PHILADELPHIA and NEW YORK, Nov. 24,
2020 /PRNewswire/ -- FS/KKR Advisor, LLC (FS/KKR), a
partnership between FS Investments and KKR Credit Advisors (US),
today announced that FS KKR Capital Corp. (NYSE: FSK) and FS KKR
Capital Corp. II (NYSE: FSKR), two publicly traded business
development companies ("BDCs") advised by FS/KKR, have entered into
a definitive merger agreement. The merger of FSK and FSKR would
create one of the largest BDCs in the U.S., with $14.9 billion in assets under management,
$7.2 billion in net asset value
("NAV") and over $3 billion of
committed capital available to new investment opportunities, each
on a pro forma basis as of September 30,
2020.
Under the terms of the agreement, shareholders of FSKR will
receive a number of FSK shares with a NAV per share equal to the
NAV of the FSKR shares they hold, as determined shortly before
closing, subject to payment of cash in lieu of fractional shares at
the election of FSK. FSK will be the surviving entity and will
continue to be managed by FS/KKR and trade on the New York Stock
Exchange under the ticker symbol "FSK".
Michael Forman, Chairman and
Chief Executive Officer of both FSK and FSKR, commented, "The
merger of FSK and FSKR represents a significant step toward our
long-term strategic goal of creating a premier middle-market
lending franchise and industry leading BDC. The combined company
will have a well-diversified investment portfolio and enhanced
access to the investment grade debt markets. The combination will
also result in reduced overall expenses and a stronger dividend
profile."
The board of directors of FS KKR Capital Corp. and FS KKR
Capital Corp. II have unanimously approved the merger. The
transaction is expected to close during the second or third quarter
of 2021, subject to approval by FSK and FSKR shareholders and other
customary closing conditions. Prior to the closing of the merger,
FS/KKR currently expects FSK and FSKR each to continue to declare
quarterly distributions in the normal course of business, subject
to board approval.
The combined company's investment strategy will continue to
focus predominantly on senior secured debt investments. Based on
publicly available information as of September 30, 2020, on a pro forma basis,
approximately 72% of the combined company's investment portfolio
will be comprised of senior secured debt investments.
The transaction is expected to provide a range of benefits for
both FSK and FSKR shareholders, including:
- Increased Size and Scale: The combined company had,
on a pro forma basis, $14.9 billion
in assets as of September 30, 2020.
The combined company's investment portfolio consisted of 216
investments across 23 industries, as of September 30, 2020.
- Enhanced Balance Sheet Size: The combined company's
larger balance sheet may lead to improved access to the capital
markets over time.
- Cost Synergies: The merger is projected to generate
approximately $5 million in near term
annual synergies by eliminating duplicative internal and external
functions.
- Enhanced Liquidity and Institutional Investor
Visibility: The combined company is expected to benefit
from increased trading liquidity with respect to its common
stock. The combined company also may improve its ability to
attract a broader and more diverse investor base.
In connection with the merger, the board of FSK has also
approved an amended advisory agreement for the combined company.
Upon the closing, the combined company will permanently reduce its
income incentive fee to 17.5% from the existing level of 20.0%. The
hurdle rate will remain at 7.0%. In conjunction with the permanent
fee reduction, the look back provision in the existing FSK advisory
agreement will be removed. At the closing of the merger, FS/KKR has
agreed to waive $90 million of
incentive fees spread evenly over the first six quarters following
the closing. This waiver equates to $15
million per quarter.
RBC Capital Markets, LLC served as financial advisor to the
independent board members of FSK, and J.P. Morgan served as
financial advisor to the independent board members of FSKR.
Dechert LLP served as legal advisor to FS/KKR Advisor.
Conference Call Information
FS/KKR will host a conference call at 10:00am (Eastern Time), today, November 24, 2020, to discuss the announcement.
All interested parties are welcome to participate and can access
the conference call by dialing (833) 818-6808 and using the
conference ID 1368478 approximately 10 minutes prior to the call.
The conference call also will be webcast, which can be accessed
from the Investor Relations section of FSK's and FSKR's website at
www.fskkradvisor.com/fsk and www.fskkradvisor.com/fskr,
respectively, under Events and Presentations.
A replay of the call will be available shortly after the end of
the call by visiting the Investor Relations section of FSK's and
FSKR's website at www.fskkradvisor.com/fsk and
www.fskkradvisor.com/fskr, respectively, under Events and
Presentations or by dialing (855) 859-2056 and using conference ID
1368478.
About FS/KKR Advisor, LLC
FS/KKR Advisor, LLC (FS/KKR) is a partnership between FS
Investments and KKR Credit that serves as the investment adviser to
BDCs with approximately $15 billion in assets under
management as of September 30, 2020. The BDCs managed by
FS/KKR are FS KKR Capital Corp. (NYSE: FSK) and FS KKR Capital
Corp. II (NYSE: FSKR).
