FS KKR Capital Corp

NYSE:FSK

Earnings Call Transcript 2019-Q4

[Operator]

Good morning ladies and gentlemen. Welcome to the FS KKR Capital Corp's Fourth Quarter and Full Year 2019 Earnings Conference Call. Your lines will be in a listen-only mode during the remarks by FSK's management. After conclusion of the company's remarks, we will begin the question-and-answer session, at which time, I will give you instructions on how to enter the queue. Please note that today's conference is being recorded.

At this time, Robert Paun, Head of Investor Relations will proceed with introductions. Mr. Paun you may begin.

[Robert Paun, Head of Investor Relations]

Thank you. Good morning and welcome to FS KKR Capital Corp.'s fourth quarter and full year 2019 earnings conference call. 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 on February 27th, 2019.

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 and full year ended December 31st, 2019.

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, reconciliations to the most directly comparable GAAP measures can be found in FSK's fourth quarter and full year earnings release that was filed with the SEC on February 27th, 2019.

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 Forman, Chairman and Chief Executive Officer; Dan Pietrzak, Chief Investment Officer and Co-President; Brian Gerson, Co-President; and Steven Lilly, Chief Financial Officer. Also joining us in the room are Co-Chief Operating Officers, Drew O'Toole and Ryan Wilson.

I will now turn the call over to Michael.

[Michael Forman, Chairman & Chief Executive Officer]

Thank you, Robert. And welcome everyone to FS KKR Capital Corp.'s fourth quarter and full year 2019 earnings conference call. On today's call, I will provide a high-level overview of certain key items, and then I'll turn the call over to Dan, Brian, and Steven to provide additional color on the investing market, portfolio activity, our quarterly and annual financial results, and some forward-looking thoughts on 2020. And then we'll open the call for Q&A.

From a strategic standpoint, 2019 was a productive year for FSK. First, over the last 12 months, we've made significant progress rotating our investment portfolio away from older vintage assets toward FS KKR directly-originated assets.

To put some context around this point, today approximately 50% of our investment portfolio is now comprised of assets sourced by the FS KKR advisor and during 2019, we rotated approximately 37% of our investment portfolio. With this, roughly 75% of total assets in the portfolio have been originated by the KKR Credit platform. Based on the average weight of life of our investments, we would expect that over the next 24 months over 90% of our assets will be FS KKR direct originations.

Second, during 2019, we made significant progress growing two important investment strategies which we believe will add long-term accretive returns within our investment portfolio.

Our asset-based finance investments have increased from less than 6% of our portfolio prior to the merger of FSIC and CCT to approximately 10% of our portfolio as of December 31, 2019. In a similar manner, our joint venture with South Carolina Retirement Systems Group Trust has increased substantially from $581 million of committed and funded investments at year-end 2018 to $1.4 billion at year-end 2019. These strategies provide us with the ability to leverage the KKR Credit investment platform in additional ways which are beyond the reach of many of our peers.

Third, during 2019 we took aggressive steps toward optimizing FSK's capital structure. In June, we closed our first middle-market CLO raising over $350 million of proceeds. In July of 2019, we issued a $400 million 5-year unsecured bond and we also closed on add-on issuance of $175 million to our existing May 2022 unsecured bonds.

Additionally in the fourth quarter of last year, we extended the maturity of our revolving credit facility to the end of 2024. Finally in November, we issued $425 million of unsecured bonds. We believe the extensive work we did on the liability side of our balance sheet further strengthens our capital structure and represents another tangible example of the strength of the FS/KKR platform.

Fourth, during 2019 we executed $153 million of our 200 million-share repurchase program by purchasing 25.2 million shares at a weighted average price of $6.08 per share. Through February 26, 2020 we have repurchased approximately $171 million of shares under this program. And we continue to believe in the importance of our share repurchase commitment.

Finally, as I mentioned on our last quarterly earnings call, we continued to build out our executive and operating team with strong leadership and experience in both private credit and the BDC industry. As pleased as we are with the strategic and operational progress we achieved during 2019, we recognize we still have work to do.

