Yesterday FS FS/KKR Advisor, LLC (FS/KKR) announced a partnership between FS Investments and KKR Credit Advisors. This will merge FS KKR Capital Corp. (FSK) and Capital Corp. II (FSKR) under the stock symbol of (NYSE: FSK) that will create one of the largest business development companies (BDCs) of $14.9B in AUM, $7.2B in net asset value (NAV), and over $3B of committed capital available to new investment opportunities. The merger is expected to take place in the 2nd quarter of 2021.
Currently FS KKR Capital Corp Stock (FSK) is trading 17.55 (+1.21) and FS KKR Capital Corp II (FSKR) is trading at $16.76 (+5.81). The rise in FSKR stock is due to the merger because of the perceived greater value that has had substantial downward price pressures. Stocks going through similar mergers are often very volatile and should make investors cautious before buying either stock.
Many investors that originally purchased FSKR as a non-traded REIT have lost substantial amounts of their investments. As result, there are several lawsuits against broker-dealers to recover losses. InvestmentFraudLawyers.com has opened up a toll-free hotline for investors at 1 888-628-5590.
Under the agreement, shareholders of FSKR will receive a number of FSK shares that will be equal to the NAV of the FSKR shares they hold. FSK will be the surviving manager under the name FS/KKR that will trade on the symbol of FSK on the New York Stock Exchange. The merger will likely reduce the overall expenses of each fund.
Michael Forman, Chairman, and CEO of both FSK and FSKR, stated, “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.”
A replay of yesterday’s conference call will be available soon by visiting the Investor Relations section of FSK’s and FSKR’s websites or by dialing (855) 859-2056 and using conference ID 1368478.
Investors that purchased FS KKR as non-traded BDC are seeing substantial losses of over 50%. This merger is unlikely to help them recover their losses. In fact, there are several lawsuits against broker-dealers and financial advisors that sold the original non-traded product. Investors looking to recover losses should consult an investment fraud lawyer.
Non-traded business development companies (BDCs) and real estate investment trusts (REITs) have continued to be very popular products with independent broker-dealers despite warnings from FINRA and other regulatory authorities.