FS Credit Opportunities Corp. Q4 2024 Key facts As of September 30, 2024 Access to a broad suite of alternative asset classes and strategies through our investment teams and partners: Private equity expertise Direct co-investments Secondaries (LP + GP-led) Private Primaries equity Multi- asset Real asset Credit Real asset expertise Real estate credit Real estate secondaries Multi-asset expertise Global allocation Multi-strategy Credit expertise Private credit Credit secondaries Multi-sector credit Special s ...

Group 1 - The CEF/ETF Income Laboratory manages closed-end fund (CEF) and exchange-traded fund (ETF) portfolios targeting safe and reliable yields of approximately 8% [2] - The service includes managed portfolios, actionable income and arbitrage recommendations, and in-depth analysis of CEFs and ETFs, catering to both active and passive investors [2] - The community consists of over a thousand members focused on finding the best income ideas, with a majority of holdings being monthly-payers for faster compounding and smoother income streams [2] Group 2 - Nick Ackerman, a former financial advisor with over 14 years of personal investing experience, provides coverage on closed-end funds and exchange-traded funds [3] - The article expresses the author's opinions and includes a disclosure of beneficial long positions in specific funds, indicating a personal investment interest [4]

Distribution Announcement - FS Credit Opportunities Corp. announced a monthly distribution of $0.0645 per share for February 2025, payable on February 28, 2025 [1][3] Financial Performance - The current annualized distribution rate is 10.7% based on the Fund's net asset value (NAV) and 11.4% based on the market price as of January 31, 2025 [2] - The monthly distribution has been fully covered by the Fund's net investment income throughout 2024 [2] - The Fund manages approximately $2.2 billion in assets and invests in event-driven credit, special situations, private capital solutions, and other non-traditional credit opportunities [2] Fund Operations - The Fund pays regular monthly cash distributions to common shareholders, which may be adjusted based on portfolio and market conditions [3] - The distribution schedule includes an ex-date and record date of February 21, 2025, with payments made on February 28, 2025 [3] Company Overview - FS Investments is a global alternative asset manager managing over $82 billion in assets for various clients, including institutional investors and individual investors [6] - The firm provides access to a broad suite of alternative asset classes and strategies, supported by a high-performance culture and commitment to client value [6]

Conference Call Information - FS Credit Opportunities Corp. will host a conference call on March 4, 2025, at 9:00 a.m. (Eastern Time) to discuss its fourth quarter and full year 2024 results[4] - A presentation containing financial and operating information will be available on the company's website after market close on March 3, 2025[5] Forward-Looking Statements - The company has indicated that it may include forward-looking statements regarding future performance and operations, which are subject to uncertainties[6]

Company Overview - FS Investments is a global alternative asset manager managing over $82 billion in assets for a diverse range of clients, including institutional investors, financial professionals, and individual investors [4] - The firm offers access to a broad suite of alternative asset classes and strategies through its investment teams and partners, emphasizing a high-performance culture and commitment to client value [4] Upcoming Events - FS Credit Opportunities Corp. (NYSE: FSCO) will host a conference call on March 4, 2025, at 9:00 a.m. Eastern Time to discuss its fourth quarter and full year 2024 results [1] - Participants are encouraged to register a day in advance or at least 15 minutes before the call [2] - A replay of the call and an investor presentation of financial information will be available on FSCO's Investor Relations website after the market close on March 3, 2025 [2]

Company Overview - FS Credit Opportunities (FSCO) operates as a closed-end fund that generates earnings from a diverse portfolio of credit investments with varying levels of risk [1] - The fund focuses on credit investments, which are interesting due to their dependency on financial conditions and market dynamics [1] Investment Strategy - The fund employs a hybrid system that balances growth and income, aiming to capture a total return comparable to the S&P 500 [1] - The strategy includes a mix of classic dividend growth stocks, Business Development Companies (BDCs), Real Estate Investment Trusts (REITs), and Closed-End Funds (CEFs) to boost investment income [1] Analyst Perspective - The analyst specializes in uncovering investment opportunities, particularly in high-quality dividend stocks and assets with long-term growth potential [1] - The analyst emphasizes the importance of a diversified portfolio that includes various investment vehicles to achieve both income and growth objectives [1]

Group 1 - The article discusses the FS Credit Opportunities Corp. (NYSE: FSCO) closed-end fund, highlighting its appeal to income-oriented investors seeking high yield income for retirement [1] - The author emphasizes the importance of conducting thorough research and making informed long-term investment decisions, particularly after experiencing the Great Recession [1] - The focus is on dividend-paying income stocks and funds, including BDCs, REITs, CEFs, and ETFs, which are essential for increasing retirement income beyond traditional sources [1] Group 2 - The article reflects the author's personal investment philosophy, which is shaped by past experiences and a desire to understand market psychology alongside financial metrics [1] - There is a disclosure of a beneficial long position in FSCO shares, indicating a vested interest in the fund's performance [1]