During the fourth quarter of 2019 we experienced realized and unrealized depreciation across our investment portfolio, totaling $127 million or $0.25 per share. The vast majority of this depreciation related to older vintage investments originated prior to the FS/KKR advisor including Borden Dairy, Art Van Furniture, Micronics and certain energy position.

Brian Gerson will discuss this in more detail later on the call. Our portfolio depreciation associated with older vintage assets underscores our focus of continuing to rotate our investment portfolio toward FS/KKR direct originations.

From a dividend perspective in 2019, we are pleased that we over-earned the dividend for the full year with net investment income coverage up 104%. As we move into 2020, we continue to expect our net investment income will be positively impacted due to the incentive fee look-back provision in our advisory agreement.

While a portion of this benefit flowed through the P&L during the fourth quarter of 2019, we currently expect the benefit to approximate $45 million to $50 million or $0.09 to $0.10 per share over the next three quarters.

And with that I'll turn the call over to Dan and the team to discuss these and other items in greater detail.

[Dan Pietrzak, Chief Investment Officer & Co-President]

Thank you, Michael. I will provide a few comments on what we are seeing in the market. And then I'll provide an update on our investment activity during the quarter. During 2019, the leverage loan markets were impacted by several key data points. First, loan fund flows declined by approximately $30 billion during the year. At the same time CLO issuance declined by approximately $8 billion or 6.5%. These factors coupled with the reduction in M&A activity resulted in a roughly 25% decline in new institutional issuance volumes year-over-year. This contributed to meaningful volatility within the broadly syndicated loan market, particularly during the third and fourth quarters of 2019.

Given the size of the KKR platform, our relationships on the origination side and our ability to make sizeable commitments across the capital structure, we were able to take advantage of this volatility to commit meaningful dollars in well-structured transactions. Our size and scale allows us to deliver certainty of execution for our upper middle-market borrowers providing an alternative to volatile and uncertain syndicated markets.

As seen on slide 10 of our earnings presentation, our total deployment increased in the fourth quarter to $1.15 billion compared to $698 million in the third quarter of 2019. Sales and pay-downs were $929 million in the fourth quarter compared to $723 million in the third quarter of 2019.

Fourth quarter sales and pay-downs included $376 million of sales to our joint venture. Excluding these sales, net deployment was $594 million, which represents the highest level of quarterly net deployments since FS/KKR began as the investment advisor continuing to highlight the momentum of our platform and our commitment to continue to rotate out of vintage names within the portfolio.

For the full year of 2019, our total deployment was $2.9 billion versus $2.85 billion of sales and pay-downs. Excluding the $732 million of sales to our joint venture, net deployments for 2019 were $785 million. Approximately 77% of total deployment in 2019 was in senior secured investments continuing our focus on that part of the capital structure.

Given the market volatility and our broad origination footprint, the KKR Credit platform continues to screen a high level of deal volume. In the fourth quarter, KKR Credit evaluated over 300 transactions. For the full year, the KKR Credit platform evaluated roughly 1,400 transactions. Nevertheless, we remain disciplined and selective as shown by our less than 3% closing rate during the year.

Our focus continues to be on high-quality businesses, good deal structures, including financial covenants and amortization; all ensuring we feel well protected in terms of downside risk. This activity is driven by the hard work of our origination team and platform, our broad network of financial sponsor and borrower relationships, as well as our unique asset-based finance investment efforts.

As we have moved into 2020, FSK deployment has remained healthy. Albeit much of this was committed in the fourth quarter of last year in much more volatile markets than we saw at the start of 2020. Across the FSK portfolio, we funded approximately $510 million of new transactions in January, of which 88% was first-lien or unitranche loans.

We also continued to expand the build out the KKR Credit team further institutionalizing the business with several hires across the platform, including our origination, underwriting and portfolio monitoring teams. As direct members of the investment team we have added seasoned legal expertise to assist in driving quality deal documentation and structures. In the current environment, we believe this is important and will help drive better future outcomes.

Now, turning to slide 9 of the earnings presentation. We thought it would be helpful to review highlights from a few of the larger transactions that occurred during the fourth quarter, which we think shows the quality of deal flow we committed to in the quarter. One interesting trend we saw was companies exiting the syndicated loan market through refinancings with direct lenders.

