FS KKR Capital Corp (FSK) 2015 Q2 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the FS Investment Corporation's second quarter 2015 earnings conference call.

(Operator Instructions)

Please note that this conference is being recorded. At this time, Jim Ballan, Senior Vice President of Investor Relations and Capital Markets will proceed with the introduction.

Thanks, Yolanda. Good morning, and welcome to the FS Investment Corporation's second quarter 2015 earnings conference call. Please note that FS Investment Corporation may be referred to as FSIC, the Fund or the Company throughout the call.

Today's conference call being recorded, and an audio replay of the call will be available for 30 days. Replay information is included in a press release that FSIC issued on August 10, 2015.

In addition, FSIC has posted on its website a presentation containing supplemental financial information with respect to its portfolio and financial performance for the quarter ended June 30, 2015. A link to today's webcast and the presentation is available on the Investor Relations section of the Company's website at www.FSinvestmentcorp.com under Presentations and Reports. Please note that this call is the property of FSIC, any unauthorized rebroadcast of this call in any form is strictly prohibited.

I'd also like to call your attention to the customary disclosure in FSIC's filings with the SEC regarding forward-looking statements. Today's conference call includes forward-looking statements. And we ask that you refer to FSIC's most recent filings with the SEC for important factors that could cause actual results or outcomes to differ materially from these statements. FSIC 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 FSIC's second quarter earnings release that was filed with the SEC on August 10, 2015.

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 FSIC's website.

Speaking on today's call will be Michael Forman, Chairman and Chief Executive Officer of FSIC; Brad Marshall, an Executive Officer of FSIC and a Senior Portfolio Manager at GSO Blackstone, FSIC's investment sub advisor; and Jerry Stahlecker, President of FSIC. We will then open the call for questions. I'll now turn the call over to Michael.

Thanks, Jim, and welcome, everyone, to the FS Investment Corporation's second quarter 2015 earnings conference call. We appreciate your interest in FSIC.

On today's call, I'll provide a summary of FSIC's key highlights and strategies. After which, Brad will provide an overview of our investment activity. Then Jerry will discuss our financial results in greater detail.

Our solid results for the second quarter reflect our high quality portfolio, differentiated model, strong partnership with GSO Blackstone, and the scale of our platform. Net investment income for the second quarter of 2015 was $0.39 per share. Compared to $0.21 per share for the first quarter of 2015, and $0.23 per share for the second quarter 2014. Adjusted net income for the second quarter of 2015 was $0.35 per share. Compared to $0.23 per share for the first quarter of 2015, and $0.26 per share in the second quarter of 2014. Both net investment income and adjusted net investment income this quarter were significantly in excess of our second quarter distribution of just over $0.22 per share.

As previously expressed, our distribution strategies to establish a regular recurring distribution at a level we believe to be sustainable through different market environments, and that provides us with the flexibility to manage risk and the portfolio. At the end of the second quarter, we had significant accumulated undistributed net investment income.

We believe that in the current environment, excess capital is most productively deployed by investing in income producing assets. As has been our policy, we continue to evaluate the best use of our capital to maximize value as our stockholders and as we have in past, may pay special distributions when we deem it most prudent. FSIC's net asset value as of June 30, 2015 was $9.89 per share, down just $0.01 per share from $9.90 per share as of March 31, 2015. Primarily due to increases in interest, fee and dividend income, offset by realized losses and the change in unrealized depreciation on investments in the second quarter. FSIC generated total NAV returns of 5.19% on its portfolio in the six months ended June 30, 2015.

At June 30, 2015, approximately 96% of the fair value of our investment portfolio was allocated to our core investment strategies. Which include direct originations and opportunistic investments. This level has remained relatively unchanged for the past few quarters, and approximates our target allocation. We also have maintained our focus on investing in senior secured debt. Which at the end of the second quarter, represent approximately 76% of the fair value of our total portfolio. We continue to seek out new ways to draw on the cross-organizational collaboration of Franklin Square and GSO Blackstone.

