for the call today and for your interest in FSK. Operator, we'd like to now open the line for questions.

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

Good morning. Thanks. The loan sales that you did, the $500 million that you referenced, maybe you just provide some color on what were these, how did you go about doing this, and is this going to be something that we would expect kind of ongoing as we look forward? Yeah, good morning.

You know, I'd put it a little bit more in probably just, you know, ordinary course of business, right? We talked about this on our last call, looking at some of the, you know, tall trees, you know, some of the larger exposures we might have had, or some, you know, we'll call it very high quality assets, but maybe just at a different kind of margin than what the market was affording. So I think net-net, we look at the overall New investments we made, but with that $1.3 billion plus of repayments, I think we're happy with that result and happy to get back down into our target leverage area.

In the marks that you took this quarter, were those more related to existing non-accrual restructurings or exits or Were these a result of new marks from other companies this quarter?

If you do look at it, Aaron, really driven off of a handful of names that we would have talked about before. The big drivers were PRG, ATX, Witter, Paraton, Lionbridge, and Medallia. That pretty much made up the entire amount, or at least a super majority of the amount.

Thank you. Thank you.

Thank you. Our next question comes from the line of Finian O'Shea of WFS. Your line is now open.

Hey, everyone. Good morning. Can you remind us or update on the sort of destination portfolio composition With your sort of strategic repositioning, is it going to look something like, say, 80% performing unit tranche and 20% ABF, JV, or are there, you know, sort of inputs or other tilts around the edges?

Yeah, good morning, Ben. We talked about this a bit last quarter. I think we're kind of on the same, I would call it, path that over time we would look to get the 1L percentage up. I think we've been happy with our asset-based finance business and effort as it relates with inside FSK. I'd say the same thing about the JV. So I think you should expect those to be in the same kind of ranges of let's call it 10 plus percent, 10 to 15%. but probably a little bit less focus on second lean and sort of junior depth.

Okay, that's helpful. And then with the JV, you know, opening up more to the partner, was that sort of a one-off or might you, you know, downsize your position more, expand it more or anything like that?

Yeah, I think time could tell there. We've had a great relationship with our partner there. I think constant conversations about what we want that to look like, how we want it to evolve, what's good for FSK, what's good for them. But I think where it sits today, we feel like we're in a pretty good spot. Great. Thanks so much. Thank you.

Thank you. Our next question comes from the line of Jason Stewart of Compass Point. Your line is now open.

Hey, good morning. Thanks. In terms of the loan sales and prepayment activity, what's your line of sight going forward in the next, you know, maybe 3Q, 4Q for that activity?

Yeah, I mean, prepayments or, you know, repayments have definitely been slower than I think we would have expected. I think that goes In line with, you know, what you would have heard on other calls where, you know, New Deal activity or just kind of broad M&A, you know, feels light versus I think everybody's expectations from the start of the year. I think you can attribute that a lot to, you know, what's happening with Iran, you know, geopolitical sort of tight points. You know, that said, the team has definitely been busier, you know, on the other side of June 30th, but I think it's still kind of muted sort of levels. I would probably expect a light number in Q3, but at some point I think it's fair to assume that that ramps back up to more traditional levels.

Okay. I mean, rough math, even if we assume that number's light or gives you plenty of liquidity and room on leverage to continue in the share repurchase. I mean, if you are done with that and the fee waivers is done in the next couple of quarters, what's the next step here?

Yeah, no, I appreciate that question. I think we are happy that we kicked off the share of a purchase. I think we've been guiding the market that we will be mindful about liquidity and leverage as we think about the share of a purchase, but we do have an intention to fulfill that. You're right about the fee waiver extending for another three quarters past the quarter that we just reported on. I think it remains our intention to get through I'd say a lot of heavy lifting on some of these non-income producing assets. I would like leverage to get down to the middle of that target range over time. It could bounce around the upper end of that target range for a couple of quarters, but I think the longer term piece is the middle of that range. So I would frame the quarter. I think we've had some good progress with things that we said we were going to do on the last call. You heard the comments in the script. We know there's some still heavy lifting to do, and we're going to be focused on that as we finish out 26 and go into 27.