For example, as part of a club deal KKR Credit was the largest investor and committed $310 million in a $1.2 billion unitranche facility and $450 million revolver and delayed draw term loan for risk strategies a national insurance broker focused on specialty practices serving middle and upper-middle commercial clients.

FSK committed $110 million of the financing, while the rest of the BDC platform and other KKR managed accounts committed the remainder. In addition as the lead investor and arranger KKR committed to a $340 million unitranche facility for Lionbridge Technologies, a leading language service provider delivering localization, digital marketing, content management and application testing services to Fortune 500 companies worldwide. FSK committed $99 million of the financing, while the rest of the BDC platform and other KKR managed accounts committed the remainder. Both the risk strategies and Lionbridge facilities refinanced syndicated market structures with these new loans.

KKR Credit was also the lead investor and arranger on a $725 million financing for KBS, a provider of janitorial and facilities management services to a range of end markets. FSK committed $179 million of the financing. This is an example of backing a high-quality business and having the size and scale to provide certainty to a borrower and sponsor.

I will now turn the call over to Brian to discuss some of our portfolio highlights.

[Brian Gerson, Co-President]

Thanks, Dan. I'll provide a summary of the events and the investment portfolio as of the end of the year. Beginning on slide 8 of the earnings presentation at December 31, our investment portfolio had a fair value of $7.4 billion, consisting of 210 portfolio companies.

At the end of the fourth quarter, our top 10 largest portfolio companies represented 22% of the portfolio in line with the end of the third quarter. We continue to focus on portfolio diversification, which we view as a key risk mitigation tool. Additionally, we remain focused on senior secured investments as our portfolio is comprised of 70% senior secured loans as of December 31.

The median EBITDA of our borrowers were $56 million and the median leverage was 5.4 times; while average EBITDA was $82 million and the average leverage was 5.7 times. This compares to median EBITDA of $58 million and median leverage of 5.1 times at September 30, 2019; and an average EBITDA of $82 million and an average leverage of 5.3 times.

The weighted average yields on accruing debt investments was 9.7% at December 31, 2019 as compared to 10.1% at September 30, 2019. The decline in yield was attributable to the decline in LIBOR as well as the repayment of certain higher-yielding investments.

At the end of the fourth quarter, approximately 2.8% of FSK's portfolio was on non-accrual on a fair value basis and 5.4% on a cost basis as compared to 1.7% at fair value and 3.7% on a cost basis at September 30, 2019.

During the fourth quarter, we placed three investments on non-accrual: Micronics Filtration Holdings, Angelica Corp. and Borden Dairy. As Michael mentioned earlier during the fourth quarter our portfolio depreciation was $127 million. And we thought it would be helpful if we provided some additional color on the specific investments that led to the majority of the decline in value.

As many of you are aware on January 5th, Borden Dairy filed for Chapter 11 protection under the U.S. Bankruptcy Code despite our best effort to prevent this outcome. FSK owns $70 million face value of $175 million unitranche loan to Borden, which was originated in 2017. Our investment in Borden was marked down to 51.7% of cost at year end 2019 resulting in a $24.8 million unrealized loss in the quarter.

Prior to the filing we were working closely with management and the sponsor to negotiate an out-of-port restructuring, which we believe would've preserved the greatest value for all stakeholders. Unfortunately, the sponsor and management decided to forego our agreed negotiated deal and in our view unnecessarily file for bankruptcy protection.

We are disappointed that the company chose the bankruptcy path which we believe will result in less value being delivered to all stakeholders including the company's employees. Nevertheless, we are working to maximize the recovery value of our investment. And we will continue to provide updates as the situation progresses.

Another investment where we experienced depreciation during the quarter was Art Van Furniture, which was also originated in 2017. FSK owns $55 million face value of $170 million unitranche loan that sits behind an $80 million asset-based revolver.

During the fourth quarter the loan was marked down to 31.5% of cost resulting in a $14.2 million unrealized loss. Art Van operates value-oriented furniture stores in Midwestern U.S. states. The company has been experiencing meaningful same-store sales declines throughout the year which has been reflected in our quarterly value of the loan.