During the quarter, we executed on financing opportunities through our strategic relationship with NewStar Financial. And increased the number of FSIC portfolio companies participating in Blackstone's group purchasing organization program. Alignment of management interests with those of FSIC stockholders is of critical importance to us. As both a sign of our continued commitment to FSIC and to further align our interests, Franklin Square and directors and officers of FSIC have purchased approximately $3 million of the Company's share since the beginning of 2015. In addition, Franklin Square and members of FSIC's management intend to renew our entrants in new 10b5-1 trading plans in the near future.

As many commercial banks have pulled back their commitments to middle market lending, BDCs are increasingly providing much needed capital to finance the growth of middle market businesses. Since the beginning of the recent financial crisis, the value of BDC loans in the marketplace has more than tripled. Franklin Square managed more than $15 billion in BDC assets, more than $10.5 billion of which are directly originated investments. As one of the largest public BDCs, with the ability to co-invest alongside other Franklin Square BDCs, we believe FSIC is well positioned to provide customized credit solutions to many of the middle market companies that are driving the growth of the American economy.

I will now turn the call over to Brad Marshall. Brad?

Thank you, Michael.

In the second quarter, we continued to leverage the capital base of the Franklin Square BDC platform. The sourcing of credit expertise of GSO's direct lending platform, and the broad and deep knowledge and resources of Blackstone to identify structure and find investments with attractive return profiles. During the second quarter, our total investment activity included $609 million in purchases, up from $191 million in the previous quarter. Total new commitments to direct originations were approximately $495 million for the three months ended June 30, 2015 driven by several new financings, as well as follow-ons to existing portfolio companies.

FSIC also experienced significant prepayments during the quarter ended June 30, 2015. The combination of strong investment activity and these prepayments, which were largely expected, contributed to a significant increase in fee and investment income during the second quarter of 2015. We believe that the investment pipeline is the deepest we have seen in a number of years, driven in part by a strong M&A environment. We believe this should enable FSIC to be more selective in its investments, and obtain attractive investment terms.

The gross portfolio yield prior to leverage of all of the funded direct originations in the portfolio as of June 30, 2015 was 10.1%. Based on amortized costs, and excluding non-income producing assets. Overall, the gross portfolio yield prior to leverage of all investments was 9.9% as of June 30, 2015 compared to 10% as of March 31, 2015, in each case based on amortized costs. As of June 30, 2015 the average leverage for our direct originations through their respective tranche in which we invested, excluding equity and collateralized securities, was 4.8 times.

As previously disclosed, our portfolio investment and Allen Systems Group was removed from non-accrual after comprehensive debt restructuring. The company's operations have stabilized, profitability is improving, and GSO Blackstone is actively working with management on its longer term business plan. During the second quarter, we also exited our investment in Boomerang Tube. The other investment that was on non-accrual as of March 31, 2015. During the second quarter, our investment in the senior subordinated debt of Samson Investment Co was placed on non-accrual. As of June 30, 2015, the position was the only company in the portfolio in non-accrual, and represented a negligible amount of FSIC's total portfolio based on fair value.

Energy investments comprised approximately 12% of FSIC's investment portfolio based on fair value as of June 30, 2015, up modestly from the previous quarter, reflecting a few new loans and the sale of certain positions that we believe had limited upside potential. We continue to view certain areas of the energy markets as interesting. And given GSO's experience and expertise in this sector, we remain confident that FSIC is well positioned to capitalize on these opportunities.

During the quarter, FSIC continued to grow its investments in specialty finance companies. Which includes investments in NewStar Financial, Global Jet Capital, Sunova, and Altus Power America. With respect to NewStar, we continue to find ways to expand our collaboration efforts and look forward to discussing additional progress in the near future. NewStar recently reported its most active quarter in its history, with over $1 billion in investment activity.

Many of FSIC's portfolio companies benefit from the Blackstone GPO program. At the end of the second quarter, 21 FSIC portfolio companies had in aggregate 191 cost saving projects through the GPO program. Our goal is to offer our portfolio companies more than just initial capital, by adding value through programs such as the GPO, which leverages the collective buying power of Blackstone's portfolio companies to reduce operating expenses. This potentially leads to significantly improved EBITDA margins for the participants and ultimately, better credit metrics for our portfolio companies and the performance for FSIC.

