Good morning, ladies and gentlemen, and welcome to FS KKR Capital Corp II's Third Quarter 2020 Earnings Conference Call. Your lines will all be in a listen-only mode during the remarks from FS KKR's management. At the conclusion of the company's remarks, we will begin the question-and-answer session. [Operator Instructions] Please note that this conference is being recorded. At this time, Robert Paun, Head of Investor Relations, will proceed with the introduction. Mr. Paun, please begin.

Thank you. Good morning, and welcome to FS KKR Capital Corp II's third quarter 2020 earnings conference call. Please note that FS KKR Capital Corp II may be referred to as FSKR 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 FSKR issued on November 9, 2020. In addition, FSKR 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, 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 a property of FSKR. Any unauthorized rebroadcast of this call in any form is strictly prohibited. Today's conference call includes forward-looking statements and are subject to risks and uncertainties, including risks associated with the possible impact of COVID-19 that could affect FSKR or the economy generally. We ask that you refer to FSKR's most recent filings with the SEC for important factors and risks that could cause actual results or outcomes to differ materially from these statements. FSKR does not undertake to update its forward-looking statements unless required to do so by law. In addition, this call will include certain non-GAAP financial measures. For such measures, reconciliations to the most directly comparable GAAP measures can be found in FSKR's third quarter earnings release that was filed with the SEC on November 9, 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 FSKR's website. Speaking on today's call will be Michael Forman, Chairman and Chief Executive Officer; Dan Pietrzak, Chief Investment Officer and Co-President; Brian Gerson, Co-President; and Steven Lilly, Chief Financial Officer. Also joining us 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 FS KKR Capital Corp II's third quarter 2020 earnings conference call. First, let me offer my continued well wishes to each of you, your loved ones and your co-workers as our country continues to adapt to a post-COVID world. The FS KKR team continues to function largely in a virtual work environment. Thanks to the ongoing dedication of our investment and operating teams, the day-to-day cadence of our business somehow has begun to seem almost normal. I continue to be extremely proud of the job our team is doing during these extraordinary times. In recent weeks, our country has been almost entirely consumed by events leading up to the presidential election. The uncertainties associated with the election, combined with the effects of the pandemic and social unrest, seem to have permeated every aspect of our society. Our hope is that as we move towards the Thanksgiving holiday season in just a few weeks that our country will begin the process of healing by recognizing we are stronger together than we are divided. Across our investment portfolio, we have seen management teams and sponsors continue to make well-informed business decisions focused on positioning their companies for long-term value creation. These decisions have included such things as building cash reserves, streamlining operations, communicating proactively with customers and realigning supply chains to maximizing time to market for products. These decisions are manifesting themselves in tangible ways as the value of our investment portfolio appreciated during the third quarter, resulting in an increase in our net asset value per share of 1.8% as of quarter end. The FS KKR investment team has done an exceptional job working closely with these companies. From an operating perspective, our net investment income was $0.52 per share during the quarter, which was in line with the guidance range we outlined in last quarter's earnings call. From a liquidity perspective, we ended the quarter with approximately $1.8 billion of available liquidity with no meaningful near-term debt maturities. During the third quarter, we began executing our previously announced $100 million share repurchase program. Through October 31, 2020, we have purchased approximately $39 million of shares under the program. Looking forward, we currently expect our fourth quarter net investment income to approximately $0.52 to $0.55 per share. Like last quarter, we are providing a range of net investment income per share given the inherent uncertainties associated with growing our investment portfolio during these extraordinary times. Our board has declared a distribution of $0.55 per share for the fourth quarter, which equates to an annualized yield of 8.9% on our NAV per share of $24.66 as of September 30, 2020. This dividend levels and keeping with our long-term targeted yield of NAV of 9%. 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. From a macro perspective, many of the trends we highlighted in our second quarter earnings calls have continued to develop, including a rebuilding of our investment pipeline alongside a re-emergence of M&A activity. And while the market is still not back to pre-COVID levels in terms of transaction volumes, we believe it has recovered to approximately 75% or 80% of those levels. Another topic we discussed in detail in our second quarter call, the disconnect between the markets and the general U.S. economy continues to raise meaningful questions and still concerns us with regard to near-term economic performance and ongoing recovery. The high-yield market continues to experience record monthly issuance levels as illustrated by year-to-date 2020 cumulative issuances of $338 billion through September 30, which is only $7 billion below the full year annual issuance record of $345 billion the market set during 2012. The high-yield market continues to be fueled by a record level of refinancings not seen since the Great Recession. In the leveraged loan market, the record level of monthly issuances in January and February evaporated in March and remained depressed through July. However, in both August and September, the leveraged loan market has returned to record levels of issuances as borrowers have accessed the market with a healthy balance of LBO, M&A and refinancing activity. Pricing for these leveraged loans has been aggressive in many instances driven in part by the low overall yield environment and a desire by many managers to put money to work in an effort to generate current yields. From a KKR perspective, we continue to believe that the Federal Reserve's stated goal of reducing unemployment from the current level of 6.9% to the Fed's long-term target of 4.1% while simultaneously targeting inflation of around 2% per year. Illustrates clearly…

