I think we felt comfortable with inside the range that we talked about I think about it.

<unk>.

118 to the one two feels like a good number so yes, we do have some room for some growth, but I think we're gonna be mindful about going above any sort of target there.

Dan Peterzak: So, yeah, we do have some room for some growth, but I think we're going to be mindful about going above any target there. You know, in the deal environment, we are expecting more robust deal flow just generally in private markets. You know, obviously, M&A has been quite slow now for approaching two years. You do have, I think, a bit of a situation out there where, you know, LPs and private equity funds are looking for a return on capital. So there is some pressure on what I call the selling side, and then there remains a fair amount of dry powder on the buying side. And I think the market has been waiting for, you know, a belief that inflation has kind of stabilized, which I think Broadstroke would agree with. But I think you're still going to see inflation in sort of some spots.

<unk>.

The deal environment, we are expecting more robust deal flow just generally in private markets. Obviously M&A has been quite slow now for approaching two years, you do have I think a bit of a situation out there where.

And private equity funds are looking for a return of capital. So there is some pressure on what I'd call. The selling side and then there remains a fair amount of dry powder on the buying side and I think the market has been waiting for a belief that inflation has kind of stabilized, which I think broad stroke, we would agree with that I think youre still going to see it in <unk>.

Some spots.

Dan Peterzak: You know, our view has been and kind of remains that, you know, the rate environment will remain elevated for some period of time. I think the market got a fair amount of euphoria around it; they're almost pricing in sort of six rate cuts, which we just didn't see. I think you'll see some downward movement in rates, but probably pretty muted, during the course of the year. Great, thanks.

Our view has been and got it remains that.

The rate environment will remain elevated for some period of time I think the market got it.

A fair amount of euphoria out there almost pricing and service six rate cuts, which we just didn't see.

I think youll see some downward movement in rates, but probably pretty muted during the course of 'twenty four.

Okay, great. Thanks.

John Heck: Thanks. Thank you. One moment for our next question. Yeah.

Thank you Doug.

Thank you one moment for our next question.

And.

Operator: Our next question comes from the line of Price Rowe from B Riley. Your question. Thanks, good morning.

Our next question comes from the line of price ROE from B Riley Your question. Please.

Thanks, Good morning.

Price Rowe: I wanted to maybe follow up on John's question there about, you know, the balance sheet use of leverage. You know, Dan, it certainly sounds like you're comfortable maybe going a little bit higher from a leverage perspective, but do want to get a sense for what that leverage might look like, especially with some note maturities that come up here in the second half of 24 and in the first half of 25, just trying to get a feel for how the debt stack might look, you know, as we get to about this time next year. Yeah, no; I'm happy to do that.

Wanted to maybe follow up on Jon's question, there about the balance sheet use of leverage.

Dan, It's certainly sounds like Youre comfortable maybe going a little bit higher from a leverage perspective that didn't want to get a sense for what that leverage might look like.

Especially with some some note maturities that come up here in the second half of 'twenty four and in the first half of 'twenty five just trying to trying to get a feel for how the debt stack might look at.

We get to about this time next year. Thanks.

Yeah, no happy to do that and good morning.

Dan Peterzak: And good morning. I think we're pretty happy with where we sit from a liability perspective. You know, we increased and extended the revolver, you know, during the course of 2023. I think that the revolver provides a lot of flexibility to us.

I think we're pretty happy with where we sit from a liability perspective.

Increased and extended the revolver.

During the course of 2023.

<unk> provides a lot of flexibility to us obviously, we've got a lot of capacity on that.

Dan Peterzak: Obviously, we've got a lot of capacity on that. You know, we did the note issuance that we mentioned in our prepared remarks. That was essentially pre-funding, you know, these kind of near-term maturities that are out there. So, I think you should see us remain consistent with how we think about the right side of the balance sheet. The revolver will be important.

We did the note issuance.

That we mentioned in our prepared remarks that was essentially a pre funding. These kind of near term maturities that are out there. So I think you should see us to remain consistent with how we think about.

The right side of the balance sheet, the revolver will be important we will keep looking to extend that.

Dan Peterzak: We will keep looking to extend that, you know, every so often to keep it more of a long-term maturity. We will continue to access the unsecured sort of bond market. You know, we have used CLOs in the past.

Every so often to keep it more of a long term maturity, we will continue to access.

Unsecured bond market, we have used in the past that may be something else, we sort of consider but I think we want to be cautious on the liability side.

Dan Peterzak: That may be something else we sort of consider, but I think we want to be cautious on the liability side, you operate with inside that target leverage to be a frequent participant in the market. I think those are important pieces of the BDC balance sheets. I think we've done a good job there over the last several years. Great, that's a helpful color.

Operate with inside that target leverage via frequent participant in the market.

Those are important pieces of BDC balance sheets, I think we've done a good job there over the last several years and we intend to continue that.

Great that's helpful color.