I will now turn the call over to Jerry.

Thank you, Brad.

Net investment income for the second quarter of 2015 was $0.39 per share. Compared to $0.21 per share for the first quarter of the year, and $0.23 per share for the second quarter of 2014. As Michael mentioned, adjusted net investment income for the second quarter was $0.35 per share compared to $0.23 per share in the first quarter of 2015, and $0.26 per share in the second quarter of 2014. These increases were primarily due to higher fee and interest income in the second quarter due largely to the prepayment of our position in Cadillac Jack, and the closings of new directly originated investments.

Fee income for the second quarter totaled approximately $25.7 million compared to $4.7 million for the prior quarter. Because fee income is generally driven by both prepayment and reinvestment activity, it can be less predictable quarter to quarter and therefore, it should be evaluated on a multi- quarter basis.

Net realized losses on investments were approximately $25.2 million in the second quarter of 2015. This was largely due to the restructuring of Allen Systems during the quarter, and not the result of the sale. As mentioned, GSO has helped stabilize operations, and the company is seeing improving profitability since the restructuring. The portfolio had a change in unrealized depreciation totaling $16.6 million during the second quarter. As a result, FSIC experienced a net increase in net assets resulting from operations of $0.21 per share in quarter ended June 30, 2015.

In the second quarter of 2015, we declared a regular quarterly distribution of $0.22275 cents per share which was paid on July 2. Taking that distribution into account, FSIC's total accumulated undistributed net investment income and realized gains on a tax basis was approximately $0.68 per share as of June 30, 2015 up from $0.66 per share at prior quarter end. On July 30, 2015, we declared a regular quarterly distribution of approximately $0.2275 per share to be paid on or about October 2, 2015 to stockholders of record on September 23, 2015. (sic - see press release "$0.222275").

As previously disclosed on April 30, 2015, FSIC issued $275 million in aggregate principal amount of 4.75% senior unsecured notes through 2022, the proceeds of which were used to repay outstanding secured indebtedness. The seven year bond issuance extended the average maturity of FSIC's liabilities, and should help to optimize with long term debt cost structure.

As of June 30, 2015, we had approximately $1.8 billion in total debt outstanding, with a weighted average interest rate of 3.96%. At quarter end, FSIC's debt to equity ratio was 76.7%, down from 77.5% as of March 31, 2015. We believe management of our liabilities positions FSIC well for a rising interest rate environment. As approximately 98% of our debt out standing is at a fixed rate, while approximately two-thirds of our assets pay variable rates. Because almost all of our outstanding debt is fixed rate, while 66% of our investments are in variable rate debt. We believe in a rising rate environment, FSIC should experience net investment income growth as our interest income grows, while our interest expense mostly remains unaffected.

As we've said in the past, we do not need to rely on serial public equity issuances to achieve scale. While we have no immediate intention to issue new equity in FSIC, we would note that we may opportunistically raise new equity to the extent that we have visibility into investment opportunities that we believe would be accretive to our existing stockholders.

I'll now turn the call back to Michael. Michael?

Thanks, Jerry.

We at Franklin Square believe our experience, scale and partnership with GSO Blackstone will continue to benefit FSIC investors. We are the largest manager of BDCs, with more than $15 billion in BDC assets under management. Given the strength of our portfolio, our differentiated model, and strong distribution coverage, we believe we are well positioned to generate reliable and sustainable income for our stockholders, as well as to capitalize on the growing opportunity for non-bank lenders.

I'd like to thank you all for joining us today. With that, we will now open the call for questions.

Thank you.

(Operator Instructions)

Our first question is from Jonathan Bock, your line is open.

Thank you. It's Jonathan Bock from Wells Fargo, and I appreciate you taking my questions. Maybe a few individual investment questions first. Michael, looking at the Caesar's Holdings, I understand that you have two. One that you sold down of Caesars Entertainment Resort properties, and then trying to understand what that was sold at relative to its mark. And then trying to understand some of the CEOC commentary or the operating company which you do have still significant exposure in, and seeing that written down by $6 million. The question is, one, a brief overview, Michael or Brad, would be helpful on the investment. And two, I was under the impression that CEC being on the hook for the CEOC debt is actually a good thing. So I'm surprised to see you mark it down.