We are closely monitoring the company's liquidity position. However, our ultimate recovery on this investment will depend on our ongoing negotiations with the company the sponsor the ABL provider and other interested parties.

Another vintage credit, where we experienced unrealized depreciation during the quarter was Micronics Filtration, a global designer and manufacturer of inline solid/liquid filtration solutions and industrial process applications, which was originated in 2013. FSK owns the entire amount of a $62 million face-value unitranche loan.

During the fourth quarter the loan was marked down to 61.9% of cost resulting in a $10.2 million unrealized mark-to-market loss. This markdown was due to declining financial performance in the fourth quarter which led to the suspension of the company's planned sales process and the placement of the loan on non-accrual status.

As Michael highlighted earlier, these three names; Borden Art Van Furniture, Micronics as well as certain energy positions accounted for the majority of the depreciation in the portfolio in the fourth quarter. The remainder of the depreciation was spread across the portfolio.

Now turning to the joint venture. As seen on Slide 14 of the earnings presentation, our joint ventures investments at fair market value was $1.44 billion at December 31, 2019 as compared to $1.25 billion at September 30. As a reminder, our joint venture has $1 billion of equity commitments. And as of December 31 this allocation represented 6.5% of our total portfolio. And we are targeting up to a 10% allocation.

On prior calls we have spoken about our focus on investing in asset-based finance opportunities and how investing in these transactions can provide compelling returns as well as creating additional diversification across our investment portfolio. Asset-based finance investments represented 10% of the portfolio as of December 31. And we are targeting a 10% to 15% allocation.

Additionally, in terms of long-term targets for portfolio allocation, we continue to focus on reducing our equity exposure and rotating out of certain non-income-producing assets. However given the nature of these investments and our minority positions, it is difficult to predict specific time lines for the strategic initiatives.

At the end of the year equity investments represented approximately 7.8% of our portfolio. Long term we are targeting a 3% to 5% allocation. And progress here is an important focus for 2020.

I will now turn the call over to Steven to discuss our financial results in more detail.

[Steven Lilly, Chief Financial Officer]

Thanks, Brian. During this portion of the call I'll provide a summary of our financial results for the fourth quarter and full year 2019. You can find this information starting on Slide 4 and continuing on Slides 17, 18 and 19 of the earnings presentation. Our total investment income in the fourth quarter was $186 million as compared to $199 million during the third quarter.

To provide a bit of color behind the numbers during the quarter, our investment income breaks into two buckets. The first bucket is recurring interest income and the second bucket is fee income and dividend income. Within the first bucket, despite our robust originations during the fourth quarter, we still experienced a decline in interest income, primarily due to timing difference associated with certain repayments we experienced during the quarter and also late in the third quarter as we mentioned on our last earnings call; coupled with originations during the quarter, which were more backend weighted in nature.

As one might expect based on Dan's earlier comments, the repayments we experienced carried higher weighted average yields than the new investments we made during the quarter. The continued decline in LIBOR during the quarter negatively affected our total interest income as well.

Finally our PIK interest income was elevated during the quarter, as we reclassified interest relating to one portfolio company, which had been recorded as cash interest earlier in the year and which we reclassified as PIK interest during the fourth quarter. This change reduced cash interest income during the quarter and elevated PIK interest.

From a fee and dividend perspective, our total fee and dividend income totaled $32 million during the fourth quarter as compared to $25 million during the third quarter. The increase quarter-over-quarter related to higher fee income, given the higher originations during the quarter that Dan discussed earlier, as well as meaningful prepayment activity that we experienced during the quarter.

For the three months ended December 31 2019, our net investment income was $0.20 per share, which compares to $0.22 per share in the third quarter of 2019 and $0.19 per share in the fourth quarter of 2018. The decline in net investment income quarter-over-quarter was largely due to the repayment of certain higher-yielding assets across our portfolio, lower floating rate portfolio yields due to a decline in LIBOR, non-accrual activity and the impact of excise taxes.

The quarterly increase in net investment income year-over-year was driven predominantly by lower incentive fees during the fourth quarter of 2019. Adjusted net investment income in the fourth quarter was $0.21 per share, which excludes the impact of excise taxes.