Price Rowe: There may be one more just around the spread environment. I mean, you mentioned in your prepared remarks that spreads were back to January 2022 levels. Can you talk about kind of how it might feel with the environment the way it is right now?

Maybe one more just around the spread environment you mentioned in your prepared remarks that <unk>.

Spreads were back to January 2022 levels.

Can you talk about kind of how it how it might feel.

With the with the environment the way it is right now I guess the prepared comments you made about market activity, possibly picking up do you think that there will be more spread compression from here or a bit of a stabilization going forward.

Dan Peterzak: I guess the prepared comments you made about market activity possibly picking up. Do you think that there will be more spread compression from here or or a bit of a stabilization going forward? Yeah, I mean, that's obviously the spread moves have been, You know, I think. Pretty material sort of on both sides, right? You know, kind of your regular way loan in January of, of 22, I would say it would have been, you know, 550, 575, you know, that gapped out arguably to 675 with kind of more fees and sort of more call pro dorm. It was called the Summer of 23, and now you've kind of come back.

Yes.

Honestly the spread moves have been.

Thank.

Pretty material sort of both sides right.

Kind of your regular way loan in January of.

22, I would say would have been $5 $55 75.

That gapped out arguably the 60 75 with kind of more fees and sort of more call pro Doron.

Some of our 2003 and now you've got a cut back.

Dan Peterzak: I think part of that move back has been that lack of deal flow, you know, they're. We've got a pretty decent origination number this quarter inside of FSK and even sort of across the platform, just that regular way deal volume is lower. So I think that there is a bit of a, we'll call it technical, issue in there. So I think we're maybe close to the point where that bottom on sort of spread moves might be, maybe even see a little bit sort of wider if that volume picks up kind of normally, but maybe TBD on that. The only point that I would say, though, is I do think the quality of risk that we're seeing is quite good and where we're getting paid in a total return sort of fashion. These loans are still paying roughly 11% when you factor in some amortization of the upfront fee instead of OID.

I think part of that move back as has been that lack of deal flow.

Yes.

We got.

<unk> got a pretty decent origination number this quarter inside of FSA, and even sort of across the platform. It just regular way deal volume is lower so I think that there is a bit of a we'll call it technical.

Technical out there so.

I think we're getting maybe close to the point of maybe that bottomline, so spread moves maybe even see a little bit sort of wider if that volume picks up kind of more normally but maybe TBD on that.

But I would say, though is I do think the quality of risks that we're seeing is quite good and what we're getting paid on a total return sort of fashion.

These loans are still paying roughly 11% when you factor in some amortization of Av.

The upfront fee instead of OID.

Dan Peterzak: To get paid that kind of level for the size of companies that we're seeing, for the equity contributions that are below us, it feels like a very good risk-adjusted return. So we're not entirely surprised by that spread move. Usually, when your benchmark kind of gaps out, especially as much as it did for how these loans are priced, which is SOFR-based, you don't get the benefit of spread wide.

You have to get paid back on a level or the size of companies that we're seeing for the equity contributions that are below us.

Very good risk adjusted return so we're not entirely surprised by that spread move.

When your benchmark.

Kind of gaps out, especially as much as it did.

For how these loans are priced switches. So for base you don't get the benefit of spread widening too I think we're not surprised by that movement.

Dan Peterzak: I think we're not surprised by that move, and I just think 11%, you know, for this type of risk, feels pretty good. Thanks for taking the question. Thank you. Have a good day.

11%.

This type of risk feels feels pretty good.

Okay.

Thanks for taking the questions.

Thank you have a good day.

Price Rowe: Thank you. One moment for our next question. Hey.

Thank you one moment for our next question.

And.

Operator: Our next question comes from the line of Finian O'Shea from Wells Fargo. Your question, please. Hey, everyone. Good morning.

Our next question comes from the line Finian O'shea from Wells Fargo. Your question. Please.

Yes.

Hey, everyone. Good morning.

First.

Finian O'shea: So the first question I want to hit on partial accruals. It looks like we have a couple new examples with the Keller-Meyer and Reliant Rehab cases this quarter, but it does seem to be a general practice where you're acknowledging that you won't fully recover the investment you made, but then you carve out a piece that allows you to run interest and come through. And that can create the impression that you're further prioritizing your performance fee at the expense of shareholder recovery. So can you outline the thinking in these setups?

So first question I wanted to hit on the partial accruals.

It looks like we have a couple of new examples with with the Keller Meyer and reliant rehab cases.

This quarter, but it does seem to be a general practice.

Where you are acknowledging that you won't fully recover the investment you've made but then you carve out a piece that allows you to run interest income through.

And that can create the impression that you are.

Further super prioritizing your performance fee at the expense of shareholder recovery. So can you outline this thinking in these setups. Thank you.

Dan Peterzak: Thank you. Yeah, no, happy to spend and, I would put it in context with maybe just the way a normal restructuring works, right? Just to take these two cases kind of individually, and we talked about them in the prepared remarks. I mean, on KBS, I think the first step of that restructuring has taken place.

