FS KKR Capital (FSK) 2026 年第三季法說會：NII 0.46 美元、股票回購與第四季配息

FS KKR Capital Corp. (NYSE: FSK) 公布 2026 年第 3 季每股淨投資收益為 0.46 美元，每股淨資產值為 18.28 美元。管理階層強調股份回購、槓桿管理和投資組合輪換，同時持續處置面臨挑戰的投資項目。

重點摘要

• 2026 年第 3 季 GAAP 與調整後每股淨投資收益均為 0.46 美元。業績包含來自 Belk 一次性股利所帶來的每股 0.08 美元收益。
• 截至 9 月 30 日，每股淨資產值為 18.28 美元，相較於第 2 季末的 18.30 美元。股份回購為每股 NAV 貢獻了 0.16 美元。
• FSK 宣布第 4 季每股配發常規股利 0.44 美元與特別股利 0.20 美元，兩者均將於 2026 年 12 月發放。
• 該公司在第 3 季以平均每股 11.24 美元的價格回購了 6,900 萬美元的股票。截至 10 月 30 日，累計回購金額達 9,000 萬美元，相當於 3 億美元授權額度的 30%。
• 停息資產占投資組合比例依成本計降至 6.4%，依公允價值計降至 3.4%，儘管 3Pillar Global 與 New Era Technology 新被列入停息名單。
• 針對 2026 年第 4 季，管理階層預期 GAAP 每股淨投資收益年化約占 NAV 的 8% 至 9%。

關鍵財務數據

NAV 受到每股 0.46 美元的 GAAP 淨投資收益與 0.16 美元的回購增值支撐。這些正面效益被投資組合價值縮水 0.19 美元、普通股每股配息 0.44 美元，以及以普通股等價計算的特別股每股配息 0.01 美元所抵銷。

業務與營運表現

FSK 在第 3 季新增了約 3.35 億美元的投資項目。出售與償還金額共計 4.42 億美元，導致投資組合淨減少 1.07 億美元。管理階層表示，相較於近期的淨資金投放，公司目前更專注於完成庫藏股買回計畫與控管槓桿水準。

投資組合的加權平均 EBITDA 為 2.35 億美元，中位數 EBITDA 為 1.31 億美元。FSK 自 2018 年 4 月以來投資的投資組合公司，其加權平均 EBITDA 年增率約為 4%。利息保障倍數中位數為 2.0 倍。

在直接申報的投資組合中，第一順位抵押貸款占 59%，資深擔保債務占 63%。若計入 FSK 合資企業的底層投資，上述比例分別上升至約 69% 與 73%。

利息收入下滑反映了投資組合規模縮減，以及在第 2 季和第 3 季被列入停息的投資項目。股利與手續費收入包括來自合資企業的 4,400 萬美元、約 4,000 萬美元的其他投資組合公司股利，以及約 400 萬美元的手續費收入。

KKR 放棄其部分次級收益激勵費，為第 3 季淨投資收益增加了 1,200 萬美元。第 3 季是先前宣布放棄該費用的連續四個季度中的第二季。

管理階層財測指引

管理階層預期 2026 年第 4 季 GAAP 每股淨投資收益年化約占 NAV 的 8% 至 9%。該公司提醒，第 3 季認列的 2,500 萬美元 Belk 股利屬於一次性收益，且第 4 季通常包含 FSK 的年度消費稅提撥。

FSK 亦預期第 4 季業績將受惠於來自 JW Aluminum 約 1,700 萬美元的股利。管理階層指出，投資組合活動與市場相關風險可能導致實際結果與此展望有所出入。

董事會宣布第 4 季每股配發常規股利 0.44 美元與特別股利 0.20 美元。管理階層表示，季度配息可能會隨淨投資收益波動。特別股利則代表 FSK 部分預估的累積溢出收益。

