Attached files
| file | filename |
|---|---|
| EX-99.1 - EX-99.1 - FS KKR Capital Corp | d704640dex991.htm |
| EX-99.2 - EX-99.2 - FS KKR Capital Corp | d704640dex992.htm |
| 8-K - FS INVESTMENT CORP--8-K - FS KKR Capital Corp | d704640d8k.htm |
 April
1, 2014 INVESTOR PRESENTATION
LISTING UPDATE
FS Investment Corporation
Exhibit 99.3
Franklin Square Capital Partners is not affiliated with Franklin Resources/Franklin
Templeton Investments or the Franklin Funds.
|
 Important
considerations 2
An investment in the common stock of FS Investment Corporation (FSIC, we or us) involves a high degree
of risk and may be considered speculative. The following are some of the risks an investment in
our common stock involves; however, you should carefully consider all of the
information
found
in
the
section
of
our
Forms
10-Q
and
10-K
filings
entitled
“Risk
Factors”
and
in
our
other
public
filings
before
deciding
to invest in shares of our common stock.
of offering proceeds or borrowings, which may constitute a return of capital and reduce the amount of
capital available to us for investment. This presentation is for informational purposes only and
is not an offer to buy or the solicitation of an offer to sell any securities of FSIC. The
tender offer will be made only pursuant to an offer to purchase, letter of transmittal and related materials (the Tender
Materials) that FSIC intends to distribute to its stockholders and file with the Securities and Exchange
Commission (SEC). The full details of the tender offer, including complete instructions on
how to tender shares of common stock, will be included in the Tender
Materials,
which
FSIC
will
distribute
to
stockholders
and
file
with
the
SEC
upon
the
commencement
of
the
tender
offer.
Stockholders are urged to carefully read the Tender Materials when they become available because they
will contain important information, including the terms and conditions of the tender offer.
Stockholders may obtain free copies of the Tender Materials that
FSIC
files
with
the
SEC
at
the
SEC’s
website
at:
www.sec.gov
or
by
calling
the
information
agent
who
will
be
identified
in
the
Tender Materials. In addition, stockholders may obtain free copies of FSIC’s filings with the
SEC from FSIC’s website at: www.fsinvestmentcorp.com
or
by
contacting
FSIC
at
Cira
Centre,
2929
Arch
Street,
Suite
675,
Philadelphia,
PA
19104
or
by
phone
at (877) 628-8575.
An
investment
strategy
focused
primarily
on
privately
held
companies
presents
certain
challenges,
including
the
lack
of
available
information
about
these
companies.
Investing
in
middle-market
companies
involves
a
number
of
significant
risks,
any
one
of
which
could
have
a
material
adverse
effect
on
our
operating
results.
A
lack
of
liquidity
in
certain
of
our
investments
may
adversely
affect
our
business.
We
are
subject
to
financial
market
risks,
including
changes
in
interest
rates,
which
may
have
a
substantial
negative
impact
on
our
investments.
We
have
borrowed
funds
to
make
investments,
which
increases
the
volatility
of
our
investments
and
may
increase
the
risks
of
investing
in
our
securities.
We
have
limited
operating
history
and
are
subject
to
the
business
risks
and
uncertainties
associated
with
any
new
business.
Our
distributions
may
be
funded
from
unlimited
amounts
of
offering
proceeds
or
borrowings,
which
may
constitute
a
return
of
capital
and
reduce
the
amount
of
capital
available
to
us
for
investment. |
 Forward-Looking
Statements Some of the statements in this presentation constitute forward-looking statements
because they relate to future events or the future performance or financial condition of FSIC.