Thanks, Dan. As of September 30, our investment portfolio had a fair value of $7.3 billion, consisting of 160 portfolio companies. This compares to a fair value of $7.3 billion and 154 portfolio companies as of June 30, 2020. At the end of the third quarter, our top 10 largest portfolio companies represented 26% of our portfolio, which remains in line with our results to the last several quarters. We continue to focus on senior secured investments as our portfolio consisted of 67% of first-lien loans and 77% senior secured debt as of September 30. The weighted average yield on occurring debt investments was 8.6% at September 30, 2020, as compared to 8.7% at June 30, 2020. The decline in our weighted average portfolio yield was primarily due to the change in certain investment spreads and maturity coupled with LIBOR contracts which reset at lower levels during the quarter. From a non-accrual perspective, as of the end of the third quarter, our non-accruals represented approximately 9.2% of our portfolio on a cost basis , and 4.2% of our portfolio on a fair value basis, compared to 11% and 5.4% as of June 30. During the quarter, we placed two investments on nonaccrual. Belk, a mall based retailer for the cost basis and fair value of $42 million and $19.2 million, respectively, as well as Intelsat Jackson, the communications satellite provider, with a cost basis and fair value of $3.5 million and $2.4 million respectively. From an overall valuation perspective, our investment portfolio increased by approximately 1% or $59 million during the quarter. The details associated with our quarterly valuation results are as follows. The total amount of realized and unrealized appreciation we experienced across the portfolio during the quarter was $336 million. A quarterly appreciation includes the reversal of $207…

Thanks Brian. My comments will be less focused on the reporting financial metrics already contained in our earnings press release in 10-Q, but rather focus more on the color behind our results. Hopefully linking them in a more transparent and informative way to the broader comments on which Michael, Dan and Brian have touched. First, the $4 million increase in our investment income this quarter was related to an increase of $12 million in dividend income from both our joint venture and asset based finance investments, which was partially offset by a decrease of $2 million and fee income and $6 million of interest income. As a reminder, 98% of our floating rate investment portfolio has floors which average 91 basis points, our recurring dividend income from our JV totaled $21.9 million during the quarter. As many of you know we typically expect this recurring dividend to approximate between $17 million and $22 million on a quarter-to-quarter basis. Our interesting expense declined by $9 million during the quarter as we've benefited from the reduction in LIBOR as approximately 86% of our drawn balance sheet is floating rate. Management fees decreased by $1 million during the quarter due to the lower amount of average gross assets during the quarter compared to the prior quarter. The detailed bridge in our net asset value per share on a quarter-over-quarter basis is as follows. Our starting 3Q 2020 net asset value per share of $24.22 was increased by net investment income of $0.52 per share and was further increased by $0.35 per share due to an increase in the overall value of our investment portfolio. Additionally, our net asset value per share was positively impacted by share repurchases of $0.12 per share during the quarter. And our net asset value per share was reduced…

Thanks, Steven. As we have mentioned throughout this call, there is no shortage of issues our world currently faces. And we believe the federal government will continue to play an active role in the economy for the foreseeable future. That said, we continue to believe the long-term benefits that we believe would accrue to investors from the establishment of the FS KKR platform are beginning to materialize in tangible ways. From deep sponsor relationships to the rigor of investment committee decision-making, to proactive portfolio management, to broad-based dedicated workout teams, to seasoned BDC industry operators, the best of what we structured and planned for as we establish the FS KKR Advisor seems to be coming to fruition at a very opportune time. We will look forward to continuing to update you on future progress. And with that, operator, we would like to open the call for questions.

