KKR and FS set to merge BDCs, making world’s second largest

The two firms have been operating their two public BDCs and four private BDCs under a single advisory agreement since April.

KKR and FS Investments, formerly married by a joint business development company management agreement, are set to unite their publicly traded BDCs – Corporate Capital Trust and FS Investment Corporation, respectively – into a single entity, the firms announced on Monday.

The two alternative lenders will have combined total assets of $8.34 billion as of 31 March, and a majority of its portfolio – about 70 percent – will consist of senior debt. The resulting combination will be the second largest BDC behind Ares Capital Corporation, which has $12.69 billion in total assets. The CCT-FSIC BDC will charge a 1.5 percent management fee and a 20 percent incentive fee over a 7 percent hurdle rate.

Neither firm could immediately be reached for comment.

 

 

New York-based KKR and Philadelphia-based FS joined forces in April when the latter parted ways with its former sub-advisor, GSO Capital Partners. KKR and FS became joint advisors to KKR’s two BDCs (one public, one private) and FS’s four BDCs (one public, three private) focused on corporate credit.

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.