The forward-looking statements contained in this presentation may include statements as to: our future operating results; our business
prospects
and
the
prospects
of
our
portfolio
companies;
the
impact
of
the
investments
that
we
expect
to
make;
the
ability
of
our
portfolio
companies
to
achieve their objectives; our current and expected financings and investments; the adequacy of our
cash resources, financing sources and working capital; the timing and amount of cash flows,
distributions and dividends, if any, from our portfolio companies; our contractual arrangements and relationships with
third parties; actual and potential conflicts of interest with FB Income Advisor, LLC (FB Advisor), FS
Investment Advisor, LLC, FS Energy and Power Fund, FSIC II Advisor, LLC, FS Investment
Corporation II, GSO / Blackstone Debt Funds Management LLC or any of their respective affiliates; the dependence of
our future success on the general economy and its effect on the industries in which we may invest; our
use of financial leverage; the ability of FB Advisor to locate
suitable
investments
for
us
and
to
monitor
and
administer
our
investments;
the
ability
of
FB
Advisor
or
its
affiliates
to
attract
and
retain
highly
talented
professionals; our ability to maintain our qualification as a regulated investment company (RIC) and
as a business development company (BDC); the impact on our business of the Dodd-Frank Wall
Street Reform and Consumer Protection Act and the rules and regulations issued thereunder; the effect of changes
to tax legislation and our tax position; the tax status of the enterprises in which we invest; our
ability to complete the listing of our shares of common stock on the New York Stock Exchange
LLC (NYSE); our ability to complete the related tender offer; and the price at which shares of our common stock may
trade on the NYSE, which may be higher or lower than the purchase price in the tender offer.
In addition, words such as “anticipate,”
“believe,”
“expect”
and “intend”
indicate a forward-looking statement, although not all forward-looking statements
include these words. The forward-looking statements contained in this presentation involve risks
and uncertainties. Our actual results could differ materially from those implied or expressed
in the forward-looking statements for any reason. Factors that could cause actual results to differ materially include:
changes
in
the
economy;
risks
associated
with
possible
disruption
in
our
operations
or
the
economy
generally
due
to
terrorism
or
natural
disasters;
and
future changes in laws or regulations and conditions in our operating areas.
We have based the forward-looking statements included in this presentation on information
available to us on the date of this presentation. Except as required by the federal securities
laws, we undertake no obligation to revise or update any forward-looking statements, whether as a result of new
information, future events or otherwise. You are advised to consult any additional disclosures that we
may make directly to stockholders or through reports that
we
have
filed
and
may
file
in
the
future
with
the
Securities
and
Exchange
Commission
(SEC),
including
annual
reports
on
Form
10-K,
quarterly
reports
on Form
10-Q and current reports on Form
8-K. In addition, information related to past performance, while helpful as an evaluative tool,
is not necessarily indicative
of
future
results,
the
achievement
of
which
cannot
be
assured.
Investors
should
not
view
the
past
performance
of
FSIC,
or
information
about
the
market, as indicative of FSIC’s future results.
Credit ratings may not reflect the potential impact of risks relating to the structure or trading of
FSIC’s common stock and are provided solely for informational purposes. Credit ratings are
not recommendations to buy, sell or hold any security, and may be revised or withdrawn at any time by the
issuing organization in its sole discretion. FSIC does not undertake any obligation to maintain the
ratings or to advise of any change in ratings. Each agency’s rating should be evaluated
independently of any other agency’s rating. An explanation of the significance of the ratings may be obtained from each
of the rating agencies.
3 |
 Phase 1
Phase 2
Phase 3
The Franklin Square BDC model
4
FSIC
LAUNCHES
2009
2010
2011
2012
2013
April 2014
COMPLETES
OFFERING
POTENTIAL
LISTING
Build portfolio
•
Raised $2.6 billion in equity capital
•
Advantageously used continuous offering model
to deploy capital over multi-year period
•
Continued transition to
direct originations
•
Optimized portfolio and
leverage facilities
•
Increased distribution
rate
•
List when market
conditions are
favorable
•
Provide new
investors access to
FSIC’s scale and
origination platform
Maximize value
Prepare for listing |
 Why
Franklin Square’s model is unique 5
INITIAL
PORTFOLIO
SIZES
OF
RECENT
BDC
IPOs
AND
THE
PROPOSED
FSIC
LISTING
1
1
Source: Public filings. Dollar amounts shown are in millions. The initial portfolio for
FSIC is based on the fair value of investments as of February 28, 2014. The initial portfolio for the other BDCs shown based on the
respective fair values of investments pro forma for the respective BDC’s initial
public offering. •
Scale provides competitive advantage for originations
•
Experienced management team
•
Fully-invested portfolio
$378.9
$67.5
$194.4
$187.8
$198.1
$210.5
$41.5
$0.0
$326.3
$197.4
$132.9
$123.6
$4,141.8
TCP Capital
Monroe
Capital
Corp.