Yes, no happy to defend and.

I wouldn't put it in context.

Maybe just the way normal restructuring works right, but.

Just to take these two cases kind of individually and we talked about these in the prepared remarks on KBS.

I think the first step of that restructuring has taken place we expect there to be.

Dan Peterzak: We expect there to be a consensual sort of handover of that business. So the loan has essentially been right-sized for what that amount will be on kind of the go-forward basis, you know, reliant. I think not entirely the same situation, but that loan has been placed and has been restructured into into two pieces. You know, one of those pieces, is You know regularly cash play one of them has the ability for the For the borrower and the sponsor to pick they would have to pick at an additional sort of rate But that is giving the company sort of flexibility to kind of manage their cash flow or sort of cash burn and effectively Reinvest in the business, so I don't think then it's entirely You know just just think when you you know restructure a company you are going to put a debt claim back on that company You are going to sort of own equity in that sort of company on the other side You know I'd equate it similar to the situations that are here You know the only other point I would note is it is more likely than not that on the two examples that we just talked about At least one of them if not both of them that the pieces that we put on non accrual will pay cash And you know the coming quarter coming quarters, but we, H.Y.P. & F.L.Y. A.M. D.R.

Consensual sort of handover of that business.

The loan has essentially been right sized for what that.

Of that amount will be on kind of the go forward basis.

Reliant.

Not entirely the same situation, but that loan has been placed.

Been restructured into two pieces one of those pieces.

Is.

Regulatory caspase one of them has the ability for the.

Borrower and the sponsor to pick they would have to pick up additional sort of rate.

But that is giving the company flexibility to kind of manage their cash flow or sort of cash burn and effectively reinvest in the business. So I don't think that thats entirely.

Thank you.

Restructure a company you are going to put a deck climb back on that company you are going to set of own equity in that set the company on the other side.

I would equate it similar to the situations that are here.

Part I would note is it is more likely than not that on the two examples that we just talked about at least one of them if not both of them.

Pieces that we put on non accrual will pay cash.

The coming quarter coming quarters, but we would just use that to reduce the basis.

Dan Peterzak: P.H. G.H. I.M. T.G.

Okay. Thanks, and then just.

Dan Peterzak: C.D.R. L.M. H.Y.P.

Zooming out a follow on the advisor joint venture.

Dan Peterzak: & S.T.R. M.F. I.G. N.L.

Dan Peterzak: L.M. G.R. M.F. I.M. S.T.R. I.G. L.M.

A lot of discussions still on of your success in rotation, but the new S. K care advisor is starting to chalk up its own.

Dan Peterzak: G.R. M.F. I.M. S.T.R. A.M.

Dan Peterzak: Okay, thanks. And then just zooming out on the advisor joint venture, there's a lot of discussion still about your success and in rotation, but the new FS KKR advisor is starting to chalk up its own, you know, sometimes significant credit losses. So do you think, is it time maybe to look more inward?

Sometimes significant credit losses. So do you think like is it time, maybe to look more in word and on that matter is the partnership model really working the right way for shareholders. Thank you.

Dan Peterzak: And on that matter, is the partnership model really working the right way for shareholders? Thank you. Yeah, I'm happy to.

Yes happy to do it I think the partnership model has worked quite well and I think Vince you got to look at the numbers a bit right.

Dan Peterzak: I think the partnership model has worked quite well, and I think, Finn, you've got to look at the numbers a bit, right? You know, when we did take over this portfolio, it was... and the entities were sort of merged. It was roughly 75% sort of legacy assets, 25% of the KKR originated. You know, that's 8713 today, the other way around, including one of the large positions is part of that. 13 would have been repaid in January.

What we did take over this portfolio it was.

And then the entities where should emerge there was roughly 75% sort of legacy assets, 25%. So the KKR originated.

Yes.

<unk> today, the other way, including one of the large positions.

As part of that 13 was repaid in January.

Dan Peterzak: You look at just total originations. I mean, look at twenty to twenty-three odd billion in originations inside of FSK since April of 2000. You know, and a 50 basis point or sub-50 basis point sort of depreciation rate, which is realized and unrealized numbers like that, are pretty good. And, you know, I look at our kind of performance against the institutional funds that were investing in the same assets, which have that sort of vintage. Those are sort of, I think, pretty strong numbers. So, you know, we're not happy with the quarter here; I think we can be honest about that. And, you know, we were always expecting a certain amount of either non-accruals or challenges and assets that we invested in. It is a credit book, right? But I do think it's a pretty interesting stat.

You look at just total originations I mean look at 'twenty two 'twenty three we got $1 billion of originations inside of a best case since April of 2018.

Yes.

50 basis point or sub 50 basis points.

The depreciation rate, which is realized and unrealized numbers like thats pretty good.

And I look at our performance on the institutional funds that's worth investing in the same assets, which has that sort of vintage like those are sort of I think pretty strong numbers. So yes, we're not happy with the quarter here I think we can be honest with that Ed.