Okay. Thanks for taking the questions.

Thank you.

Thank you. As a reminder, to ask a question, you'll need to press star 1-1. Our next question comes from the line of Kenneth Lee of RBC Capital Markets. Your line is now open.

Hey, good morning. Thanks for taking my question. Just one more on the loan sales there. Any details in terms of the types of loans across the industries or any other details around the specifics around what kind of loans were sold there? Thanks.

Yeah, Ken, no kind of real target beyond what I said. I don't view kind of what we did as much different than some of the ordinary course business stuff. I think we're always mindful about some of these larger positions and can we bring those down. I think it's good to see a certain amount of liquidity in the book. When we're underwriting a loan, we're not assuming that we're looking to move on from it or sell some of it, but we had the opportunity to do so. I think it was good for the entity as we're talking about You know, reducing leverage and getting inside that target range. But there was, you know, really no specific theme besides that. Gotcha. Very helpful there.

And just one more follow-up here.

In terms of the share repurchases go forward, and I realize you're going to be mindful of the leverage targets as well, how active could you be and what factors are you going to be looking at closely to judge the activity of repurchases there? Thanks.

Yeah, and I mean, I think it's a couple of things, right? I mean, obviously it's going to be, we've historically done these things under a 10b-5-1 program. You're going to be mindful about market volumes and there's a bunch of rules as it relates around that. I think we're still, I think quite mindful about On the one hand, just managing that leverage ratio, but with where the stock has been trading, it's quite an attractive time to buy back the stock. Like I said, I think we've been trying to guide folks. I think we talked about this on the last call. We have every intention of filling this, but it's going to be mindful of those points and probably occurs over the course of 26 and 27.

Gotcha. Very helpful there. Thanks again. Thank you, Ken. Thank you.

Our next question comes from the line of Hali Sheth of Raymond James. Your line is now open.

Good morning. Thanks for the question. You mentioned activities being somewhat of a pickup after 2Q. Are you seeing anything different there in terms of spreads or pricing, or is it kind of steady on that front?

Yeah, good morning. Thanks for the question. I put in a couple of buckets. I think the activity level is picking up as there was some, we'll call it, sense of belief in the market that the Iran situation was either under control or at least the sides were working towards a deal. I think we did see spreads widen and terms and conditions get better really on the back of the redemption activity and the non-traded space That's not really different than what we saw in 2022. We'll call that could have been up to 75 basis points plus of sort of spread move as you kind of work through the quarter for the new deals that were getting done. It's probably come back a little bit since then on the spread side, just as I think the redemption, we'll call it noises, calmed down a little bit, even though the numbers remain elevated. There has been continued interest in the space from an institutional perspective. My guess is that will probably widen back out a little bit if M&A picks up to a normal volume. But I think net-net, we have seen the environment toggle to what I call more of a lender-friendly environment versus a borrower-friendly environment. We're happy to see that.

Got it. That makes sense. On repayments, I think you had pretty elevated repayments this past quarter. How are you weighing reinvesting back into assets into the portfolio versus share repurchases? Any specific strategy there?

I'm not sure it's a specific strategy beyond what we talked about, right? We want to get the share repurchase plan done. We want to be mindful about our leverage number. We want to see the repayments come through. We want actually that leverage to get back to probably more the middle of that range. So we're going to try to balance all those together. The majority of our new investments for the quarter really related to fundings on delayed draw term loans or revolvers. We'll be mindful about new investments as well. We're trying to just factor that all together to achieve the goals that we laid out.

Got it. Thanks for the call.

Thank you.

Thank you.

This does conclude the question and answer session. I would now like to turn it back to Dan Pietrzak for closing remarks. Great. Thank you.

And thank you all for your time today. If there are any other additional questions, please do not hesitate to reach out to us. Enjoy the rest of the summer. We'll talk to you again next quarter. Thank you.

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