FS KKR Advisor Merges Two Publicly Traded BDCs in All-Stock Deal

FS KKR Capital Corp. (NYSE: FSK) and FS KKR Capital Corp. II (NYSE: FSKR), both publicly traded business development companies (BDCs), have come together in a merger. The merged entity will henceforth operate as FS KKR Capital Corp. and retain the ticker ‘FSK’ for trading on the New York Stock Exchange.

The exchange ratio has been based on the net asset value (NAV) per share as at close of business on 14th June 2021, which was $26.77 for FSK and $25.42 for FSKR. Based on this, 0.9498 shares of FSK will be received by FSKR shareholders for every share held. As a result, the NAV of shares that the erstwhile holders of FSKR will have in FSK will be the same as the NAV of their shares in FSKR. No cash will be paid by FSK for fractional shares held.

Dan Pietrzak, chief investment officer and co-president of FSK, has justified the merger and said, “The combination creates a premier BDC lending franchise with approximately $15 billion in assets. With our portfolio diversification, enhanced access to capital markets, and over $3 billion of available investment capacity, we believe we are well-positioned as a leading lender to upper-middle market borrowers.”

FSKR Merger & Lawsuits

Both the merging companies, FSK and FSKR, were a part of FS/KKR Advisor LLC which, in turn, was formed as the result of a partnership between KKR Credit Advisors and FS Investments.

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FSK had been created as a merger of FS Investment Corporation (NYSE: FSIC) and Corporate Capital Trust Inc. (NYSE: CCT), both non-traded BDCs. FSK had started trading in December 2018.

Several investor lawsuits have been filed by investors against broker-dealers and financial advisors that sold the original FSKR non-traded BDCs.  Haselkorn & Thibaut, a law firm representing investors, alleges massive losses and set up a toll-free number for investors to call at 1-800-856-3352.

FSKR had listed on NYSE in June 2020 and was the result of the coming together of four non-traded BDCs. These were:

  1. FS Investment Corporation II
  2. FS Investment Corporation III
  3. FS Investment Corporation IV
  4. Corporate Capital Trust II
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In connection with the closing, a share repurchase program has been authorized by the FSK board. The company can repurchase outstanding shares up to the value of $100 million in the open market subject to the repurchase price is lower than the current NAV per share. The exact timing and price will be determined by FSK.

FSK shares saw a gain of 0.22% and closed at $22.62 on Wednesday. In after-hours trading, by when the announcement had been made, they jumped to $23.00, a gain of 1.68%.

FSKR shares, however, closed down 0.51% at $21.56. The previous close had been $21.67.

 

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