We were always expecting a certain amount of Av.

Either non accruals are challenges that assets that we invested it is a credit book right, but.

I do think it's a pretty interesting stat.

Finian O'shea: You look at roughly half of the non-accruals are coming from 87% of the portfolio, and roughly half of the non-accruals are coming from 13% of the portfolio. So we know we're in the business of, in the credit business, you need to be right 99 out of the 100 times. I think these credits, we've got a lot of focus on them from the deal team, the restructuring, and we're going to look to maximize value there, but, you know, I think that 22 to 23 billion dollars is a pretty real number, as is that, you know, sub-50 basis. Thank you. Thank you.

You look at <unk>.

Roughly half of the non accruals are coming from 87% of the portfolio and roughly half of that non accruals are coming from 13% of the portfolio. So.

We know we're in the business.

And the credit business, you need to be right. So the 99 out of the 100 times.

These credits and we've got a lot of focus on that from the deal team there restructuring team.

We look to maximize value there but.

I think that 'twenty two to 'twenty three 1 billion.

30.

Real number as is that sub 50 basis points depreciation rate.

Thank you.

Thanks, Matt.

Operator: One moment for our next question. And our next question comes from the line of Casey Alexander from Compass Point. Your question, please. Hi, good morning. Not to over nitpick, but, in relation to Miami Beach and Reliance, medical Medicare reimbursement has been an area that private credit managers have assiduously avoided.

One moment for our next question.

And our next question comes from the line of Casey Alexander from Compass point Your question. Please.

Hi, good morning.

Not to not to over nitpick, but.

In relation to Miami Beach and reliant.

Medical Medicare reimbursement has been an area that private credit managers have assiduously avoided. So I'm curious when were those underwritten and kind of what was the base case that made you comfortable that you could underwrite a Medicare reimbursement model.

Casey Alexander: So I'm curious, when were those underwritten, and kind of what was the base case that made you comfortable that you could underwrite a Medicare reimbursement model? And then how did that get sideways?

And then how does that get sideways and.

Dan Peterzak: And, you know, lead us again through the potential recoveries on those? Yeah, I'm happy to, and then I'll frame them both. I mean, they were both done, you know, essentially prior to COVID, or at least in kind of the, you know, the earliest, earliest sort of days of COVID, you know, both of these deals would have been, you know, well south of 50 LTV from an equity perspective. I think Casey one of the interesting things is these were both sponsor-owned businesses. The sponsors injected a meaningful amount of additional capital into these Yes, I think that's a good result. And we'll make kind of a you think about a net recovery rate on the overall loan, you know, sort of much higher and gives these kind of, you know, smaller positions to where we sit today. I think that the path for each is, is, you know, probably still an active dialogue.

Lead us again through the potential recoveries on this.

Yes, no happy to and then frame.

I mean, they were both done.

Essentially prior to COVID-19 or at least in kind of the earliest earliest sort of days of COVID-19.

Both of these deals.

What have been.

Well south of 50 LTV from.

From an equity perspective.

I think Casey one of the interesting things is these are both sponsor owned businesses.

Sponsors injected a meaningful amount of additional capital it needs at a post close.

That's the reference we made that we got $175 million.

Par debt Paydowns, along the way.

Yes, so I think that's been a good result, it will make out of it when you think about a net recovery rate on the overall volume.

Yes at a much higher it makes these kind of smaller positions to where we sit today.

I think the path for Hs is.

Probably still an active dialogue I mean, we have been approached.

Dan Peterzak: I mean, we have been approached, you know, for certain of these or either of them with, you know, inbound sort of M&A sort of opportunities or merger opportunities. You know, I think there will be some settling of these businesses over the, we'll call it the medium to sort of long term, but, you know, they were materially impacted by COVID is probably specifically reliant. And we'll do we kind of kind of maximize value, but I would, you know, these weren't kind of one-off kind of random things.

For certain of these or either of them and.

Inbound set of M&A sort of opportunities or merger opportunities.

I think there will be some settling in these businesses over the we'll call it the medium to long term, but.

They were materially impacted from Covid, it's probably specifically reliance.

And we'll do what we can to kind of maximize value, but I would these weren't kind of one off kind of random things I mean big name.

Casey Alexander: I mean, big names, I think, you know, kind of sponsors in there, large equity checks, we thought we were, we were well downside protected, we've taken real principal dollars off the table. Alright, thank you for that. And second, my follow-up question is, you know, the stock is now once again at a pretty elevated discount to NAV. Is there an existing share repurchase program?

I think sponsors in their larger equity checks. We thought we will we were well downside protected we've taken real principal dollars off the table on the left.

Alright. Thank you for that and then second my follow up question is the stock is now once again at a pretty elevated discount to NAV is there an existing share repurchase program.

