FS, KKR BDCs land $3.4bn revolver with syndicate of more than 20 lenders

The two financial firms plan will save in the aggregate of up to $10m due to lower interest rate spreads.

The suite of business development companies overseen by FS Investments and KKR have collectively arranged a $3.44 billion revolving credit facility, the largest in the BDC space, management said on Friday.

The announcement comes several weeks after FS and KKR announced intentions to combine their publicly traded BDCs, FS Investment Corporation and Corporate Capital Trust, respectively, into what would be the second-largest BDC with more than $8 billion in total assets.

More than 20 parties are lenders on the loan. JPMorgan Chase Bank, ING Capital, BMO Capital Markets Corporation and SunTrust Robinson Humphrey serve as joint lead arrangers and joint bookrunners. FSIC will save $2 million as a result of the refinancing, while CCT will save $7 million-$8 million, both as a result of lower interest-rate spreads, management said on the two BDCs’ earnings call.

FSIC posted a net loss of $0.13 a share for the second quarter, according to the firm’s quarterly report. Net investment income of $0.19 a share, which covered its quarterly dividend of the same amount, was offset by $0.32-a-share of unrealised credit losses. These came from write-downs, including a $19.75 million write-down of ThermaSys. which also contributed to a decline in its net asset value per share from $9.16 to $8.87. The stock was down 6.48 percent at $7.58 in intraday trading, at 2:50 p.m.

The firm’s total investment portfolio stood at $3.63 billion, according to Thomson Reuters BDC Collateral. A.P. Plasman is the FSIC’s largest position, consisting of 5.22 percent at fair value, respectively, the database showed. Less than 1 percent of its book was on non-accrual, both at fair value and at cost.

For its part, CCT posted earnings per share of $0.30, with net realised and unrealised losses of $0.09 a share partially offsetting net investment income per share of $0.39 cents a share. CCT’s net investment income fell just short of covering its $0.40-a-share dividend for the third quarter. Net asset value per share decreased from $19.72 as of 31 March to $19.58 as of 30 June. The stock traded down 1.72 percent at $16.61 on Friday as of 2:49 p.m.

Its aggregate investment book stood at $4.08 billion, BDC Collateral reported. Apart from its joint venture with Conway Capital, which made up 7.51 percent of its book, Home Partners of America was the firm’s largest single name, making up 3.27 percent of CCT’s portfolio. Its non-accruals stood at 1.45 percent and 2.93 percent at fair value and at cost, the Thomson Reuters database reported.

On 23 July, the FSIC and CCT said they would merge and trade under the FSIC ticker. The combined entity will charge a 1.5 percent management fee and a 20 percent incentive fee over a 7 percent hurdle rate.

Through the transaction, which will require the firms to seek approval from their shareholders, CCT shareholders would receive FSIC shares equal to the net asset value of the CCT stock currently in their portfolio. The merger is expected to close in December, the announcement said.