So John, I'm going to let Jerry answer that question. Jerry spends a fair amount of his time monitoring and involved in the Caesar's process. So, Jerry, go ahead.

Hey, John, how are you?

Good.

We agreed that the thesis is that the value of the parent guarantee provides us with comfort of a par recovery. But obviously, with any position where there's a lot of news flow as there is with Caesars, with various constituencies trying to negotiate with a sponsor to support various points of restructuring. That creates volatility in the position and the market prices move around. And so we see that in a venture of the names like Caesars, where there will be is some volatility in the mark on the position. But we still hold the position, and we still feel good about a par recovery. We're still actively involved with the first lien bank debt group, and are confident that ultimately there will be a restructuring where we recover part plus accrued.

And, Jonathan, if I can just add to that. Just as you look at the operating entities and you put this restructuring aside, the assets are performing quite well. If you look at the last quarter, if you look at [Stirrup] and CEOC, both assets are performing well. Their prices are reflecting in the uncertainty on how the restructuring is going to play out. And then to answer your question further, we sold our Stirrup first lien assets at a gain, relative to our cost at market. So the price was reflected in where we sold it. And then we thought there was more downside risk to the Stirrup position, so we decreased our exposure there at a slight loss. But the asset wise, the assets are performing quite well in Vegas as there's a bit of a resurgence there.

Okay, great. Thank you. And then, Brad, just appreciate and generally comments that we've been hearing generally on energy, particularly GSO's focus in the area. Plains offshore with the $6.4 million write down, still interested in the long term view that yes, while liquidity is not an issue yet, borrowing base revisions et cetera that are on to come in the fall, make liquidity concerns or are causing an increase in liquidity concerns at underlying portfolio companies. Just curious at the liquidity positions that you're looking at today. And while they're not a problem yet, when you think about borrowing base revisions at the lower dollar price oil, what's being done to limit shareholder losses, if any? As well as improve your position, particularly for several of your upstream investments?

Great, so lots in that question. So let me try and pick it off. The energy markets clearly are a big focus for our Firm. We have 30 people at GSO that live and breathe energy on a daily basis. We recognize the energy markets are volatile, due to swings in commodity prices. And so when we look at and take a step back and look at which companies we want to support through this cyclical downturn in commodity prices, we focus on liquidity, as you suggested, good capital structures, good management, good sponsors. And I think what our energy team would say is, and if we just look at oil, at $45 oil prices, it's not a sustainable price environment for producers both domestically or internationally. The timeframe in which that plays out is a little bit less certain. But over a longer period of time, those are not sustainable price environments for companies to produce oil profitably. So we are looking at our portfolio actively. It's the reason why you saw us sell Boomerang in the second quarter. We're very negative on service companies for the upstream space, so we exited that position at a loss. We don't have much exposure at all in the portfolio to the service side right now.

If you look at our upstream exposure and the bulk of our energy exposure, which makes up about 85% of our direct deals. It's made up of Ascent, which is American Energy Utica, Four Points Plains, as you mentioned, FabTech, and some of our specialty lenders. All those are performing fairly well. If you look at Ascent, American Energy, we're a first claim position at 25% loan to value. Meaning there's 75% of the capital structure is junior to us. We just put in $250 million of additional capital on a senior basis, but that was conditioned on them putting $850 million of capital below us. Four Points, the same thing. We're about 50% loan to value. There was a big equity injection that's going into that business for liquidity purposes, it's very well positioned. Plains, is developing a very, very big oil field that takes an extended period of time to develop and produce. But they are profitable at $20 a barrel of oil, so we don't have any concern about redetermination levels with Plains. The write down was related to not whether we're going to get our principal back in that investment, but we wrote down the upside potential in that investment which is why you saw the equity position get marked down for the quarter. And FabTech, year-to-date its doubled its budget. So as I step back and look at our energy portfolio and our direct side, it's very, very well positioned. Where I think we're most exposed is in our high yield investments. Where we have subordinated debt in upstream companies, that's where we have the most exposure. But that is about $25 million of fair market value right now in our portfolio, so very de minimus amount of downside risk in our energy exposure as we sit here today.