風險與關注領域

停息資產比例有所改善，依成本計自第 2 季的 7.1% 降至 6.4%，依公允價值計則自 3.8% 降至 3.4%。然而，3Pillar Global 與 New Era Technology 在第 3 季被新增為停息資產，其成本合計約 1.42 億美元，公允價值約 1.02 億美元。

Medallia 在重組為 6,600 萬美元的第一順位抵押貸款、4,200 萬美元的特別股及 1,400 萬美元的普通股權益後，已自停息名單中剔除。管理階層強調，重組後依然存在風險與不確定性。

管理階層指出，由於估值變化、再融資環境及 AI 相關風險，軟體產業是特別值得關注的領域。投資組合中約有 25% 在贖回日與 2028 年之間到期，但管理階層表示，對於軟體產業以外整體更廣泛的到期時程並不太擔憂。

該公司還指出地緣政治緊張局勢、貨幣政策不確定性，以及 AI 資本需求的不斷演變，都是塑造當前市場環境的因素。

分析師問答重點摘要

• 資本配置：管理階層預期買回股票與槓桿管理的優先要務將在未來約五個季度內持續進行。FSK 明確提出的槓桿目標約為 1.0 至 1.25 倍。
• 私人信貸定價：管理階層估計，包含原始發行折價與前期手續費在內的利差，在經歷一度擴大約 100 個基點後，目前較 2026 年初擴大約 50 個基點。當前市場被形容為對貸方更為有利。
• 新交易活動：整體 KKR 平台正迎來更多主動接洽案件與出售準備，但管理階層表示，私募基金贊助的併購活動仍受限於買賣雙方的估值差距。
• 資產擔保融資：管理階層持續將 10% 至 15% 視為適當的配置區間，且無意主動縮減該策略規模。管理階層形容該領域的風險調整後報酬表現相當具吸引力。
• 費用豁免：管理階層並未承諾延長目前的四個季度激勵費豁免期。相關費用安排每年都會與董事會進行討論。
• JW Aluminum：管理階層表示，預期的第 4 季款項將是該公司近年來的第四或第五次配息，這使得此類配息比單純的一次性事件更具常態性，儘管並非每季發放。

財報電話會議完整逐字稿

完整財報電話會議逐字稿

管理層陳述

Operator

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 you instructions on entering the queue. Please note that this conference call is being recorded. At this time, Anna Klein, Head of Investor Relations, will proceed with the introduction. Ms. Klein, you may begin.

Unknown Speaker

Thank you. Good morning and welcome to FS KKR Capital Corp's third quarter 2026 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 this morning. 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 September 30, 2026. A link to today's webcast and the presentation is available on the For Investors 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 that are not historical facts, including, without limitation, statements with regard to future events or future performance or financial condition. regarding share repurchase activity, distribution levels and frequency, expectations for net investment income levels in future quarters, and the financial position, business strategy, and plans and objectives of management for FSK's future operations. Words such as anticipate, believe, expect, intend, project, and future, or similar expressions, indicate a forward-looking statement, although not all forward-looking statements include these words. These forward-looking statements are not guarantees of performance or events and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict, and could cause our actual results or future events to differ materially from those expressed or forecasted in these forward-looking statements for any reason. 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 future events to differ materially from these statements. The forward-looking statements included on this call are based on information available to FSK today and current expectations. forecasts and assumptions and involve a number of judgments, risks and uncertainties. Except as required by the federal securities laws, FSK undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In addition, this call will include certain non-GAAP financial measures that have not been prepared in accordance with U.S. generally accepted accounting principles.

These non-GAAP financial measures are not in accordance with, or an alternative to measures, prepared in accordance with GAAP and may be different from non-GAAP financial measures used by other companies. In addition, these non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles. These measures should only be used to evaluate FSK's results of operations in conjunction with their corresponding GAAP measures. For such non-GAAP measures, reconciliations to the most directly comparable GAAP measures can be found in FSK's third quarter earnings release that was furnished with the SEC on November 5, 2026, and in the presentation posted on our website. To obtain copies of the company's latest SEC filings, please visit FSK's website. Speaking on today's call will be Michael Forman, Chief Executive Officer and Chairman, Dan Pietrzak, Chief Investment Officer and President, and Stephen Lilly, Chief Financial Officer. Also joining us on the call today, are Co-Chief Operating Officers Drew O'Toole and Ryan Wilson.