Stellus
Capital
Investment
Corp.
OFS Capital
Corp.
WhiteHorse
Finance, Inc.
Garrison
Capital
Harvest
Capital
Credit Corp.
Fifth Street
Senior
Floating
Rate Corp.
Capitala
Finance
Corp.
American
Capital
Senior
Floating, Ltd.
CM Finance
Inc.
TriplePoint
Venture
Growth
FS
Investment
Corp.
4/4/2012
10/24/2012
11/7/2012
11/7/2012
12/4/2012
3/26/2013
5/2/2013
7/11/2013
9/25/2013
1/15/2014
2/5/2014
3/6/2014
Apr-14 |
 •
LEADING MANAGER OF
ALTERNATIVE INVESTMENTS
•
LEADING FRANCHISES
in credit,
private equity, real estate, hedge fund
solutions and financial advisory
•
BRAND AND SCALE
provides
exceptional access
•
BLACKSTONE’S GROUP
PURCHASING ORGANIZATION
available to FSIC portfolio companies
•
LEADING MANAGER OF
ALTERNATIVE CREDIT
focused on
non-investment grade corporate debt
•
GLOBAL PRESENCE
with over 250
employees
•
INVESTMENTS IN MORE THAN
1,100
corporate credits
•
$17.9 BILLION
in directly originated
transactions
•
LARGEST MANAGER OF BDCs
•
60 BDC PROFESSIONALS
•
SCALE
allows for one-stop financing
solutions and low cost structure
•
310 PORTFOLIO COMPANIES
across entire BDC platform
Platform provides a competitive advantage
SCALE
BRAND
INVESTMENT
EXPERTISE
COMPETITIVE
ADVANTAGE
6
1
2
3
2
2
2
Based on total balance sheet assets as of December 31, 2013. Includes the assets of
FSIC, FS Investment Corporation II (FSIC II) and FS Energy & Power Fund (FSEP).
As of December 31, 2013.
Includes portfolio companies of FSIC, FSIC II and FSEP as of December 31, 2013.
1
2
3 |
 FSIC’s Size Makes
It an Immediately Relevant BDC TOTAL ASSETS AND BOOK EQUITY OF SELECT BDCs
3rd largest
EXTERNALLY MANAGED BDC
2
7
2
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
$9,000
ARCC
PSEC
FSIC
AINV
FSC
SLRC
BKCC
GBDC
PNNT
NMFC
TICC
1
Total assets and book equity of the ten largest externally managed BDCs by total
assets. ARCC: Ares Capital Corporation; PSEC: Prospect Capital Corporation; FSIC: FS Investment Corporation; AINV: Apollo
Investment Corporation; FSC: Fifth Street Finance Corp.; SLRC: Solar Capital Ltd.;
BKCC: BlackRock Kelso Capital Corp.; GBDC: Golub Capital BDC, Inc.; PNNT: PennantPark Investment Corporation; NMFC: New Mountain
Finance Corporation; TICC: TICC Capital Corp. 2 Total assets and book equity shown in millions as of
February 28, 2014 for FSIC. Total assets and book equity shown in millions as of December 31, 2013 for ARCC, PSEC, AINV, FSC, SLRC, BKCC, GBDC, PNNT, NMFC and
TICC.