Got it. Appreciate that, Brad, for the detailed answer. And then just two more, if I may. The last one relating to new capital allocation, in particular some of these second lien positions. We understand that there is a point at times when investors will see a second lien position, and at times it's considered a dirty word. More so, when you see it associated with broadly syndicated financings. Just because, even if the first lien is out and you guys are coming in on the second, there's just more eyes on the transaction. And given all of the liquidity and surplus of capital chasing loans, there's the potential for risk adjusted returns to deteriorate. So what we see is for your second lien position, Spencer's Gifts, National Surgical, et cetera. A lot of these were done in conjunction with BSL first lien deals. And so, give us a sense, Brad, as to the risk adjusted return present in the name. Given that clients are assuming that this is a relatively competitive environment, and even more so in yield [E] securities like that of second liens. Which we saw some pretty big allocations to in the quarter.

Yes, so what I would say is broadly syndicated second liens tend to have fairly -- and just to talk generally, fairly tight pricing and loose structures. What you saw us do in the second quarter and what we're continuing to do is, privately negotiate the second lien investments of National Surgical. While there was a syndicated first lien, our second lien was privately placed. Same thing with Spencer. We anchored that transaction, and we brought in some other investors at the end. But we drove the documents, we drove the structure in those transactions. And so that's what I would say, that we're very aware of what the syndicated market offers to investors, and so we're trying to structure that up through our privately negotiated positions with those companies. What I would say more broadly though, Jonathan, is that the second lien market is breaking down a little bit right now. And I think that's on the back of a weak high yield market. Some of those investors are pulling back from just repositioning their funds. And so we're seeing more opportunities present themselves on a second lien basis, not to say we're going to dramatically increase our exposure there. But just as a market commentary, we are seeing that part of the market back up along with the high yield market.

Got it. And then last question, Michael. So we appreciate the uniqueness of FSIC in terms of how it approaches capital raising et cetera. And a lot of that clients understand is predicated on the success of the private vehicles, which done very well and have garnered quite a bit of AUM. The question is though with 1502 coming into effect on April of 2016, obviously, enhanced disclosure will require investor or perhaps increased investor criticism or oversight as it relates to the loads. Now I believe FSIC 4 has now, instead of charging a previous sales load that was higher, is now charging all-in investor load of 5%. But then also offering a 75 basis point servicing fee over time to make up the difference, like we paid to the broker. The question is, help us understand the capital raising dynamics now that FSIC 4 is in place, this is your mark. You are the largest of non-traded BDC product in general. And help us understand the dynamic of growth, and whether or not the SEC has allowed this type of fee structure to be put in place for you to continue to raise private capital over time. That's it for me.

Thanks, John. So 1502, for those of you who are new to our world, we were the first non-traded BDC. We lifted FSIC in April of 2014. We continue to raise capital in a unlisted non-traded publicly registered BDC, right now we're raising capital for FSIC 3. We do expect at some point this year to close FSIC and transition to FSIC 4. 1502, also known as the account statement rule, will provide enhanced transparency to investors so that loads will be reflected or commissions will be netted out on the account statement. And we've always felt that was a positive change, John. We think that enhanced transparency to the investors is a positive move. We don't control the account statement, that's a independent broker dealer issue. I think the effect of that will be that commissions will come down over time. There's no doubt that's what FINRA, which sponsored 1502 suggests, we think that will have the impact of enhancing investor return. We will have a plan which we think will work in the new 1502 environment, and will allow us to continue to raise capital. If you look at the non-traded space, we've never been the folks that raised the most capital. We've always been the folks that raised fairly consistent capital, and tried to do it the right way. And we'll continue to do that, John, but loads will come down, investor performance will be enhanced. We would note that there are lots of folks that are copying our model and coming into the space. There's probably close to a dozen non-traded BDCs in the marketplace that are coming to the marketplace. So lots of folks have copied what we're doing. We'll continue to innovate. We'll have lots of different ideas about what the load structures and what the commission structure should look like. But we respect what the regulators are doing here, and we think that commissions coming down is a positive thing for the industry, as well as for our investors.