FS Investments is a leading asset manager dedicated to helping
individuals, financial professionals and institutions design better
portfolios. The firm provides access to alternative sources of
income and growth, and focuses on setting industry standards for
investor protection, education and transparency. FS Investments is
headquartered in Philadelphia, PA with offices
in New York, NY, Orlando, FL and Leawood,
KS. Visit www.fsinvestments.com to learn more.
KKR Credit is a subsidiary of KKR & Co. Inc., a leading
global investment firm that manages multiple alternative asset
classes, including private equity, credit and real assets, with
strategic manager partnerships that manage hedge funds. KKR aims to
generate attractive investment returns for its fund investors by
following a patient and disciplined investment approach, employing
world-class people, and driving growth and value creation with KKR
portfolio companies. KKR invests its own capital alongside the
capital it manages for fund investors and provides financing
solutions and investment opportunities through its capital markets
business. References to KKR's investments may include the
activities of its sponsored funds. For additional information about
KKR & Co. Inc. (NYSE: KKR), please visit KKR's website
at www.kkr.com and on Twitter @KKR_Co.
Contact Information
Institutional Investors
Robert
Paun
robert.paun@fsinvestments.com
Financial Advisors and Retail
Investors
877-628-8575
Media (FS Investments)
Melanie
Hemmert
media@fsinvestments.com
Media (KKR)
Kristi Huller / Cara Major / Miles
Radcliffe-Trenner
media@kkr.com
212-750-8300
Forward-Looking Statements
Statements included herein may constitute "forward-looking"
statements as that term is defined in Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended by the Private
Securities Litigation Reform Act of 1995, including statements with
regard to future events or the future performance or operations of
FSK and FSKR (collectively, the "Funds"). Words such as "believes,"
"expects," "projects," and "future" or similar expressions are
intended to identify forward-looking statements. These
forward-looking statements are subject to the inherent
uncertainties in predicting future results and conditions. Certain
factors could cause actual results to differ materially from those
projected in these forward-looking statements. Factors that could
cause actual results to differ materially include changes in the
economy, risks associated with possible disruption to a Fund's
operations or the economy generally due to terrorism, natural
disasters or pandemics such as COVID-19, future changes in laws or
regulations and conditions in a Fund's operating area, failure to
obtain requisite shareholder approval for the Proposals (as defined
below) set forth in the Proxy Statement (as defined below), failure
to consummate the business combination transaction involving the
Funds, uncertainties as to the timing of the consummation of the
business combination transaction involving the Funds, unexpected
costs, charges or expenses resulting from the business combination
transaction involving the Funds and failure to realize the
anticipated benefits of the business combination transaction
involving the Funds. Some of these factors are enumerated in the
filings the Funds made with the Securities and Exchange Commission
(the "SEC") and will also be contained in the Proxy Statement when
such document becomes available. The inclusion of forward-looking
statements should not be regarded as a representation that any
plans, estimates or expectations will be achieved. Any
forward-looking statements speak only as of the date of this
communication. Except as required by federal securities laws, the
Funds undertake no obligation to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. Readers are cautioned not to place
undue reliance on any of these forward-looking statements.
Additional Information and Where to Find It
This communication relates to a proposed business combination
involving the Funds, along with related proposals for which
shareholder approval will be sought (collectively, the
"Proposals"). In connection with the Proposals, the Funds intend to
file relevant materials with the SEC, including a registration
statement on Form N-14, which will include a
joint proxy statement of the Funds and a prospectus of FSK (the
"Proxy Statement"). This communication does not constitute an offer
to sell or the solicitation of an offer to buy any securities or a
solicitation of any vote or approval. No offer of securities shall
be made except by means of a prospectus meeting the requirements of
Section 10 of the Securities Act. SHAREHOLDERS OF THE
FUNDS ARE URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH THE SEC,
INCLUDING THE PROXY STATEMENT WHEN IT BECOMES AVAILABLE, AS WELL AS
ANY AMENDMENTS OR SUPPLEMENTS THERETO, BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION ABOUT THE FUNDS, THE BUSINESS COMBINATION
TRANSACTION INVOLVING THE FUNDS AND THE
PROPOSALS. Investors and security holders will be able to
obtain the documents filed with the SEC free of charge at the SEC's
web site, www.sec.gov, or from the FSK's website
at www.fskkradvisor.com/fsk or FSKR's website at
www.fskkradvisor.com/fskr.
Participants in the Solicitation
The Funds and their respective directors, executive officers and
certain other members of management and employees, including
employees of FS/KKR Advisor, LLC, Franklin Square Holdings, L.P.
(which does business as FS Investments), KKR Credit Advisors (US)
LLC and their respective affiliates, may be deemed to be
participants in the solicitation of proxies from the stockholders
of the Funds in connection with the Proposals. Information
regarding the persons who may, under the rules of the SEC, be
considered participants in the solicitation of the Funds'
stockholders in connection with the Proposals will be contained in
the Proxy Statement when such document becomes available. This
document may be obtained free of charge from the sources indicated
above.
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SOURCE FS/KKR Advisor, LLC