[Operator Instructions] And our first question comes from the line of Rick Shane with JP Morgan. Your line is open. Please go ahead.

In terms of the sales nonaccrual, that had been on nonaccrual at FSK previously, and I believe it's two different securities. Can you just talk about the decision to move to security at FSKR on to nonaccrual as well, please?

Thanks, Rick. And you're correct, it is a different security. I think there's nothing a scholar specific about the name other than being kind of a mall based retailer. Obviously impacted by COVID. We actually don't have any knowledge of them, not expecting to pay in the near term, they've actually made all of their recent payments up and down the capital structure both first and secondly, including amortization payments. So we thought the prudent thing to do is have this on nonaccrual.

That's helpful color especially the continued payments. And then obviously, the other big move during the quarter was the restructuring or production resource from a loan to an equity investment. When we look at the history of that nonaccrual that seems to be given the timing of going on nonaccrual in the first quarter, a COVID related challenge, is that correct? And when you look forward on the path given the equity investment and potentially the COVID sensitivity. How do you think that plays out? Is this a recoverable investment?

It's very much a COVID impacted name, I mean, just to level set, it is sort of, and industry leader, the industry leader in providing in production services lighting sort of volume et cetera. Broadway's in a big focus for them. Obviously, with the status of large scale events and Broadway in particular, the business has been challenged. I think we're quite happy with where we've gotten to on this. It's been a lot of hard work, I think we're quite happy with the team there. And what their footprint is. I think their road to recovery will be -- we'll call dictated by what happens with the pandemic, and when things start to open up, but we think -- we think a lot of hard work still in front of them. But I think, we're satisfied with where we sit today being cognizant of the meaningful impact that COVID has had on this thing.

Thank you. [Operator Instructions] And our next question comes from Finian O’Shea with Wells Fargo Securities. Your line is open. Please go ahead. Finian O’Shea: Just a question on the CLP's credit facility that was amended to a higher interest rate, Alpha Street 30. Which is a little bit against the trend. Obviously, by July 30 a lot better by understanding, those processes can be in place for some time. So any color you can provide on why those -- yes, I guess lending conditions may have gotten more tight on the joint venture?

Yes, Finian it's a fair question. I think a lot of it is timing related. I think we've used -- we've seen a euphoria in the market as it relates to financing spreads on deals like this. But that's probably even more, post-August of the middle of August. The terms here, here were agreed in what's called a bit of a harsher environment and in the middle of the summer. That said, I think it was it's a one year extension, I think we continue to optimize, and in some ways kind of clean up the overall liability structure of FSKR. So it's a one year extension. But I think your point is right, with where we sit today versus when that would have been specifically negotiated. Finian O’Shea: And I guess just a follow up on a higher level? I think it's IPO about six months ago, maybe less. But on any, obviously, you have a history of some merging the BDC vehicles together, understanding so expensive thing to talk about. But any, like higher level direction on how you view these vehicles being separated. Is it still a medium to long term desire to have them come together? And anything, any sort of color on the journey that, that you need to go through before that would happen?

Now, it's a good question. And we've obviously got that question a bunch of times on this call last quarter, or sort of along the way. I mean, we've obviously been focused on kind of performance and getting FSKR deployed. I think we're very happy. This is, the first kind of full public quarter as a public entity, so it's clearly something that remains in our minds. And I think the color we've gotten for many years it's something that can make a lot of sense. I think we've just been focused on this sort of quarter now. But it's a very fair question to ask.

Thank you. And I'm showing no further questions at this time and I would like to turn the conference over to Mr. Dan Pietrzak for any further remarks.

Thank you. We want to thank everyone again for your time today. We do hope that you and your families remain safe and healthy. And we do look forward to talking with you again soon. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a great day.