And just a small clarification. So has the SEC deemed effective and/or approved, whatever the legalese term that you want to use for it, approved that FSIC method for of raising capital yet?

The SEC doesn't necessarily have an approval right over that. Recognize that 1502 is a FINRA regulation. What we are in front of the SEC is with our registration statement for FSIC 4. It has not been declared effective yet, but we would expect that it would within the next I'd say couple months. So we will be in market in the fall with FSIC 4 with a different commission structure. And I think, frankly, based upon the performance of all of the FSIC vehicles, we believe we'll continue to raise our fair share of capital. Brad and his colleagues, together with my colleagues at Franklin Square, have done a great job with FSIC 1, 2, 3, and expect to continue with 4 being as the scale that we have and the engine we build. We believe we can continue to performance, and as a result, we'll continue to raise capital.

Great. Thank you. Excellent answer, and thank you for taking my questions.

Thanks, John.

Our next question is from Rick Shane from JPMorgan.

Guys, thanks for taking my questions this morning. First, just a true-up issue for us. When we think about the interest income for the second quarter, was there any impact from the reversal of non accruals that we should be thinking about in terms of run rate?

Sorry, Rick, this is Jerry. The reversal of non-accrual?

Yes, so you had some things come off non-accrual, and was there any catch up related to -- was there any one-time interest income?

No, what you did see was that Cadillac Jack was a large repayment during the quarter. There was significant unamortized OID. And so when that paid down, that OID got accelerated. So that was a big chunk of the increase in interest income for the quarter, and also was responsible for a significant amount of the change in unrealized appreciation. Because that unamortized OID went from being unrealized depreciation, based on the fact that you had a fair market value significantly above the amortized cost basis. So that delta then changed the unrealized appreciation number downward, so that's a big part of the change in unrealized depreciation. And then was a big part of the increase in interest income for the quarter. Make sense?

Totally. It's funny, I understood it in terms of the unrealized and realized depreciation, but I hadn't thought about it in terms of the interest income. And obviously, the spike there caught us a little bit off guard, and we wanted to make sure we were modeling it correctly going forward. So that's very helpful.

Second question, when we look at the leverage on a net basis, at this point, it's down what I would describe as the low end of the range. Your sitting on a lot of cash at the moment. Is there something large in the pipeline that we should anticipate as you move through the third quarter to take leverage back to the historical range?

Just from a leverage standpoint, we've historically said, leverage expected to be anywhere in the [0.7%] to [0.8%] range and 0.75%, maybe a little bit above that on average. So from a leverage standpoint, we're around where we've historically been and around where would we expect to be. But in terms of cash balances, I'll let Brad address the pipeline issues.

Brad?

Yes, because we look at it on a net basis, and that big cash balance is why when we look at it on a net basis the leverage is a little bit lower.

Hey, Rick, it's Brad. What I would say is that a lot of those prepayments came at the end of the second quarter. So the cash built at the end of the second quarter, there's a, as I mentioned in my comments, a very robust pipeline. Such that I would see a meaningful change in the cash balance and the leverage profile, in line with what Jerry said, through the balance of this quarter.

Great. Okay excellent, guys, thank you.

Our next question is from Ryan Lynch from KBW.

Hey, guys, I'm just trying to get a little more color around the fee income in the quarter. So it sounds like prepayment fees primarily driven by the Cadillac Jack repayment really drove that number. But I was curious, were syndication fees a meaningful part of fee income this quarter, and how should we think about your guys' syndication business going forward?