Dan Peterzak: And are we at levels where, you know, you think the board would consider starting to act on a share repurchase program given the elevated level of the discount? Yeah, but I think, you know, we've been active here in the past. You know, just in terms of the sheer number of dollars that we have repurchased, obviously, we've been rewarding shareholders by ensuring that we're paying out kind of all the earnings we earn. You know, I think that, you know, we essentially declared 20 cents of specials this year, right?

And are we at levels, where you think the board would consider starting to act on the share repurchase program given the elevated level of a discount.

Yes, I think you know we've been active here in the past.

Just in terms of the sheer number of <unk>.

That we have repurchased obviously, we've been rewarding shareholders with ensuring we're paying out out of all the earnings we earned.

I think that we.

Essentially declared 20 specials this year right. So even though you look at our.

Casey Alexander: So even though you look at our, you know, kind of year on year, so the number is that 10% ROE, and you do see a 1.7% NAB decline, you know, after the specials, that's close to 85 basis points. It is a conversation we frequently have with the board. We'll continue to do that. But, you know, it is something we did in the past.

Just kind of year on year, so the numbers that 10% ROE and you do see a one 7% of the NAV decline after the specials, that's closer to 85 basis points.

It is a conversation.

We frequently have with the board will continue to do that but it is something that we've said in the past.

Paul Johnson: One moment for our next question. Our next question comes from the line of Paul Johnson from KBW. Your question, please. I'm just curious, so any of the non-accruals, the new non-accruals this quarter, do any of those overlap with the joint venture, and was that, I guess, what drove the lower mark on the joint venture?

Happened under consideration.

Thank you.

Thank you one moment for our next question.

And.

Our next question comes from the line of Paul Johnson from <unk>. Your question. Please.

Yes. Good morning, Thanks for taking my questions.

I'm just curious so any of the non accruals the.

The new non accruals this quarter do any of those overlap with the joint venture and was that I guess, what drove I guess, the lower mark on on the joint venture this quarter.

Dan Peterzak: Yeah, just to level set again. I mean, obviously, we went through the names that we put on nonaccrual, you know, five in total. You know, two of those relate to the Medicare reimbursement story, two of those relate to the wage kind of inflation piece, and maybe some of the roll ups, and JWA was like more of an EV point than a performance point, and that we took two names kind of off nonaccrual. There was some overlap, you know, with these names between, you know, FSK and the JV. I think KBS and Reliant would have been the bigger of those, but you know smaller sized dollars kind of in the JV.

Yes.

Level set again I mean, obviously, we went through the names that we put on non accrual five in total.

Two of those relate to that to the Medicare reimbursement, sorry to those related to the wage inflation piece and maybe some of the raws jws like more of an EV point then.

That our performance points and then we took to name is kind of off non accrual.

Some overlap.

With these names between.

SK and the JV I think KBS and rely on what had been the bigger of those.

But smaller size dollars got them in the JV did you recall the JV most of the assets are kind of originated onto the balance sheet and that we.

Paul Johnson: If you do recall the JV, most of the assets are kind of originated on the FSK balance sheet. You know, we're creating that portfolio down at the JV, a little bit strategically based upon the purpose of the JV, but then also just thinking about a broader kind of diversification and portfolio management. There's still a little bit of overlap, but not every day. Okay.

We're creating that portfolio is out of the JV a little bit strategically based upon the purpose of the JV, but then also just thinking about a broader kind of diversification.

In portfolio management.

So a little bit of overlap but.

Not every day.

Got it thanks and then.

Dan Peterzak: And then for any of these non-accruals, you know, new or existing, I guess, you know, we're talking about KBS, the sweeping, are any of these in any way related to kind of the downturn in the CRE market, just kind of referring to, you know, lower capex and lower property level budgets? Is that are any of these related to that? Thank you very much.

For any of these non accruals new or existing I guess.

We're talking about KBS.

Sweeping.

Any of these in any way related to kind of the downturn in the CRE market, just kind of referring to like lower capex and lower property level budgets.

Are any of these related to that.

Paul Johnson: Thank you. You know, it's an interesting question and, I think, a thoughtful one considering what's going on, you know, in sort of that office market. It's not a big driver here, though. I think the big driver is more, you know, wage inflation and then sort of higher interest costs, higher sort of debt costs, creating kind of, you know, limited sort of free cash flow. And then when you sort of, you know, exacerbate that or, you know, include that in a situation where KBS had, we'll call it, some revenue volatility, it had an extremely strong performance during and You know, it has to be a certain amount of a factor, but I just don't find it. I just don't think it's, you know, the material.

Situations.

It's an interesting question and I think a thoughtful one considering what's going on.

So that office market.

It's not a big driver here, though I think the big driver is more.

Wage inflation.

And then sort of higher.

Interest costs higher sort of debt cost, creating kind of limited sort of free cash flow.

And then when you sort of.

I think exacerbate that or.

Include that in a situation where.

Yes.

<unk> got some revenue volatility.

It has an extremely strong performance.

Performance during and right after.