Unknown Speaker

I'll now turn the call over to Michael. Thank you, Anna, and good.

Unknown Speaker

morning, everyone. Thank you for joining FSK's third quarter 2026 earnings conference call. During the third quarter, FSK generated net investment income totaling $0.46 per share and adjusted net investment income totaling $0.46 per share. As of September 30th, our net asset value per share was $18.28. Thank you. On October 8th, we announced that our board declared a fourth quarter 2026 distribution of 44 cents per share to common stockholders and a special distribution of 20 cents per share to common stockholders. Both distributions will be paid in December of this year. As we have indicated on prior earnings calls, we expect our quarterly distribution level will fluctuate as our net investment income varies on a quarter to quarter basis. The special distribution amount represents a portion of FSK's estimated accumulated spillback income and is intended to distribute additional taxable income to shareholders in connection with the company's maintenance of its treatment as a regulated investment company under the Internal Revenue Code.

Our third quarter net investment income was positively impacted by a one-time portfolio company dividend, which Dan will discuss during his portion of the call. In terms of FSK's strategic objectives, while we recognize there is more work to be done, we are pleased with the progress we are making. Since the stock buyback plan's inception on June 29th through October 30th, we have purchased $90 million worth of common stock, representing 30% of our $300 million authorization. program. The activity has resulted in the companies repurchasing approximately 8 million shares of common stock. We are continuing to achieve our goal of delivering a per share annualized dividend rate of 8 to 9% of net asset value per share to our common shareholders. We are continuing to work through certain non-income producing assets and investments facing challenges within our portfolio. And we are continuing our longer term focus of transitioning our investment portfolio. to more first lien senior secured positions.

As we move into the fourth quarter of 2026 and begin contemplating the year ahead, we remain focused on achieving our strategic objectives. And with that, I'll turn the call over to Dan.

Daniel Pietrzak

Thanks, Michael. The market environment continues to be shaped by uncertainty surrounding geopolitical tensions, monetary policy, and the evolution and capital requirements of AI. Against this backdrop, we believe economic and corporate fundamentals continue to demonstrate resilience. We believe private credit portfolios offer attractive characteristics in the current environment, including directly negotiated transactions, predominantly floating rate structures, and diversified exposure across issuers and industries. During the third quarter, we continued making progress on the strategic actions the FSK Care Advisor announced earlier this year to help enhance the financial profile of FSK. During the third quarter, we repurchased 6.2 million shares of common stock, or approximately $69 million, at an average price of $11.24 per share. Our third quarter share repurchases were accretive to our net asset value per share by 16 cents. Since the beginning of the fourth quarter through October 30th, we have repurchased 1.5 million shares, or approximately $17 million, bringing the cumulative value of share repurchases to $90 million since the $300 million Common Stock Repurchase Program commenced on June 29th.

And as a reminder, beginning in the second quarter of 2026, KKR agreed to waive its portion of the subordinated income incentive fee for four consecutive quarters. waiver had a positive $12 million impact on our third quarter net investment income. As Michael mentioned, during the third quarter, FSK's net investment income was positively impacted by a $25 million non-recurring dividend from our portfolio company, Belk. dividend increased our third quarter net investment income per share by 8 cents. Turning to our investment activity, during the third quarter we originated approximately $335 million of new investments. Our new investments, combined with $442 million of sales and repayments, equates to a net portfolio decrease of $107 million during the third quarter. We continue to focus on upper middle market companies with EBITDA in the 50 to 150 million range across a diverse set of industries and sectors. As of September 30th, the weighted average EBITDA of our portfolio was $235 million and the median EBITDA was $131 million. Our portfolio companies reported a weighted average year-over-year EBITDA growth rate of approximately 4% across companies in which we have invested in since April of 2018.