Core Viewpoint - FS Credit Opportunities Corp. announced a 7.5% increase in its monthly distribution for January 2025, raising it to $0.0645 per share, which reflects a significant growth of approximately 51.8% since its listing in November 2022 [1][2]. Distribution Details - The January distribution will be paid on January 31, 2025, with an ex-date and record date of January 24, 2025 [4]. - The Fund has consistently covered its monthly distributions with net investment income throughout 2024 [2]. Financial Performance - The Fund's current annualized distribution yield is estimated at 10.1% based on net asset value (NAV) and 10.6% based on market price as of December 31, 2024 [2]. - The Fund has achieved a total return of 14.24% on NAV and 34.7% on market price year-to-date through December 31, 2024 [2]. Fund Overview - FS Credit Opportunities Corp. manages approximately $2.3 billion in assets, focusing on event-driven credit, special situations, private capital solutions, and other non-traditional credit opportunities [3]. - FS Investments, the parent company, manages over $82 billion in assets and provides a range of alternative asset classes and strategies [7].

Core Points - FS Credit Opportunities Corp. announced a monthly distribution of $0.06 per share for December 2024, payable on December 31, 2024 [1][3] - The current annualized distribution rate is 10.1% based on the Fund's net asset value (NAV) and 10.6% based on market price as of November 30, 2024 [2] - The Fund has generated a total return of 12.75% on NAV and 33.1% on market price year-to-date through November 30, 2024 [2] Fund Overview - FS Credit Opportunities Corp. manages approximately $2.2 billion in assets, focusing on event-driven credit, special situations, private capital solutions, and other non-traditional credit opportunities [3] - The Fund pays regular monthly cash distributions to common shareholders, which may be adjusted based on portfolio and market conditions [3] Distribution Schedule - The ex-date and record date for the December distribution is December 23, 2024, with the payment date set for December 31, 2024 [3]

Financial Data and Key Metrics Changes - The Fund delivered a net return of 3.35% based on NAV for Q3 2024, with a year-to-date net return of 12.31%, outperforming high yield bonds by approximately 430 basis points and loans by 580 basis points [9][10] - The Fund paid distributions of $0.18 per share in Q3 2024, fully covered by net investment income [12] - As of November 22, 2024, the Fund's annualized distribution yield was 10.3% based on NAV and 11.1% based on stock price [13] - Total return for FSCO shareholders was 2.6% in Q3 2024 and 27.4% year-to-date as of November 22, 2024 [14] Business Line Data and Key Metrics Changes - The Fund remained fully invested throughout Q3 2024, with purchases totaling approximately $270 million compared to sales and repayments of $233 million [24] - Approximately 59% of new investment activity was in privately originated investments, with 100% in first lien loans [26] - By asset type, 82% of the portfolio consisted of senior secured debt, while subordinated debt was 6% [26] Market Data and Key Metrics Changes - The US economy grew 5.5% in real terms since the Fed began raising interest rates in Q1 2022, with middle market companies showing an average revenue growth of nearly 13% as of June 2024 [16] - Privately originated senior loans returned 12.5% over the past year, marking the highest return outside of late 2020 and early 2021 [17] - High yield bonds returned 5.28%, outperforming senior secured loans by 324 basis points [19] - Loan defaults have risen to a 44-month high, while high yield bond default rates fell to a 26-month low as of the end of October [21] Company Strategy and Development Direction - The company focuses on businesses with strong cash flows and modest leverage profiles, investing in credits with appropriate loan-to-values [30][34] - The strategy includes leveraging the size and scale of FSCO to drive differentiated outcomes, with $2.2 billion in assets as of September 30, 2024 [35] - The company aims to dynamically allocate capital across public and private markets based on risk-return opportunities [37] Management's Comments on Operating Environment and Future Outlook - The management anticipates potential volatility driven by geopolitical conflicts and changes in US rates following the November election [29] - The portfolio is constructed to be durable over the long term, focusing on sectors with better downside protection and higher recoveries [30][34] - The management is cautious about making new investments due to tight credit spreads and weak covenants in the market [32] Other Important Information - Non-accruals are just under 3% of fair market value in the portfolio, consistent with historical levels [50] - The company successfully refinanced its leverage facility, reducing the term loan and revolver pricing [53] Q&A Session Summary Question: Insights on forward-looking dividend policy - The company will review its distribution policy based on the Fund's earnings profile, base rates, and credit spreads [42] Question: Relative value in private credit - Both private and public credit are tight, but private credit still offers a premium of 150 to 175 basis points [44] Question: Impact of weak covenants on deal volumes - Weak covenants are affecting the market, leading to increased scrutiny on transactions [45] Question: Future allocation in private credit - The company sees attractive opportunities in private credit due to spread premiums and significant dispersion [46] Question: Relative value subsectors in credit - Healthcare and media/entertainment are identified as sectors with potential for excess returns [47] Question: Macro environment outlook - Recent rate moves suggest base rates may remain higher, with a focus on floating rate assets in the portfolio [49] Question: Updates on non-accrual investments - Non-accruals are under 3% of fair market value, with one new non-accrual in LaserShip [50] Question: Fee structure relative to peers - The fee structure is justified by the nature of investments, with a significant portion in private credit [51] Question: Progress on refinancing capital structure - The company successfully refinanced its leverage facility, improving pricing and borrowing capacity [53]