Hey, Ryan, this is Brad. The bulk, as you suggested, the bulk of those fees came from Cadillac Jack, as well as a few other deals. Remember, we invested about $600 million during the quarter, so fees as related to those new investments. We're not in the business of syndicating debt. We are investors, so we make investments for our own accounts. I think we invested across the BDCs at Franklin Square about $2.5 billion during the quarter. Syndicating debt is a bank model, and one that works in good environments and doesn't work in bad environments. It historically has been a big part of GSO's DNA when we're at Credit Suisse, but it's not something that we think is the right approach to generate fee income with this type of capital base.

All right. And it looks like you said one portfolio company drove the big dividend income in the quarter. What was that portfolio company, and what were the circumstances surrounding that big dividend in the quarter?

Certainly on -- Ryan, this is Jerry. On the increase in interest income, a big portion of that was the acceleration of unamortized OID around the Cadillac Jack repayment. So that goes to the interest income. Specifically then around the fee income, as Brad mentioned, we did have some prepayment fees. We also had origination fees, we had nearly $500 million of directly originated deals, which generally will have origination fees of call it 2 points on average on those deals. And then on the dividend income, one of our specific investments, PSAV, audio visual, we had dividend income during the quarter as well.

Okay. And then just one on advanced lighting. It looks like the fair value mark took a little bit of a drop this quarter, just given the size of investment. Can you maybe talk about what caused that drop in fair value, and maybe how that business is currently performing?

Sure. Ryan, this is Brad. I think advanced lighting is a good kind of segue into just the high yield market in general. There's a lack of liquidity in the market. So when there's a seller of an illiquid asset, the price tends to gap down. The performance of advanced lighting has slightly improved. So performance is in line with what we thought it would be, and the performance is slowly improving. Yes, there was likely a sale or two during the quarter which brought the price down. This is a publicly marked security, and so that's why you saw the write down in that position. Just on the credit itself, we are actively working with management to install several operating improvements with some new outside parties. So we expect that to be an ongoing project. But credit wise, things are marginally improving.

All right. Thanks. And then just one last one on Boomerang Tube, I know you guys said you exited in the quarter. At what value was that company exited at?

Yes, so Boomerang, and we sold this position across our entire Firm, so as a position it was held in a variety of funds. There was a block investor that came in and wanted to buy our position, so we are able to negotiate a better price than what was being reflected in the market. But the answer to your question, we sold at [61.75%].

Okay. Thanks for answering my questions.

Our next question is from David Tervini from Cantor Fitzgerald.

Hey, guys, thanks, good morning. So a couple questions for you. So you mentioned in regards to the very deep pipeline for originations, can you comment on loan pricing in any industries that look particularly attractive in this environment?

Sure. What I would say is, there's certain sectors that are clearly out of favor in the loan market. And we should distinguish that between the high yield market. But in the loan market, clearly energy, metals, anything to do with media, certain chemical businesses, businesses that have high exposure to China are negatively perceived in the market. Some cases correctly, some cases incorrectly. It's our job to sift through all that and find opportunities in companies that are getting painted with a broad bush. The high yield markets, it's a little bit different than the loan market, just because of capital flows out of the high yield market. And we're seeing a lot of broad based widening of spreads, I think it's the widest it's been since the credit crisis. So I think that's presenting certain opportunities in some sectors in building products, as well as some of the other sectors that I mentioned.

Okay, thanks for that. And then you also mentioned during your prepared comments that insiders brought $3 million since the beginning of 2015, and that there's a 10b5-1 plan in place. I was just curious, is that plan that insiders put in place or is that at the corporate level that a 10b5-1 plan was put in place?

This is Michael, David, how are you? The plans are at the Franklin Square holdings level, as well as at the senior executive officers and Board level for FSIC. So it's not capital of the fund. As you may recall back in the Spring after the lifting, we did a fairly large tender at FSIC, and brought back a lot of the shares. But these plans are all third-party plans, not part of the FSIC fund.

Got it. And remind me, those automatically kick in at a certain discount to NAV. Is that how it works?

They automatically kick in at the place that's determined by the sponsor, and everyone has a different plan in place.

Got it. Thanks very much.

Sure, thank you.

We have no further questions at this time.

Great. Well thank you all for your time this morning. Always happy to get on these calls and look forward to continuing our relationship.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.