That was always going to sort of fall off a bit, but probably fell off a little bit more than sort of folks' expectations. So.

It has to be a certain amount of a factor, but I just thought I just don't think it's material. So the major one.

Got it thanks that's helpful.

Dan Peterzak: God, thanks, that's helpful. And last one, just kind of stepping back here, just on the pipeline. I'm just, you know, any high-level comments you might have on kind of the outlook for the year. And just, I'm also sort of curious, you know, what the pipeline looks like today, maybe compared to, you know, a year ago, or the beginning of last year. That's all for me.

And.

Last one just kind of stepping back here just.

On the pipeline just any high level comments, you might have on kind of the outlook for the year and I'm also sort of curious what the pipeline looks like today, maybe compared to like a year ago at the beginning of last year and that's all for me. Thanks.

Paul Johnson: Thanks. Yeah, no, and it's in line with, I think, what we sort of talked about from the remarks or maybe John Hackson's question, but it feels like it will be a more active 24. It feels like, you know, there's pressure on both sides, for lack of a better word, to do deals. I think the valuation mismatch that existed to get the willing buyer and the willing seller there is starting to sort of fall away. Obviously, the syndicated loan markets have started to return. You know, I think that would be highly correlated to just more M&A volumes sort of coming through. You know, that is our expectation.

Yes.

In line with I think what we sort of talked about either from the remarks or maybe John for the question, but it feels like it will be a more active 24 it feels like.

There is pressure on both sides for lack of a better word to do deals I think the valuation.

Mismatch that exists to get the willing buyer willing seller or they're starting to sort of fall away. Obviously the syndicated loan markets have started to return I think that would be highly correlated to just more M&A volumes that are coming through so.

Yes that is our expectation I think it will be weighted to the back half of 'twenty four just because those were seeing more and more kind of processes either being considered or started it takes time to get those done from the deal to sign the deals to close that would probably point to fundings more in the second half of the year, obviously that should be accretive to fee income.

Dan Peterzak: I think it will be, you know, weighted to the back half of 24, just because as we're seeing more and more kinds of processes either being considered or started, you know, it takes time to get those done for the deals to sign, the deals to close. So that would probably point to funding, you know, more in the second half of the year. Obviously, that should be accretive to fee income, which has been historically low for us during the course of 2020. Thank you both.

Which has been historically low.

For us during the course of 2023.

Kenneth S. Lee: Thank you. One moment for our next question. And our next question comes from the line of Kenneth Lee from RBC Capital Markets. Your question, please. Hey, good morning.

Thank you Bob.

Thank you one moment for our next question.

And our next question comes from the line of Kenneth Lee from RBC capital markets. Your question. Please.

Dan Peterzak: Thanks for taking my question. I was wondering if you could share some thoughts around where you think portfolio average interest coverage ratios could peak and perhaps, give us a little color around what you're seeing from portfolio companies in terms of managing across the elevated interest expense there. Yeah, thanks for the question. I think we have a sort of trough, right? You start to see SOFR trend down, you know, this kind of past quarter, although that number is the minimum. I think it was like seven basis points on average across the portfolio.

Hey, good morning, Thanks for taking my question wondering if you could just share some thoughts around where you think portfolio average interest coverage ratios could trough and perhaps just.

Give us a little color around what youre seeing from portfolio companies in terms of managing across the the elevated interest expense there. Thanks.

Yes. Thanks for the question, Yes, I think we have sort of trough right.

You're starting to see sulfur trend down.

Past quarter, although that number is de Minimis I think it was seven basis points on average across the portfolio.

Dan Peterzak: You know, I don't, as I said before, I don't believe in the six rate cuts, but I think you will start to see that trend out sort of, you know, overall. So I think we have kind of hit the bottom there. I would note, Ken, for your benefit, I think there's only seven or eight names in the portfolio that have an interest coverage of less than one. So that's, you know, roughly 200 names, so kind of a small sort of percentage there.

As I said before I don't believe in the fixed rate cuts, but I think you will start to see that.

I think trend out.

Overall, so I think we have kind of hit the bottom there.

I would note Ken for your benefit I think there is only 7% or eight names in the portfolio that have an interest coverage less than one.

So that's.

Roughly 200 names that we've got a small set of percentage there, but I think you'll see that one five so to start to tick up over the course of 2024.

Dan Peterzak: But I think you'll see that number sort of start to tick up, you know, over the course of 2024. And I think in terms of how they're managing it, I think they're, You know, they're doing kind of all they can, sort of pulling the levers they can. You know, a decent amount of companies did have a certain amount of hedges, but they were never perfect. A lot of those could be rolling off. So I think it is an environment in which, you know, portfolio companies, CFOs, sort of treasurers, obviously have a lot to do these days and have to spend a lot of time sort of focused on that.

I think in terms of how they're managing and I think there.

Theyre doing all they can sort of pulling the levers they can.