In terms of details with regard to our incentive fee look-back provision, the contractual agreement resulted in approximately $20 million of incentive fee reductions in the fourth quarter of 2019. This is in addition to the $16 million of reductions we experienced during the third quarter of 2019.

In line with what we stated during our third quarter 2019 earnings call, we anticipate that the look-back provision will continue to reduce incentive fees over the next three quarters, providing additional net investment income of approximately $45 million to $50 million or $0.09 to $0.10 per share.

Turning back to our results. Net realized and unrealized losses on investments were $127 million during the quarter or $0.25 per share. As Michael and Brian discussed earlier, the majority of the portfolio depreciation during the quarter was related to certain vintage assets across our investment portfolio.

In terms of full year results. Our net investment income for 2019 was $0.17 per share as compared to our full year dividend of $0.76 per share and our net investment income of $0.82 per share during 2018. Our net asset value was $7.64 per share as of December 31, 2019 as compared to $7.86 per share at September 30, 2019 and $7.84 per share as of December 31, 2018.

The main drivers of the change in net asset value can be seen on slide 6 of the earnings presentation, which include realized and unrealized losses, the benefit of the share repurchase activity and net investment income in excess of the dividend.

In terms of dividends. During the fourth quarter, we paid our regular $0.19 per share dividend. Our Board of Directors has declared a first quarter dividend of $0.19 per share, which will be paid on April 2, 2020 to stockholders of record as of the close of business on March 18, 2020. This dividend is consistent with the regular quarterly per-share dividend paid throughout 2019.

Turning to our balance sheet as of December 31, 2019, total investments at fair value were $7.4 billion, total cash was $106 million and total assets were $8.2 billion. This compares to total investments at fair value of $7.2 billion, total cash of $126 million and total assets of $7.8 billion as of September 30, 2019.

As Michael highlighted earlier, we have made significant progress on the liability side of our balance sheet during the past year, further strengthening our capital structure by adding longer dated maturity fixed rate debt. We will continue to focus on our capital structure during 2020 as we seek to improve and diversify our funding sources.

At December 31, 2019, total outstanding debt was $4.2 billion with total committed debt of $4.8 billion. Unsecured debt represented approximately 37% of our drawn debt as of December 31, 2019. Our net debt to equity at the end of the fourth quarter was 89% as compared to 78% at the end of the third quarter and is calculated by excluding cash on our balance sheet, as well as the $657 million in receivables, representing sales to our joint venture.

Our effective weighted average interest rate on debt was approximately 4.0% at December 31, 2019 as compared to 4.3% at the end of the third quarter of 2019. This rate represents a meaningful reduction from our weighted average interest rate on debt of 4.6% at the end of 2018.

And with that, I'll turn the call back to Michael for a few closing comments.

[Michael Forman, Chairman & Chief Executive Officer]

Thanks, Steven. In closing, while we are pleased with our progress across several strategic initiatives over the past year, including rotating out of older vintage assets, optimizing our capital structure and building out our leadership team, we also recognize that there is continued work to be done. We look forward to updating you on our progress over the next year. Thank you to everyone for your time today. As always, we appreciate your support.

With that, we will now open the call for questions.

[Operator]

[Operator Instructions] Our first question comes from Rick Shane with JPMorgan.

[Rick Shane, JPMorgan]

Hey guys. Thanks for taking my questions this morning. First, one of your big investments during the quarter was in Truck-Lite. I am curious given that business if you've had conversations with them about any supply chain disruptions related to coronavirus?

[Dan Pietrzak, Chief Investment Officer & Co-President]

Hey Rick, thanks for that. I think the corona point is probably a little bit broader to be honest, right? We spent a lot of time when the tariffs were an issue kind of gone company by company, thinking about what the impacts were. I think that was really the start of I think the discussion around the coronavirus as it originated out of Asia. We've clearly gone broader than that in the past few days. We're continuing the scrub of the portfolio and the supply chain sort of points.

As of the last few days to be honest across the portfolio not just that name we have not heard kind of challenges on supply chain. But it won't kind of surprise me if that sort of changes or evolves in the coming weeks especially with what we saw out of Apple and others. So, clear focus for us. Obviously the situation is fairly fluid and dynamic.