1
Total Assets (in millions)
Total Book Equity (in millions) |
 GREATER THAN 80% SENIOR DEBT:
Average distribution rate : 8.93%
Average premium to NAV
:
5%
LESS THAN 80% SENIOR DEBT: Average
distribution rate : 10.43%
Average discount to NAV : 1%
Senior debt = premium pricing
%
SENIOR
DEBT
8
80%
96%
92%
85%
83%
81%
75%
69%
62%
60%
51%
41%
0%
25%
50%
75%
100%
GBDC
NMFC
ARCC
FSIC
FSC
PSEC
TICC
BKCC
PNNT
AINV
SLRC
1
2
3
2
3
1
Senior debt includes first lien senior secured loans, second lien senior secured loans
and senior secured bonds. ARCC senior debt includes Subordinated Certificates of the Senior Secured Loan Program. GBDC senior
debt includes GBDC’s Senior Loan Facility. Senior debt based on fair value as of
February 28, 2014 for FSIC. Senior debt based on fair value as of December 31, 2013 for GBDC, NMFC, ARCC, FSC, PSEC, TICC,
BKCC, PNNT, AINV and SLRC. Sourced from public filings. 2 Distributions rates based on each BDC’s last declared
regular cash distribution and share price data as of March 31, 2014.
3
Average premium and discount to NAV based on each BDC’s last declared NAV and
share price data as of March 31, 2014. There can be no assurance that FSIC will trade at a premium to NAV if FSIC lists its shares.
FSIC’s actual share price upon any listing could be significantly higher or lower
than values shown.
|
 BDC
valuations and implied FSIC share price PREMIUM TO NAV
3
1
Premiums of the ten largest externally managed BDCs based on total assets. Share price
data as of March 31, 2014 and each BDC’s last reported NAV as reported in public filings. There can be no assurance that FSIC
will trade at a premium to NAV if FSIC lists its shares. FSIC’s actual share
price upon any listing could be significantly higher or lower than values shown.
2
Based on FSIC’s last reported NAV per share of $10.27 as of February 28,
2014. 3
Peer group includes GBDC, ARCC, NMFC and FSC.
9
Implied FSIC
share price
PEER AVERAGE
AVERAGE
FSC
BKCC
SLRC
AINV
TICC
PSEC
NMFC
PNNT
ARCC
GBDC
1.05x
1.01x
0.96x
0.96x
0.97x
0.97x
0.99x
1.01x
1.01x
1.02x
1.07x
1.17x
0.90x
0.95x
1.00x
1.05x
1.10x
1.15x
1.20x
1.25x
1.30x
$12.02
$10.99
$10.48
$10.37
$10.37
$10.17
$9.96
$9.96
$9.86
$9.86
$10.78
$10.37
(as
of
March
31,
2014)
1
2 |
 How FSIC continues to
add value 10
8.25%
target annualized
distribution rate
At listing
After listing
+
$0.20
special cash
distributions
1
Target annualized distribution rate based on FSIC’s monthly distribution per share
of $0.07425 declared in April 2014 and an assumed FSIC listing price of $10.80 per share. This assumed listing price of $10.80 per share
is hypothetical and is not intended to be indicative of the current or future value of
the shares of FSIC’s common stock at or following the time of listing. There can be no assurance a listing will occur. If a listing occurs, the
actual listing share price may be significantly higher or lower. Distributions
are not guaranteed and are subject to the discretion of the board of directors of FSIC.
2
On March 31, 2014, FSIC’s board of directors expressed its intent to declare two
special cash distributions, each in the amount of $0.10 per share, that will be paid on August 15, 2014 and November 14, 2014 to
stockholders of record as of July 31, 2014 and October 31, 2014, respectively. 1
2 |
 FSIC is an income
solution 11
DISTRIBUTION YIELDS ACROSS ASSET CLASSES
1
Target annualized distribution rate based on FSIC’s monthly distribution per share
of $0.07425 declared in April 2014 and an assumed FSIC listing price of $10.80 per share. This assumed listing price of $10.80 per share
is hypothetical and is not intended to be indicative of the current or future value of
the shares of FSIC’s common stock at or following the time of listing. There can be no assurance a listing will occur. If a listing occurs, the
actual listing share price may be significantly higher or lower. Distributions
are not guaranteed and are subject to the discretion of the board of directors of FSIC.