A decent amount of companies that have a certain amount of hedges, but they were never perfect, but a lot of those so it could be rolling off. So I think it is it is an environment that portfolio company Cfos Treasurers, obviously have a lot to do these days and that had to spend a lot of time focused on that and I think the majority of the portfolio has done a good job.

Kenneth S. Lee: The other thing that we've seen is for our more acquisitive companies, sponsors raising junior capital, typically pick preferred or something like that, to continue to drive acquisition strategies and growth, as well as sponsors contributing equity on their own. So we're definitely seeing some junior capital support in certain, Gotcha. Very helpful there. And just one follow-up, if I may, I wonder if you could just talk about what you're seeing around either covenants or documentation for recent investments, especially in our middle market segment. Thanks. Yeah, I think the documentation is held, right? I think people know that we're in the, I like to say we're in the storage business through direct lending and private credit, so they're not in the moving business. So, you know, I think things like collateral stripping or other terms like that have kind of not made their way into the market yet.

The other thing Brian the other thing that we've seen is for more acquisitive companies sponsor raising junior capital typically pick preferred or something like that to.

We continue to drive acquisition strategies and growth.

So as well as sponsors contributing equity on their own. So we're definitely seeing some junior capital support.

Certain companies.

Got you very helpful. There.

Just one follow up.

If I may wonder if you could just talk about what youre seeing around either covenants or documentation for recent investments, especially within the upper middle market segment. Thanks.

Yeah, I think Ken.

The documentation I think has helped but I think people know that we're in.

I'd like to say, we're in the storage business and direct lending private credit sort of not in the moving business. So.

I think things like collateral stripping our other terms like that ups have not made their way into the market.

Dan Peterzak: You know, I think Covenants is a little more sort of case specific, you know, I think as we've just, you know, been more and more active in, you know, sort of larger-sized deals. I mean, the EBITDA numbers I spoke about in the prepared remarks, you know, $250 million plus, you're getting less access to what I would call financial covenants, but you're lending to better companies, which I think we're sort of comfortable with that. I don't think those size numbers, though, will necessarily be sustainable, right? As companies have, you know, access to the public market, some of them will take that. I think we'll average more down in line with what our historical kind of medians or weighted average numbers have been, you know, that there will be certain parts of or certain sectors or sizes of companies where we would only do the deal with the financial covenant, you know, larger companies. I think we'll be a little bit more flexible there because we're going to like the credit. I've got you. Very helpful people there. Thanks again.

I think covenants as all of our sort of case specific.

I think as we've just.

But more and more active in sort of larger sized deals and EBITDA numbers I spoke about in the prepared remarks $250 million plus youre getting lax less access to what I would call financial covenants, but youre lending the better companies, which I think we're sort of comfortable with that I don't think those size numbers, though.

So it'd be sustainable right.

As companies have access to the public markets. Some of them will take that I think will average more down in line with what our historical medians are weighted average numbers a bit but.

There will be certain parts of <unk>.

So sectors or size of companies, where we would only do the deal with a financial covenant larger companies I think it will be a little bit more flexible there because we're going to like the credit risk.

Got you very helpful. There. Thanks again.

Kenneth S. Lee: Thank you. One moment for our next question. And our next question comes from the line of Mark Hughes from Two Securities. Your question, please. Yeah, thank you. Good morning. Looks like you had some good success with asset-based finance in the quarter. Is there anything there that was just kind of opportunistic?

Thanks.

Thank you one moment for our next question.

And our next question comes from the line of Mark Hughes from two Securities. Your question. Please.

Yes. Thank you good morning.

I'm a good success with the asset base.

Finance in the quarter is there anything there that was just kind of opportunistic or is there more.

Mark Douglas Hughes: Or is there more activity? Yeah, thanks for the question, Mark. A little bit more, I'd say.

Activity.

Yes, and thanks for the question talk a little bit more I would say activity.

Dan Peterzak: You know, the one deal I mentioned in the prepared remarks, the, you know, the high FICO, so the loan book out of BMO, we were pretty excited about that, you know, seven odd billion dollar portfolio. Yeah, we're pretty constructive on the prime and sort of super prime part of the consumer sort of portfolios in this. I think we're happy to be in that. You know, the two other names, just so you have it, that probably drove that, you know, we talked about on prior calls, the deal with PayPal in Europe, that transaction funded.

The one deal I mentioned in the prepared remarks.

The high FICO sort of loan book out of female we were pretty excited about that.

Seven odd billion portfolio.

We're pretty constructive on.

The prime and Super Prime part of the consumer.

The portfolio is about there. So I think we're happy to be in that two other names. Just you have it that probably drove that we talked about on prior calls the deal with Paypal in Europe that transaction funded.

Dan Peterzak: So we're happy to see that getting off to a good start. And then we did do a receivables facility. I think there was a press release out there on it for a company, Webber.

So we're happy to see that getting off to a good start and that we did do all receivables facility I think there was a press release out there on it.

For a company.