[Rick Shane, JPMorgan]

Got it. Okay. And then, when we total up the new nonaccruals of somewhere between on a cost basis about $175 million to $180 million. When we think about how that runs through the P&L on an NII basis, does that equate to about 3% to 4% of NII?

[Dan Pietrzak, Chief Investment Officer & Co-President]

I'm looking at Steven. I think it's a little bit -- you put it into sort of dollar terms is probably a better way; we think there's about a $5 million sort of impact to that for this quarter.

[Steven Lilly, Chief Financial Officer]

Yes, that's right Rick.

[Rick Shane, JPMorgan]

So it's $5 million per quarter?

[Steven Lilly, Chief Financial Officer]

Correct.

[Rick Shane, JPMorgan]

Okay. Great. Thank you, very much Michael.

[Operator]

Our next question comes from John Hecht with Jefferies.

[John Hecht, Jefferies]

Good morning guys and thanks for taking my questions. You guys talked about, I think an 18-month -- you'd planned to complete the rotation in the portfolio. What should we think about kind of the NIM and the characteristics of the portfolio when that's completed relative to where it is now?

[Dan Pietrzak, Chief Investment Officer & Co-President]

Thanks John. Good question. We did give some stats as it related to originations during the quarter originations since the start of this advisor. I think, we were happy with the deal volume we saw in Q4. I think, you'll see some of that flow into Q1 as we discussed; a lot of that just being driven by the volatility in the syndicated markets. We saw that abate, quite frankly, in beginning of Q1. But I think in some ways, it's probably on its way back.

I think we will have 12 to 24 months to, I think, continue to rotate this and get this to a 90%-plus threshold for overall KKR originations. That will clearly be higher than even the 50% that we should've talked about, just from when this advisor started.

I think in terms of portfolio construction, I don't think our percentages are that far off for what we're laying out on page five with probably a couple of caveats, right? One, we do want the joint venture to be higher. We're probably thinking around 10% there as a target. That's been accretive. I think you can see the dividends going up. I think we expect the dividend to be higher in Q1 as well. The equity bucket is too high. That needs to come down to more of a 3% to 5% sort of number. That needs to go down.

And then, from just a risk perspective -- and, obviously, you've got a pretty -- couple fluid weeks in the risk market, but we're pretty defensive. So as you can see, where we're putting on new deals has been more on the top of the capital structure. I think you expect the subordinated debt number to go down. But that portfolio construction is generally in that -- I think the path or the way we're headed is what you should expect going forward.

[John Hecht, Jefferies]

Okay. Thanks for that color. And then, just thinking about company level or portfolio level trends, any commentary on EBITDA or revenue trends within the -- I know, you guys get to kind of the high level average EBITDA, but what are you guys seeing at the company level in terms of EBITDA and revenue trends?

[Dan Pietrzak, Chief Investment Officer & Co-President]

Yes. It's a good question as well. I mean, yes, we go through the entire portfolio, we think about it, quite frankly, even more broadly than just what's inside of FSK. I think for the last several quarters of 2019, we were still seeing growth as it related to revenue and EBITDA. I think that growth though generally has just been more muted, which I think you probably would expect.

I think it's a trend we're seeing generally across the entire credit portfolio. I think we have seen some budgets missed in some names. I think, in some ways, those budgets are not necessarily relevant to our underwriting, but at least relevant to what was sort of put forward there. But, I think, revenue trends, still sort of up, but just more muted than we were seeing in prior quarters.

[John Hecht, Jefferies]

And then, last question is, obviously, we all see the equity markets have been disrupted with the concerns about the coronavirus. I mean, are you seeing anything with respect to your pipeline, whether its ability to kind of work through the funnel or what's happening to spreads in the current environment?

[Dan Pietrzak, Chief Investment Officer & Co-President]

Probably, a little bit too fast from the coronavirus, sort of, direct. That said, I think the high-level points are, you had a -- and just maybe even flow-through for the last more 14 months. 2019 started off quite aggressive in the syndicated market. But, I think, that did flow in through the private credit market, just in terms of market feeling dynamics.