Interest coverage levels remain healthy with median third quarter coverage of two times. In August, Velocity Financial publicly announced its intention to acquire TORAC, a business-purpose real estate lending platform. KKR originally invested in Torac in 2016, and since that time has worked closely with Torac's management team to scale the platform considerably. As of September 30th, Toffalon, Torac's holding company, was FSK's eighth largest investment. The acquisition is currently expected to close in the fourth quarter of 2026, subject to closing conditions. As of September 30th, non-accruals represented 6.4% of our portfolio on a cost basis and 3.4% of our portfolio on a fair value basis. as compared to 7.1% of our portfolio on a cost basis and 3.8% of our portfolio on a fair value basis as of June 30th. During the third quarter, two investments, 3Pillar Global and New Era Technology, were added to non-accrual status.

These new non-accruals total approximately $142 million of costs and $102 million of fair value across our investment portfolio. Medallia was restructured during the third quarter into a new $66 million first lien loan, a new $42 million preferred equity investment, and a new $14 million common equity investment. Following the restructuring, Medallia was removed from non-accrual status during the third quarter. We'd like to remind investors, as with any restructuring, risk and uncertainties remain with respect to future performance. And with that, I'll turn the call over to Stephen to go through our financial results. Thanks, Dan.

Steven Lilly

As of September 30th, 2026, FSK's investment portfolio had a fair value of $11.3 billion, consisting of 234 portfolio companies. At the end of the third quarter, our 10 largest portfolio companies represented approximately 21% of the fair value of our portfolio. which is in line with prior quarters. We remain focused on senior secured investments as our portfolio consisted of approximately 59% first lien loans and 63% senior secured debt as of September 30th. In addition, our joint venture represented approximately 14% of the fair value of our portfolio as of the end of the third quarter. As a result, when looking through to the investments in our joint venture, first lien loans total approximately 69% of our total portfolio, and senior secured investments total approximately 73% of our total portfolio as of September 30th. The weighted average yield on accruing debt investments was 10% as of September 30th, as compared to 9.8% during the second quarter. Turning to our quarterly operating results, our total investment income was $294 million for the third quarter, an increase of $4 million compared to the second quarter.

The primary components of our total quarterly investment income were as follows. Total interest income was $206 million, representing a decrease of $11 million quarter over quarter. The decline in interest income primarily was due to a reduction in the size of our investment portfolio and assets placed on non-accrual during the second and third quarters. Dividend and fee income totaled $88 million, an increase of $15 million quarter over quarter. Our total dividend and fee income is summarized as follows. $44 million of dividend income from our joint venture. Other dividends from various portfolio companies totaling approximately $40 million during the quarter. which includes the $25 million one-time dividend from Belk and fee income totaling approximately $4 million during the quarter. Our net expenses were $167 million during the third quarter, which is a decrease of $1 million compared to the second quarter.

The primary components of our net expenses were as follows. Our interest expense totaled $99 million, a decrease of $2 million quarter over quarter. Our weighted average stated interest rate on borrowings was 5.6% as of September 30th. Management fees total $42 million, a decrease of $2 million quarter over quarter. As Dan mentioned, for the second of four consecutive quarters, KKR waived 100% of its portion of the subordinated income incentive fee. This waiver applies to 50% of the subordinated income incentive fee that otherwise would be paid. Net of this waiver, income incentive fees totaled $11 million, a decrease of $1 million compared to the second quarter.