Dan Peterzak: So those were the three big drivers. But, you know, we do think that's a really interesting space right now. We think what's going on with the regional banks in the United States allows us to potentially acquire assets or fill certain voids. So it's an area we're spending a lot of time on.

Webber.

Those were the three big drivers, but we do think that's a really interesting space right. Now we do think what's going on with the regional banks in the United States. It allows us to potentially acquire assets or fill certain voids. So that's an area. We're spending a lot of time on.

Mark Douglas Hughes: And then you talked about some pressure on spreads in the, I think for larger deals, does that extend down to the middle market, smaller deals? Yeah, we do see it kind of extending. I mean, I think our definition of the upper end of the middle market is pretty broad, right? You know, we're thinking about companies historically in the kind of 50 to 150 context.

Understood and then you talked about some pressure on spreads.

Looking for larger deals.

<unk> got into the middle market smaller deal.

Yes, we do see it kind of extending I mean I think.

Our definition of upper end of the middle market is pretty broad right.

We're thinking about companies historically in the kind of 50 to 150 context, obviously, we've been above that with.

Dan Peterzak: Obviously, we've been above that, you know, with the numbers that we quoted in the remarks around the deal flow in Q4. But, I do think it's an important point, though, to think about what the total return is on these deals versus the risk you're taking versus where you're sitting in the capital structure, as sort of... Still, you know, pretty darn interesting risk-adjusted returns, but, you know, spreads, you know, kind of definitely did move downward in Q4. Understandable. Thank you. Thank you. Thank you. Please take a moment for our next question. And our next question comes from the line of Robert Dodd from Raymond James. Your question, please. This morning,

With the numbers that we quoted in the remarks about around the deal flow in Q4.

I do think it's an important point, though to think about what the total return is on these deals.

Versus the risk, you're taking versus where you were sitting in the capital structure.

As you know.

Still.

Pretty darn interesting risk adjusted returns, but spreads definitely did move in Q4 down one.

Understood. Thank you.

Thank you.

Thank you one moment for our next question.

Yeah.

And our next question comes from the line of Robert Dodd from Raymond James Your question. Please.

Good morning, if I can.

Robert Dodd: If I can ask another question about the JV, right? So if we look at the BDC, total income dropped 3.5%, I think, this quarter. But within the JV, it was down more than double that, north of 8%.

Another kind of another question about the JV right. So if we look at the BDC totally can come.

Sure.

We get 5% I think this this quarter.

The JV it was down more than double that north of 8%.

Dan Peterzak: Yet there's some same exposure reliant KBS, low, and O, where the dividends are dropping. But can you walk us through what's driving that greater decline at the JV than you're experiencing at the BDC? And given that the guidance for the dividend for Q1 is down again, it appears maybe whatever's driving that isn't over yet. So can you give us any color on that? Yeah, it's a fair

Yes.

Same exposure of Alliant Kps Logan.

Dividends dropping.

But can you can you walk us through about what.

What's driving that greater decline that the JV, then you're experiencing at the BDC and given the guidance for the dividend.

Q1 is down again.

Maybe what was driving that isn't over yet so can you give us any color on that.

Yeah, It's a fair question.

Dan Peterzak: You know, I think, you know, part of it, and Stephen Lilly might want to sort of add to this as well, but, you know, part of it was just a certain amount of larger fee income or ABF dividends on names that were probably, you know, overweight in the joint venture flowing through in Q3 than they were in Q4. There's nothing kind of broader than that, you know, vis-a-vis the rest of the portfolio there. If anything, you know, I think we've got room to grow the joint venture, you know, room to, you know, sort of increase the kind of dividends that can be paid out there over the coming quarters or during, you know, the overall kind of 2000, sort of 24. That's exactly what happened.

I think part of it and then Steven Lily might want us to do that as well.

Part of it was just a certain amount of larger fee income our ABF dividends on names that were probably overweight in the joint venture flowing through in Q3 than they were in Q4.

There is nothing kind of broader than that.

Vis vis kind of the rest of the portfolio are there if anything I think we've got room to grow the joint venture room to sort of increase kind of dividends that can be paid out there over the coming quarters or during the overall kind of 2000.

24, but.

If you have any of that.

Exactly yes.

Robert Dodd: Okay, thank you. Thank you. This does conclude the question and answer session for today's program. I'd like to hand the program back to Dan Peterzak for any further remarks. Well, thank you all for joining the call today and for your support during 2023. If you do have any follow-ups, you know, please let us know.

Okay. Thank you.

Thank you. This does conclude the question and answer session of today's program I'd like to hand, the program back to Dan Pietrzak for any further remarks.

Well. Thank you all for joining the call today and the support during 2023 do you have any follow ups. Please let us know, we're very happy to spend the time.

Dan Peterzak: We're very happy to spend the time. Thanks, and have a good day. Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day. Goodbye. Merry Christmas. www.gyrositer.com

Thanks and have a good day.

Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect. Good day bye.

Okay.

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