News & Analysis

FSIC and CCT shareholders back BDCs’ merger

While the merger of the publicly traded vehicles is set to be completed, the combination of their non-traded BDCs has been put on hold amid low stock-trading prices.

By
Andrew Hedlund
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The shareholders of FS Investment Corporation and Corporate Capital Trust have backed a merger combining the vehicles.

Philadelphia-based FSIC and New York-based CCT put the matter to a vote of stockholders at their respective annual meetings on Monday. The deal will close before the end of the year, and the integrated entity, FS KKR Capital Corporation, will trade on the New York Stock Exchange under the ticker FSK.

CCT shareholders will receive FSIC shares equivalent to the net asset value per share of CCT stock they hold. There will also be a $0.40-a-share cash dividend.

FSIC and CCT reported a NAV per share at the end of the third quarter of $8.64 and $19.44, respectively. Those are down on the equivalent numbers posted the end of the second quarter and as of 30 September 2017.

FSIC was previously aligned with GSO Capital Partners; the Blackstone credit arm serving as the sub-advisor to FSIC.

In December 2017, FS Investments and KKR, the firms’ respective advisors, announced plans to form a partnership and hinted at plans to combine the publicly traded and non-traded BDCs. The two firms formally announced the merger of the listed vehicles in July.

FS Investments declined to comment. KKR did not respond to request for comment by press time.

Plans to merge the four private BDCs they oversee – FSIC II, III, IV and CCT II – were halted as trading prices for FSIC and CCT reached near historical lows.

“Given recent trading performance of both FSIC and CCT, we do not believe current conditions support such a consolidation,” Todd Builione, president of both CCT and FSIC, said on the firms’ respective earnings calls. “And even when these conditions improve, let me be clear by saying that consolidation of these non-traded BDCs with our listed BDC will need to be accretive to CCT shareholders, position the public-traded vehicle for success and be in the interest of all shareholders.”

Meanwhile, FSIC has hired Robert Stark as senior managing director of corporate development. The new role will see the JPMorgan veteran help navigate the merger.