Other expenses total $13 million, an increase of $2 million quarter over quarter. primarily due to an increase in certain deal costs and professional expenses. Lastly, we incurred $2 million of excise tax during the third quarter in conjunction with the finalization of 2025 tax items related to certain international and ABF investments. The detailed bridge in our net asset value per share on a quarter-over-quarter basis is as follows. Ending 2Q2026 net asset value per share of $18.30 was increased by GAAP net investment income of 46 cents per share and was decreased by 19 cents per share due to a decrease in the overall value of our investment portfolio. Our net asset value per share was reduced by our 44 cents per share quarter common stock distribution and our one cent per share quarterly preferred stock distribution on a common stock equivalent basis paid during the quarter. our net asset value per share was increased by 16 cents per share due to share repurchases. The sum of these activities results in our September 30, 2026 net asset value per share of $18.28. From a forward-looking perspective, for the fourth quarter of 2026, we currently expect our GAAP net investment income per share to be in the range of 8% to 9% of net asset value per share on an annualized basis.

We encourage investors to consider that the third quarter Belk dividend was non-recurring and that the fourth quarter is when FSK typically recognizes its annual excise tax provision. In addition to these items, we expect the fourth quarter will be positively impacted by a dividend from a portfolio company, JW Aluminum, approximating $17 million. We were to remind investors that the portfolio activity Dan described, as well as market-based future risks and uncertainties, could cause their anticipated fourth quarter 2026 results to differ from this guidance. As of September 30th, our debt to equity and net debt to equity levels were 127% and 125% respectively can be compared to 127% and 122% of June 30. At the end of the third quarter, our available liquidity was $3.4 billion and approximately 73% of our drawn balance sheet and 49% of our committed balance sheet was comprised of unsecured debt. And with that, I'll turn the call back to Michael for a few closing remarks before we open the call for questions.

Unknown Speaker

Thanks, Stephen. We believe the third quarter represents another step forward in the goals we outlined earlier this year. We are encouraged by our progress, but we recognize there is still more work to do. Looking ahead, we remain focused on advancing our portfolio rotation efforts, repurchasing shares, and delivering long-term value for shareholders. As always, we appreciate your participation on the call today and for your interest in SSK. Operator, we'd now like to open the line for questions.

Operator

Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you'll need to press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. Please stand by, we will compile the Q&A roster. Our first question comes from the line of John Hecht of Jefferies, your line is now open.

分析師問答

John Hecht

Morning, guys, and thanks for taking my questions. And, Stephen, thanks for the detail about Q4. First question is, you know, within your portfolio, you know, what's the maturity cadence over the next two years? And is there any industry-specific composition that you can call out? I guess software, really. would be of interest predominantly, but anything else in terms of the industry composition during that period of time?.

Unknown Speaker

Good morning, John. Thanks for the question. You know, ballpark 25% of the portfolio would be sort of between now and kind of 28. You probably expect considering one, you have to tie that back to origination dates. Yes, I think from a conceptual perspective, I'm probably a little bit less worried about, you know, the maturity wall concept in general, but I think we are focused on that on the software space. Obviously, there's been a seismic shift there in terms of you know, valuations, where the debt market is going to take sort of new deals or refi's of existing deals. So, you know, I think outside of software, probably not that worried. Inside of software, I think it's clearly on our mind.

And I suspect it's on the mind of many others.

John Hecht

Okay. And then I guess thinking about your pipeline and outlook for deployment activity, any thoughts anything moving with bid-ask spreads or terms, I guess, particularly in light of interest rate uncertainty and geopolitical uncertainty?.

Unknown Speaker

Yes, I'll take that in a couple different pieces, right? Because the market is definitely, I would say, wider than it was at the start of the year. And I would attribute that mainly to the activity or the redemption activity in the non-traded BDC space. I think, at least in our opinion, I think spread's probably gone 100 basis points wider. including OID, the sort of up-front fees, and it's since given sort of some of that back, but probably 50 basis points wider versus the start of the year. And I would say the overall tone or... um you know a little bit more lender friendly than sort of borrower friendly and obviously you know, not just the redemptions, but the rest of the stuff gone on kind of macro. geopolitical helps that. I think in terms of FSK specifically, obviously we're a little less focused on deployment, more focused on... getting the buyback plan done, more focused on getting leverage inside the target. So the number, you know, even our new deals or kind of new deployment this quarter was a little bit skewed by one transaction was committed to in 25 that actually funded this quarter. So, you know, I think Mark did a little bit better.

