FS KKR Capital Corp.

Good morning, ladies and gentlemen. Welcome to the FSKKR Capital Corp Second Quarter 2020 Earnings Conference Call. Your lines will be in a listen-only mode during remarks by FSK's management. At the conclusion of the company's remarks, we will begin the question-and-answer session, at which time I will give the instructions on entering the queue. Please note that this conference is being recorded. At this time, Robert Pond, Head of Investor Relations, will proceed with the introduction. Mr. Pond, you may begin.

Thank you. Good morning and welcome to FSKKR Capital Corp's second quarter 2020 earnings conference call. Please note that FSKKR Capital Corp may be referred to as FSK, the fund, or the company throughout the call. Today's conference call is being recorded and an audio replay of the call will be available for 30 days. Replay information is included in a press release that FSK issued on August 10th, 2020. 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 June 30, 2020. A link to today's webcast and the presentation is available on the investor relations section of the company's website under events and presentations. Please note that this call is the property of FSK. Any unauthorized rebroadcast of this call in any form is strictly prohibited. Today's conference call includes forward-looking statements, and we ask that you refer to FSK's most recent filings with the SEC for important factors that could cause actual results or outcomes to differ materially from these statements. FSK does not undertake to update its forward-looking statements unless required to do so by law. In addition, this call will include certain non-GAAP financial measures. For such measures, reconciliation to the most directly comparable GAAP measures can be found in FSK's second quarter earnings release that was filed with the SEC on August 10, 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. In addition, these non-GAAP financial measures may not be the same as similarly named measures reported by other companies. To obtain copies of the company's latest SEC filings, please visit FSK's website. Speaking on today's call will be Michael Foreman, Chairman and Chief Executive Officer, Dan Pietrzak, Chief Investment Officer and Co-President, Brian Gerson, Co-President, and Stephen Lilly, Chief Financial Officer. Also joining us on the phone are Co-Chief Operating Officers Drew O'Toole and Ryan Wilson. I will now turn the call over to Michael.

Thank you, Robert, and welcome, everyone, to FSKKR Capital Corp's second quarter 2020 Earnings Conference Call. To start, I'd like to say that all of us hope that you, your family, your colleagues, and your friends are remaining safe and healthy during this unprecedented time. Like other companies, the second quarter was our first full quarter operating in a COVID world. I'm pleased with how the FSK care team has adapted its operational activities to a fully virtual work environment. Also, as I start, I'd like to remind everyone that, as previously announced, during June we had effectuated a four-for-one reverse stock split for FSK. As a result, all per-share information contained in this call will take such information into account. In recent weeks, state and local economies across our country have experienced reopenings and renewed challenges, all to varying degrees. In the financial world, the public equity markets have rebounded much faster than many observers would have predicted just a few months ago. On the one hand, rising equity markets, thanks in major part to government stimulus plans on a scale not seen since World War II and the Great Depression, are looking through the current operational challenges almost all companies are facing. On the other hand, as Dan will discuss in detail in his comments, the credit markets are providing a different view of the operating world. From a portfolio perspective, our management teams and financial sponsors are intently focused on maintaining liquidity, cutting costs, and discerning new growth opportunities. Our view is the credit markets are more accurately pricing risk than the equity markets, as the equity markets have almost entirely looked through the realities of the current economic climate and focused on the long term. As is often the case, time will be a primary arbiter of which markets view as more well-reasoned. During the first quarter, we estimated that approximately 70% of our portfolio depreciation was related to COVID or spread widening. Most other VDCs provided these estimates as well, with a range of approximately 50% on the low end and 90% on the high end. Perhaps not surprisingly, our estimates fell somewhat in the middle of the industry, owing on the one hand to the high-quality nature of our more recent investment vintages, which have been led by KKR, offset to an extent by legacy assets we have discussed on prior earnings calls. In terms of NAV, during the second quarter, our valuation process yielded the following results. First, we experienced depreciation within the majority of the portion of our portfolio, which previously was impacted by COVID-related spread widening and our multiple contractions. Second, we experienced additional write-downs in certain legacy and previously credit challenge investments, including energy investments and investments that were fully restructured. Third, we experienced a modest amount of further depreciation in a portion of the portfolio that continues to be impacted by the effects of COVID. While Brian will discuss our portfolio evaluation in detail during his portion of the call, in summary, the net results was that our total investment portfolio declined in value by approximately 1.9 percent during the second quarter, which resulted in a 4.1 decline in our NAV on a per share basis. Shifting to our quarterly operating results, our net investment income was 62 cents per share during the quarter, which was two cents above our second quarter dividend of 60 cents per share. From a liquidity perspective, we ended the quarter with approximately 1.3 billion of liquidity with no meaningful near-term debt maturities. From a forward-looking perspective, consistent with the dividend strategy we outlined during our last earnings call, we currently expect our third quarter net investment income per share to approximate 60 cents per share. As such, our Board has declared a distribution of 60 cents per share in the third quarter, which equates to an annualized yield of 10.3 percent on our NAV per share of 23.37 cents as of June 30, 2020. In terms of strategic BDC industry updates, we are extremely pleased to see the SEC's recent proposed modifications to the mutual fund and exchange traded fund disclosure requirements, which include meaningful forward progress with regard to the AFFE rule. For the last several years, we have maintained an active voice in Washington on behalf of the BDC industry. We have also maintained a significant presence with both elected and appointed officials over the years. It is gratifying to see tangible results emerge from our and others' efforts. Before I turn the call over to Dan, I'd like to take a minute to recognize the entire FSKKR team. Some of these people, such as the leadership team represented on this call, you know, but many of them you have not met. They're an exceptional group of individuals of over 150 strong who work in their own unique and individual capacities. They are focused, hardworking, and dedicated to the work of making the FSKKR BDC franchise an industry leader across multiple metrics. While we acknowledge there is still work to do as we rotate our portfolio, I can assure you that we are closer to achieving our goals because of the quality of the work of these individuals. And with that, I'll turn the call over to Dan and the team.