That changed meaningfully, kind of, post Labor Day. I think that's what you see in our origination numbers. I think that's what you'll see flowing through our origination numbers in sort of Q1, what we talked about in our prepared remarks. You then move back. The market was pretty darn hot, the start of this year.

Clearly, everybody's in wait-and-see mode. I think it's going to be a couple of interesting days and weeks for deals that either were being marketed or sort of talked about. I suspect that volatility will be positive for us and we're keeping a close eye on it.

[John Hecht, Jefferies]

Great. Thanks very much guys.

[Operator]

Your next question comes from Casey Alexander with Compass Point.

[Casey Alexander, Compass Point]

Hi. A couple of questions. Can you tell us how much was reclassified from interest income into PIK income in the quarter? You said it was for a full year of income from that particular loan. How much was it just so that we can kind of gauge what sort of the go-forward PIK rate is?

[Steven Lilly, Chief Financial Officer]

Sure. This is Steven. The breakdown Casey is this about $7 million, its rough numbers a little less than $2 million a quarter. And we realized this -- it's an instrument that compounds once a year, we realized it in the fourth quarter. So, PIK, I think in the earnings presentation on page 17, it goes from $11 million in the third quarter to $21 million. There's a little bit of rounding in there; it's actually technically $20.6 million or something like that. So, $7 million of the difference is related to that one name.

[Casey Alexander, Compass Point]

Okay. All right. Secondly, over the last three months, since your last earnings call, you're now up to $171 million on the share repurchase program. Over the last three months, you purchased $35 million give or take a couple bucks. You have $29 million left which is less than three months. Can you give us some sense of yours or the Board's temper in terms of reloading the share repurchase program?

[Michael Forman, Chairman & Chief Executive Officer]

Yes, this is Michael Forman. Thank you for the question. And your numbers are correct. I would've recited the same numbers. We've always been big believers in share repurchase plans under the right circumstances. We've always followed through on our promises. As you said, we still have $27 million left in the program before we fully execute that program and then we will revisit the dynamics with the Board. And we do recognize the accretive impact of these programs at the current levels.

[Casey Alexander, Compass Point]

Yes, okay. Thank you. And lastly Dan you were mentioning the dividend income. And actually on a quarter-over-quarter basis, the dividend income actually declined a little bit. I'm assuming -- and maybe I'm wrong, that the waterfall down into the JV of the $300 million-plus worth of loans which is a lot, did that occur late in the quarter? Is that something that we should expect to have a greater impact on Q1?

[Dan Pietrzak, Chief Investment Officer & Co-President]

Yes. I think Casey it's exactly right. I mean this is -- I think we've got the JV dividend income up quarter-over-quarter. I think that timing difference that you talk exactly about is there. I think we have -- you should have an expectation that that number will continue to go up inside of Q1.

And the other sort of smaller movers in there, some of the asset-based finance investments that continue to pay dividends were just sort of nominally smaller amounts which should've impacted the overall total for the quarter.

[Casey Alexander, Compass Point]

Okay. All right. Thank you for taking my questions.

[Operator]

Your next question comes from Matt Tjaden with Raymond James.

[Matt Tjaden, Raymond James]

Hi guys. Good morning. Quick question on portfolio company leverage so -- or median leverage, I should say, so up to 5.4 from 5.1. Anything specifically top of mind you can give us in terms of color as to why that increased?

[Dan Pietrzak, Chief Investment Officer & Co-President]

Yeah. Hey, Matt, it's Dan Pietrzak. Nothing specific. I mean, we are choosing that median, right? I think we've been very focused on backing kind of the right companies and thinking about ensuring from a risk perspective that we are in those sectors in companies where we think there's real downside. I think some of those positions will just end up having leverage that was higher than the median, which sort of ticks up individual names in there. I wouldn't read anything specific into the numbers.

[Matt Tjaden, Raymond James]

Okay. Great. And then secondly just any general update on Hilding Anders?

[Dan Pietrzak, Chief Investment Officer & Co-President]

I think the couple things we can say, there was a new CEO announced at the start of the year. We're very excited about that appointment. I think he comes from a really interesting background and can add real value to that business. I think we've seen some green chutes in other parts of that including on the raw materials sort of cost side. So I think certain sort of key positive items. But we acknowledge there's still a lot of work to do there.