I think where we're at now is we're focused on the things we sort of talked about. You know, at some point that dynamic will change. We'll get a little bit more kind of fresh new deal flow in here, hopefully generate a little bit more on the upfront fee side as well.

Operator

Great, thanks very much. Thank you. Our next question comes from the line of Rick Shane of JPMorgan. Your line is now open.

Richard Shane

Hey guys, thanks for taking my questions. John really stuck the landing in terms of what I wanted to ask. The comment about focusing on continuing to delever and at the same time buy back stock, through pay downs makes sense. I am curious now that we're starting to see book value stabilize, you realized a lot of losses in the third quarter but did not hit book, so suggesting your reserve levels or your reserve levels, your marks, are appropriate, that's good execution. What do you think the timeframe realistically to starting to deploy capital again on a net basis looks like? Is that a 28 timeframe? Yes.

Unknown Speaker

Yes, it's a fair question. I appreciate the question. I think we've been pretty consistent in either conversations or talking about it on the last couple of calls. It's important for us to get the buyback done. I think we want to manage that buyback with also kind of being in the right leverage kind of zip code, right? I think we've talked about our leverage target, you know, it's kind of one to one and a quarter. We've gotten it down at least versus, say, two quarters ago, you know, so that's probably planned. out, you know, John, over the course of 27 is my guess, right? You think about both getting the repurchase program done as well as getting within that leverage number. Now, there are things that I think are, you know, good results, like you had a very good investment or experience with the Torax investment. We started that in 2016. the company grew meaningfully, well beyond anybody's expectations in terms of value, but it felt like a good time for that company to take its next step and sort of monetize.

So I'd probably think about it over the course of the next five quarters.

Richard Shane

Got it. And Dan, I do realize the irony of me asking questions about growth and sort of glossing over the commitment on the buyback. So I do appreciate, you know, know where you guys are sort of what you're moving through. I appreciate that comment. Thank you.

Operator

Thanks, guys. Thank you. Thank you. Our next question comes from the line of Finian O'Shea of Wells Fargo Securities. Your line is now open.

Finian O'Shea

Hey everyone, good morning. Steve I think you mentioned you had a more complete picture of spillover from the EBF vehicles. Any color you could give on that as to where you are, if we might expect future specials or this is it. if you will, maybe a range on the fourth quarter tax item.

Steven Lilly

Yes, Ben, good morning. I think when you consider in our last 10K, I think we said spillover was 464 million. We paid 2 million of excise in this quarter, so that would imply that that balance is a little bit higher. when you do that math, and then we also announced the special distribution of 20 cents a share. So, you're sort of settling still in the top end of the range, and we will publish the spillover for the end of 2026, when we file our 10-K in February. So that number will come out then, but still would say from a guidance standpoint, you're more the top end of the range. Yes, so I'd probably just leave it there for now. Okay, that's helpful. Thanks.

Finian O'Shea

Then just a follow-up on sort of the overall progress – that continues, you guys talked a bit about should we think about the fee waivers and the as more straightforwardly this one time one year event or as they lapse, do you all contemplate a more permanent change after that?.

Unknown Speaker

Yes good morning I think that one obviously we're in the second quarter of that the second quarter of the announced sort of four quarters you know I think we're, you know, happy we sort of did that. I think we're happy with the overall package of items we did, gone back now sort of two quarters. I think we'll obviously have that conversation with the board kind of as appropriate, as kind of required on that annual basis. But right now I think we're only two quarters in. And I think we're, with some of the progress that we've been able to make across the portfolio, but I think we acknowledge that there is more work to do and that's what we're focused on.

Finian O'Shea

So it ties to the portfolio progress. as to whether it's sort of just this one time.