2
Dow Jones Dividend Index represented by the iShares Dow Jones Select Dividend ETF
(DVY), Treasury Inflation Protected Securities represented by the iShares Barclays TIPS Bond ETF (TIP), High Yield Bonds
represented by the iShares iBoxx $ High Yield Corporate Bond ETF (HYG), Syndicated Bank
Loans represented by the PowerShares Senior Loan Portfolio ETF (BKLN), Investment Grade Bonds represented by the
iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD), MLPs represented by the ALPS
Alerian MLP ETF (AMLP) and REITs represented by the Vanguard REIT Index ETF (VNQ). Distribution yields as of
March 31, 2014. This data is for illustrative purposes only. FSIC
Traditional
investment
options
Fixed income
options
Other income
alternatives
8.25%
3.29%
1.13%
5.89%
3.99%
3.55%
6.30%
2.57%
FSIC
Dow Jones
Dividend Index
Treasury
Inflation
Protected
Securities
High-yield
bonds
Syndicated
bank loans
Investment
grade bonds
MLPs
REITs
1
2
2
2 |
 FSIC's value proposition
12
PROVEN
STRATEGY
PROVEN
PORTFOLIO
PROVEN
PERFORMANCE
110%
cumulative
total
return
8.25%
target annualized
distribution
rate
16.0%
average annual
GAAP
return
•
Direct originations
•
Distributions
paid
from
net
investment
income
and
capital
gains
•
Fully
ramped
portfolio
•
Invest primarily in senior secured, floating rate loans of U.S. private companies
•
Generate income and capital appreciation
PROVEN
MANAGEMENT
1
2
2
3
3
1
Target annualized distribution rate based on FSIC’s monthly distribution of
$0.07425 per share declared in April 2014 and an assumed FSIC listing price of $10.80 per share. This assumed listing price of $10.80 per share is
hypothetical and is not intended to be indicative of the current or future value of the
shares of FSIC’s common stock at or following the time of listing. There can be no assurance a listing will occur. If a listing occurs, the
actual listing share price may be significantly higher or lower. Distributions
are not guaranteed and are subject to the discretion of the board of directors of FSIC.
2
Cumulative and average annual GAAP returns since inception through the quarter ended
December 31, 2013. These returns are calculated in accordance with GAAP using NAV performance and cash distributions declared
during the relevant period and represent the return on the fund’s investment
portfolio rather than an actual return to stockholders. Past performance is not indicative of future results.
3
As of December 31, 2013. |
 FSIC listing
details 13
TICKER
FSIC
EVENT
Listing shares on the NYSE
ANTICIPATED
TIMING
April 16, 2014
STOCKHOLDER LOCK-
UP
None; fully tradable at listing
MANAGEMENT LOCK-
UP
Expected for 180 days post listing
POST-LISTING
TENDER
Up to $250 million tender at expected listing
POTENTIAL POST-
TENDER SHARE
PURCHASES
CURRENT ANNUALIZED
DISTRIBUTION
$0.891 per share
SPECIAL CASH
DISTRIBUTIONS
$0.10 per share that may be paid on 8/15/14
$0.10 per share that may be paid on 11/14/14
•
An innovative offering model
•
Publicly-traded BDC premiums suggest potential for
share price appreciation
•
Potential special cash distributions
•
No longer an illiquid alternative
•
Compares well to other income-producing investments
•
Sets precedent for the BDC industry
•
Continued sponsor commitment
LISTING CONSIDERATIONS
2
3
5
4
1
1
There can be no assurance FSIC will list in this time frame or at all.
2
Terms of the FSIC tender offer, including size thereof, are subject to the discretion
of FSIC’s board of directors. 3
Franklin Square Holdings, members of management of FSIC and Franklin Square Holdings
and GSO Capital Partners do not intend to participate in the tender offer. There can be no assurance that Franklin Square, any
member
of
management
of
FSIC
and
Franklin
Square
Holdings
or
GSO
Capital
Partners
will
purchase
any shares.