[Matt Tjaden, Raymond James]

Okay. Right. That's all for me. Thanks guys.

[Operator]

Our next question comes from Finian O'Shea with Wells Fargo.

[Finian O'Shea, Wells Fargo]

Hi. Good morning. Thanks for taking my question. Just first on Borden Dairy, appreciating that it's probably mostly confidential, but my last read is the company was granted 30 days consensual cash use and that should have just approximately expired. Can you give us color on the tone of your current negotiations and how that is baked into the 12/31 mark?

[Dan Pietrzak, Chief Investment Officer & Co-President]

Yeah. Hi, Fin, it's Dan. I think there's a lot of this name, because it's in the public domain, right? I think you can find a lot of the recent dialogues that we've filed in response to this. But as we said in the prepared remarks, we were pretty disappointed with this outcome. You can go to our initial filings and see the agreed-upon sort of deal that was there.

I think there's probably nothing to comment on beyond what's kind of out there right now. We took a lot of things into play when we thought about that sort of Q4 mark. And this thing will play out meaningfully over the next handful of weeks and months. And we're focused on maximizing the outcome source.

[Finian O’Shea]

Okay. Thank you. And on hiring I think you mentioned a few more people on portfolio and monitoring. Can you give us any more outlook as to the pathway in terms of where you are in staffing and what capacities those were in a little more color?

[Dan Pietrzak, Chief Investment Officer & Co-President]

Yeah, happy to. I think we've been at the overall platform level excited by the opportunity here. We've added staff. We've added certain of that just in direct relation to us becoming involved in the partnership here. And with this BDC platform, I think we're very proud.

The last handful of years we've really institutionalized the business. We've gotten more originators who are driving, I think outcomes. I think, you can see in the numbers. We've built-up a lot of resources including very experienced on, what I will call a, structuring and underwriting side.

We've built a portfolio monitoring unit to really work with the investment team's, drive early looks into portfolio performance, just the what you'd imagine a real resource for a book of this size.

I mentioned the legal expertise that we added. I do have a belief -- I think we all do -- that in this market we need to be very focused on, on the downside. Being on top of key terms and conditions, and documents is important.

So, we've added -- I think, we will continue to do that, where we see sort of necessary. But I think, it's been important for us to build on the platform like, we've done to-date.

[Finian O’Shea]

Okay. Thank you. And then, just final question on, sort of the legacy or vintage names, that have say, probably gone onto non-accrual or underperformed -- is there any theme here across these businesses?

Is it an underperformance? And approaching maturity type situation? Is it one off? Or is part of this you, as a platform, being more aggressive, trying to manage out of them, and that kind of forcing a lot of these situations to come to a head?

[Dan Pietrzak, Chief Investment Officer & Co-President]

Yeah. I think a couple parts. So there's definitely situations that I think, we've been proactively trying to get out of which may include us, selling positions at below kind of face value or sort of par.

I think there are certain names that we've just been very happy to get that cash back and get repaid. I think, there were situations like we talked about last quarter, where A.P. Plasman -- which was the largest portfolio name, in FSK fairly high-yielding position -- got repaid, at par.

We were quite happy about that. That was just not a sector we wanted to be in, at sort of that leverage number. I think, the names we talked about today, probably one of them was a Cov-Lite sort of loan that, is probably in a sector that should not be Cov-Lite, meaning a furniture retailer.

And I think both of those larger names Borden and Art Van hit by somewhat secular changes, in retail in the consumption of milk. But I'm looking at Brian, too in case there's anything else to add.

[Brian Gerson, Co-President]

Yeah. I mean, look I think, you're right with Borden and Art Van, both secularly challenged businesses. I think, Micronics is now Dairy business, not something that we're focusing on going forward.

Energy was a little bit of drive this quarter, again not something we're focusing on going forward.

[Finian O’Shea]

Okay. That's all for me. Thanks so much.

[Operator]

I'm not showing any further questions, at this time.

[Dan Pietrzak, Chief Investment Officer & Co-President]

Great, well thanks everybody, for their time today. We look forward to talking to you next quarter. Thank you.

[Operator]

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect. And have a wonderful day.