Unknown Speaker

You know, obviously, I think it ties to, in some ways, the entirety of the situation, right? I wouldn't say it ties directly to the portfolio process. My point being more that we're two quarters into the four quarters being announced. We obviously discussed fees with the board. on an annual basis. But I think we singularly, on our side as a team, are focused on the portfolio and the work we have to do.

Unknown Speaker

Very good. I appreciate that. Thank you. Thanks. Have a good day.

Operator

Thank you. Our next question comes from the line of Aaron Rakers of Truist Securities. Your line is now open. We can't hear you. Yes. Thank you. Apologies.

Arren Cyganovich

I want to touch on the portfolio management and non-accruals that have already come through. You had a couple new ones this quarter. What's in the watch list? I know it's hard to say. when things go bad or not, but do you feel like you've gotten a good handle in terms of maybe limiting some of these new non-accruals as you're kind of working through the portfolio and going forward.

Unknown Speaker

Yeah, I'm happy to take that. You know, I think, I mean, you are correct, right? A credit book does move. And, you know, does sort of change quarter on quarter. So, you know, that said, I think you can, you know, look at kind of our – you know, risk rating threes and fours as probably a fair description of watch list names. You know, I think if you think about some of the specific events of the quarter, you know, I think, you know, speaking for ourselves, but I suspect the other lenders as well, we were happy to get the Medallion restructuring done to try to get to the next, you know, phase for that company. you know, Repiller is one of the names that would be kind of in that software space with some AI risk around it. the team is very active in trying to work on to the next steps there. You know, the new year is more of a... of an IT integration kind of managed services business. I think there's really operational points there more than anything else.

But again, kind of team and other lenders in that kind of position focused on that. So you know I think you know active across the board feel like we've had you know some good progress on some of the other names that we may have talked about in the past but I think we are mindful that you know things can change or if the world is a pretty volatile place right now and we've got to get some of these positions to the other side.

Arren Cyganovich

And maybe just to talk about it from the standpoint of your platform beyond this BDC. What are you seeing? I imagine that you're still originating and you're the you're doing all of the more forward-looking and forward actions in other vehicles. You know, what are you seeing from the market from that standpoint? Maybe just some thoughts on some of the trends you're seeing currently.

Unknown Speaker

Yes maybe a couple points i mean you are correct right i mean um you know we are uh quite active in the market um to other pools of capital, but FSK is historically invested alongside of, or still does, maybe just in much, much smaller size. I do go back to what I said on, I think it was John's question. The overall tone of the market, definitely a little bit more lender-friendly than it was prior. I think that's good to see. I think the team, for most of this year, probably felt pretty light in terms of new deal flow. kind of broad stroke across the board. I'm not sure that's entirely surprising considering, you know, Iran and still this lingering inflation. Yes, I think we're getting a bit, you know, busier or there's a bit more kind of activity, more kind of inbounds on books being prepared, companies trying to be sold.

But I think the market is still missing some, you know what I think we've all been expecting you know healthy amount of deal flow of sponsors selling businesses and I think that's just going to take some time or it's going to be the kind of bid ask for price is going to sort of narrow or need to narrow Yes, so I think we're out of the business of forecasting. when M&A is going to come back in a normal sort of sense. But at some point, I think some of these things will have to come to market. You'll have to see some of the activity and stuff. And maybe the only other comment just for your benefit, we have seen, you know, even, you know, we'll call it the opposite side of maybe the redemptions in the retail space. We have seen a strong either continued interest or maybe even a little bit greater interest from the institutional side on investing in the space. on the investor side.

Arren Cyganovich

On that last comment, is the institutional interest remaining at that level? you know picked up in the summer and uh early fall uh whenever spreads were yes i think it seems like Yes, I think it's remaining. Okay. Great. Thank you very much.

Unknown Speaker

there's a little bit of a tailwind to rates ticking up, right? Yep, absolutely. Thank you. Alright, thanks for your questions. Have a good day.