Any
such
purchases
may
be
conducted
in
open
market
transactions
(which
may
include
purchases
pursuant to 10b5-1
plans),
subject
to
restrictions
under
applicable
law.
4
On March 31, 2014, FSIC’s board of directors determined to increase the amount of
the regular monthly cash distribution payable to stockholders of record from $0.0720 per share to $0.07425 per share effective as of the
regular cash distribution payable for April 2014. Distributions are not guaranteed and
are subject to the discretion of the board of directors of FSIC. 5
On
March
31,
2014,
FSIC’s
board
of
directors
expressed
its
intent
to
declare
two
special
cash
distributions,
each
in
the
amount
of
$0.10
per
share,
that
will
be
paid
on
August
15,
2014
and
November
14,
2014
to
stockholders
of
record
as
of
July
31,
2014
and
October
31,
2014,
respectively.
Up to $175 million being considered:
–
$100 million by Franklin Square Holdings
–
$25 million by members of management of
FSIC and Franklin Square Holdings
–
$50 million by GSO Capital Partners |
 FSIC listing operational review
14
ACCOUNT FREEZE
Expected to begin approximately two weeks prior to listing.
DISTRIBUTION
REINVESTMENT
PLAN (DRP)
Will be terminated shortly prior to listing subject to the occurrence of a
listing. After listing, a new DRP may be put into place so stockholders can
again reinvest monthly distributions in additional shares of FSIC. If the
current DRP is terminated, pending the adoption of a new DRP, stockholders that had elected to
participate in the current DRP will receive cash rather than shares in respect of
any cash distribution declared by FSIC.
FRACTIONAL
SHARES
The
mechanics
required
for
transferring
shares
in
order
for
FSIC
to
list
will
not
accept
fractional
shares.
If
an
investor
owns
any
fractional
shares
in
FSIC,
FSIC
expects
to
“round
up”
the
number
of
fractional
shares
held by stockholders immediately prior to a listing to the nearest whole number of
shares. |
 What should you do to
prepare your clients for a listing? 2. Hold
3. Sell
15
1
FSIC and its advisors and representatives are not making any recommendation to you as to whether to
tender or refrain from tendering your shares or regarding price or prices at which you may
choose to tender your shares. You are urged to discuss your decision with your tax and financial advisor.
1. Buy
BUY MORE SHARES
HOLD SHARES
SELL
OR
TENDER
SHARES
Increases investment in FSIC without
an initial sales load
Same considerations as holding
•
•
Continued opportunity to receive
current income
Participate in potential special cash
distributions
•
•
Participate in potential market upside and
future growth of FSIC
Investment re-classified from alternative
to domestic equity
Ability to liquidate at time of your choosing
Not a taxable event
•
•
•
•
Loss of current income
Loss of opportunity to receive special cash
distributions
Loss of potential market upside and future
growth of FSIC
Open market sales subject to market volatility
Taxable event
•
•
•
•
•
•
If necessary, move shares to brokerage
account, at advisor and investor’s
convenience
Buy additional shares at market price at
time of your choosing
•
If necessary, move shares to brokerage
account, at advisor and investor’s
convenience
•
•
Consult tax advisor
The post-listing tender offer, if any, will be
made only pursuant to an offer to purchase,
letter of transmittal and related materials (the
Tender Materials) that FSIC intends to
distribute to its stockholders and file with the
SEC. The full details of the tender offer,
including complete instructions on how to
tender shares of common stock, will be
included in the Tender Materials, which FSIC
will distribute to stockholders and file with the
SEC upon the commencement of the tender
offer.
•
1 |
 For additional
information 16
FOR GENERAL FSIC QUESTIONS, CONTACT FRANKLIN SQUARE AT
877-628-8575, option 2
FRANKLIN SQUARE CLIENT SERVICES AT
877-628-8575, option 3
EMAIL
ASKFSIC@franklinsquare.com
WEB
Consult www.FSIClist.com |