FS Investments Announces Partnership with KKR
December 11, 2017 | FS Investments
FS Investments, a leading alternative investment manager, and KKR, a leading global investment firm, today announced that they have entered into an agreement to create the largest business development company (BDC) platform, with $18 billion in combined assets under management. The platform will offer differentiated origination capabilities and expertise in capital markets that provides sponsors and corporates with broad product solutions and delivers value to investors through enhanced deal flow and expanded proprietary investment opportunities.
“As the market has evolved, we’ve recognized the need to also evolve our approach to the business and we believe this partnership with KKR provides the scale, infrastructure and credit expertise necessary to succeed as an investor in the private credit markets,” said Michael Forman, Chairman and Chief Executive Officer of FS Investments. “We are excited to partner with KKR, a leader in the alternative asset management industry, to create the preeminent BDC platform.”
Todd Builione, Chief Executive Officer of CCT and President of KKR Credit and Markets, said, “We are very much looking forward to working closely with our partners at FS Investments. Through our collective scale, we believe we will be able to offer enhanced opportunities for value to our investors – and more holistic financing solutions to our sponsor and corporate clients. This partnership also represents a substantial milestone for KKR Credit, growing our assets under management by 33% to $55 billion.”
Under the terms of the agreement, FS Investments and KKR will seek stockholder approval for the partnership to provide investment advisory services to the BDCs that FS Investments sponsors, FS Investment Corporation (NYSE: FSIC) (FSIC), FS Investment Corporation II (FSIC II), FS Investment Corporation III (FSIC III), and FS Investment Corporation IV (FSIC IV), and to the BDC currently advised by KKR, Corporate Capital Trust, Inc. (NYSE: CCT) (CCT). Corporate Capital Trust II (CCT II), currently advised by CNL and sub-advised by KKR, will also be offered the opportunity to be included subject to board and shareholder approval. The FSIC funds will be able to co-invest with KKR’s other funds and accounts.
Timeframe for Transition
The board of directors or trustees have approved the new investment advisory agreements for each FSIC fund and CCT, and each fund will seek stockholder approval. The funds currently intend to begin soliciting stockholder approval of the new investment advisory agreements, as applicable, in January 2018.
KKR will provide non-advisory services to FS Investments through a sourcing and administrative services agreement until stockholder approvals for the new investment advisory agreements are obtained.
Ending GSO Blackstone Sub-Advising Relationship
As part of this transaction, FS Investments and GSO Capital Partners (GSO) have entered into an agreement to conclude their relationship with respect to all of FS Investments’ sponsored funds sub-advised by GSO. FS, GSO and KKR will work together to facilitate a smooth transition. GSO Blackstone sub-advises four BDCs in the FS Investments fund family, one of which is listed and three of which are not. Combined, those four companies have roughly $14 billion in assets.
“Our partnership with GSO has created significant value for our investors and borrowers,” added Forman. “We thank GSO for its sub-advisory services and commitment to ensure a seamless transfer of advisory responsibilities.”
In a release, Blackstone said that GSO will receive payments totaling $640 million from FS Investments, which are expected to be paid in 2018. The $640 million in cash proceeds represent approximately three years of revenue from the FS Funds, according to Blackstone, which will cease sub-advising the funds in April and launch a new, direct lending business.
FSIC Conference Call
FSIC will host a conference call at 9:00am (Eastern Time) today, December 11, 2017, to discuss today’s announcement. All interested parties are welcome to participate and can access the conference call by dialing (877) 443-2408 and using the conference ID 7356669 approximately 10 minutes prior to the call.
A joint slide presentation containing supplemental information from FSIC and CCT will be referenced on the conference call and also has been posted to www.fsinvestmentcorp.com and www.corporatecapitaltrust.com.
CCT II investors will receive information and company updates via postings to www.corporatecapitaltrustii.com.
CCT Conference Call
CCT will host a conference call at 10:00am (Eastern Time) today, December 11, 2017, to discuss today’s announcement. The conference call may be accessed by dialing (833) 818-6808 (U.S. callers) or +1(409) 350-3502 (non-U.S. callers); a passcode is not required. Additionally, the conference call will be broadcast live over the Internet and may be accessed at http://corporatecapitaltrust.com/investor-relations/events-presentations/. A replay of the live broadcast will be available on CCT’s website or by dialing (855) 859-2056 (U.S. callers) or +1(404) 537-3406 (non-U.S. callers), pass code 9698498, beginning approximately two hours after the broadcast.
Additional Announcements from FS Investments
Separately, FS Investments also announced that it has entered into an agreement to create a joint venture with EIG Global Energy Partners to provide investment advisory services to FS Energy and Power Fund, and the firm has hired a seasoned liquid credit portfolio manager to manage FS Global Credit Opportunities Fund.
Additional information regarding these announcements can be accessed at www.fsproxy.com and www.fsinvestments.com.
This announcement does not impact FS Investments’ other funds: FS Credit Income Fund, FS Credit Real Estate Income Trust, Inc., FS Energy Total Return Fund and FS Multi-Strategy Alternatives Fund.
About FS Investments
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 Washington, DC. Visit fsinvestments.com to learn more.
About KKR
KKR is a leading global investment firm that manages multiple alternative asset classes, including credit, private equity, energy, infrastructure and real estate, and, through its strategic manager partnerships, hedge funds. KKR aims to generate attractive investment returns 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 its partners’ capital 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. L.P. (NYSE: KKR), please visit KKR’s website at www.kkr.com and on Twitter @KKR_Co.
Learn more about FS Investments on the Blue Vault Sponsor Focus page.
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