Operator

Thank you. As a reminder, to ask a question, you will need to press star 1-1 on your telephone. Our next question comes from the line of Robert Dodd of Raymond James. Your line is now open.

Robert Dodd

Hi, guys, and congratulations on the stable quarter. I've got a question on the asset-backed finance side of the book. I mean, if I look at it in the – just do the math, right? You had 11.6% of the portfolio at the end of Q3, but with TORAC, Romano, whatever I'm supposed to currently call it, getting acquired in Q4. I mean, you could end the year potentially in the single digits on that side of the business, so call it 10%-ish. Is that like is that the new plan right? I mean you've talked about going to more first lien I mean is the plan to shrink the ABS completely component in the book which may not be as well understood by investors, because it is different from a lot of other BDCs, is it the plan to shrink that? Or is this just a temporary low in terms of allocation to the ABF strategy?.

Unknown Speaker

Yes, good morning. I wouldn't classify it as an active focus on shrinking it. I think we've historically talked about it in the range of 10 to 15 percent. I think you should expect that range to sort of continue. We're constantly managing, like any other BDC, the 30% bucket as well. And as we are kind of shrinking, you know, certain assets are taking repayments to buy back shares and sort of delever. So I think it's part of the whole calculus, but I wouldn't think about it as an active sort of piece. I think we've seen good performance in that part of our portfolio.

We think that marketplace itself remains quite interesting from... from a risk-adjusted return perspective. You know, so it's, but I just constantly have that 10 to 15% range.

Robert Dodd

Got it. Thank you. I mean, on that, just on Webster, I mean, obviously, there's about a 40 million gap between your fair value and your cost basis this quarter. I mean, on the acquisition price, is that basically the same? Basically, that's baked into the fair value, or is the acquisition price potentially higher than you had it marked at Q3?.

Unknown Speaker

Yes, I mean, I will actually go check this specific and circle back. I think that business has historically been a strong sort of dividend payer for us. So I want to check on some of that sort of piece, but I think overall result of the investment you know, considering when we started that business, I think we thought we would have originated a billion dollars of assets. I think the company's done 14 or 15 billion by this point. And they've done a good job. I think it was just the, you know, we've owned it for 10 years, I think both for the company's benefit. I think from time to time it's good to rotate out of these things.

It was sort of proper to sell. But I'll come back on that to a specific point to you.

Robert Dodd

Got it, thank you. One more if I can real quick, flipping the other end on what's normally non-income producing equity, JW Aluminum, but it's going to pay, dividend in the fourth quarter. I mean, that business continues to do very well. Um, I know I've asked you about this before, but like, you know, yes, the M&A market's slow, but that's a good business. It's not AI exposed. Um, maybe it's going to, you're going to use aluminum to build the skeletons for a robot overlords, but, um, That seems like exactly the kind of business that would be attractive to a buyer right now. Have there been any inquiries or any interest more recently in you monetizing that business? Yes.

Unknown Speaker

Yes, your points are not unfair. I think we've been very happy with performance there. I think the team has done a good job over a long period of time. The management team today is doing a good job. There is tailwind there to your point probably difficult to comment on if there's any, you know, inbound interest, but I don't think you're incorrect in the sense that, you know, with those tailwinds, with it not being AI, it's probably not a bad fact. You know, I would note... this is the fourth or fifth dividend the business has paid in the last handful of years. It's not necessarily every quarter, but considering performance, it is becoming a little bit more of a consistent fact or recurring fact than sort of a one-off fact.

I just would note that. Yes, fair enough. Fair enough. Thank you. Okay, have a good day. Thank you.

Operator

I am showing no further questions at this time. I would now like to turn it back to Dan Pietrzak for closing remarks.

Unknown Speaker

So thank you. And thank you, everyone, for your time today. If there are any follow-up points, please do not hesitate to reach out to the team. We look forward to speaking with you on our next quarterly call. Have a good day.

Operator

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

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