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Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 10-Q

 

 

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2014.

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER: 814-00757

 

 

FS Investment Corporation

(Exact name of registrant as specified in its charter)

 

 

 

Maryland   26-1630040

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

Cira Centre

2929 Arch Street, Suite 675

Philadelphia, Pennsylvania

  19104
(Address of principal executive office)   (Zip Code)

Registrant’s telephone number, including area code: (215) 495-1150

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for shorter period that the registrant was required to submit and post such files).    Yes  ¨    No  ¨.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer   ¨    Accelerated filer   ¨
Non-accelerated filer   x (Do not check if a smaller reporting company)    Smaller reporting company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x.

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

The issuer has 240,210,060 shares of common stock outstanding as of October 31, 2014.

 

 

 


Table of Contents

TABLE OF CONTENTS

 

          Page  

PART I—FINANCIAL INFORMATION

  

ITEM 1.

   FINANCIAL STATEMENTS      1   
  

Consolidated Balance Sheets as of September 30, 2014 (Unaudited) and December 31, 2013

     1   
  

Unaudited Consolidated Statements of Operations for the three and nine months ended September 30, 2014 and 2013

     2   
  

Unaudited Consolidated Statements of Changes in Net Assets for the nine months ended September 30, 2014 and 2013

     3   
  

Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2014 and 2013

     4   
  

Consolidated Schedules of Investments as of September 30, 2014 (Unaudited) and December 31, 2013

     5   
  

Notes to Unaudited Consolidated Financial Statements

     23   

ITEM 2.

  

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     56   

ITEM 3.

   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK      82   

ITEM 4.

   CONTROLS AND PROCEDURES      82   

PART II—OTHER INFORMATION

  

ITEM 1.

   LEGAL PROCEEDINGS      84   

ITEM 1A.

   RISK FACTORS      84   

ITEM 2.

   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS      84   

ITEM 3.

   DEFAULTS UPON SENIOR SECURITIES      84   

ITEM 4.

   MINE SAFETY DISCLOSURES      84   

ITEM 5.

   OTHER INFORMATION      85   

ITEM 6.

   EXHIBITS      85   
   SIGNATURES      90   


Table of Contents

PART I—FINANCIAL INFORMATION

 

Item 1. Financial Statements.

FS Investment Corporation

Consolidated Balance Sheets

(in thousands, except share and per share amounts)

 

 

 

     September 30, 2014
(Unaudited)
     December 31,
2013
 

Assets

     

Investments, at fair value—unaffiliated (amortized cost—$4,210,003 and $4,054,085, respectively)

   $ 4,299,639       $ 4,137,581   

Investments, at fair value—affiliated (amortized cost—$17,931 and $0, respectively)

     16,885         —     

Cash

     179,984         227,328   

Receivable for investments sold and repaid

     9,502         26,722   

Interest receivable

     52,650         47,622   

Deferred financing costs

     10,962         5,168   

Prepaid expenses and other assets

     1,033         156   
  

 

 

    

 

 

 

Total assets

   $ 4,570,655       $ 4,444,577   
  

 

 

    

 

 

 

Liabilities

     

Payable for investments purchased

   $ 105,425       $ 23,423   

Credit facilities payable

     564,294         723,682   

Unsecured notes payable

     400,000         —     

Repurchase agreement payable(1)

     950,000         950,000   

Stockholder distributions payable

     17,819         18,671   

Management fees payable

     20,009         22,700   

Accrued capital gains incentive fees(2)

     36,737         32,133   

Subordinated income incentive fees payable(2)

     14,794         14,303   

Administrative services expense payable

     988         1,153   

Interest payable

     12,801         10,563   

Directors’ fees payable

     292         254   

Other accrued expenses and liabilities

     1,712         6,703   
  

 

 

    

 

 

 

Total liabilities

     2,124,871         1,803,585   
  

 

 

    

 

 

 

Commitments and contingencies(3)

     

Stockholders’ equity

     

Preferred stock, $0.001 par value, 50,000,000 shares authorized, none issued and outstanding

     —           —     

Common stock, $0.001 par value, 450,000,000 shares authorized, 240,001,859 and 259,320,161 shares issued and outstanding, respectively

     240         259   

Capital in excess of par value

     2,256,843         2,466,753   

Accumulated undistributed net realized gains on investments and gain/loss on foreign currency(4)

     9,431         55,344   

Accumulated undistributed (distributions in excess of) net investment income(4)

     90,655         35,322   

Net unrealized appreciation (depreciation) on investments and unrealized gain/loss on foreign currency

     88,615         83,314   
  

 

 

    

 

 

 

Total stockholders’ equity

     2,445,784         2,640,992   
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 4,570,655       $ 4,444,577   
  

 

 

    

 

 

 

Net asset value per share of common stock at period end

   $ 10.19       $ 10.18   

 

(1) See Note 8 for a discussion of the Company’s repurchase transaction.

 

(2) See Note 2 and Note 4 for a discussion of the methodology employed by the Company in calculating the capital gains incentive fees and subordinated income incentive fees.

 

(3) See Note 9 for a discussion of the Company’s commitments and contingencies.

 

(4) See Note 5 for a discussion of the sources of distributions paid by the Company.

See notes to unaudited consolidated financial statements.

 

1


Table of Contents

FS Investment Corporation

Unaudited Consolidated Statements of Operations

(in thousands, except share and per share amounts)

 

 

 

    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
    2014     2013     2014     2013  

Investment income

       

Interest income—unaffiliated

  $ 104,823      $ 109,886      $ 311,630      $ 317,603   

Fee income—unaffiliated

    10,606        11,975        39,141        30,181   

Dividend income—unaffiliated

    488        1,446        663        9,916   
 

 

 

   

 

 

   

 

 

   

 

 

 

Total investment income

    115,917        123,307        351,434        357,700   
 

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

       

Management fees(1)

    20,000        22,720        65,066        67,541   

Capital gains incentive fees(2)

    (910     (1,548     6,194        (621

Subordinated income incentive fees(2)

    14,794        16,555        45,033        47,950   

Administrative services expenses

    1,202        1,243        3,591        4,034   

Stock transfer agent fees

    4        610        1,001        2,400   

Accounting and administrative fees

    172        343        824        1,063   

Interest expense

    18,940        13,098        45,769        37,110   

Directors’ fees

    266        241        795        689   

Listing advisory fees

    —          —          5,043        —     

Other general and administrative expenses

    1,346        2,273        7,002        4,978   
 

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

    55,814        55,535        180,318        165,144   

Management fee waiver(1)

    —          —          (2,837     —     
 

 

 

   

 

 

   

 

 

   

 

 

 

Net expenses

    55,814        55,535        177,481        165,144   
 

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income

    60,103        67,772        173,953        192,556   
 

 

 

   

 

 

   

 

 

   

 

 

 

Realized and unrealized gain/loss

       

Net realized gain (loss) on investments—unaffiliated

    5,421        6,602        25,959        37,220   

Net realized gain (loss) on foreign currency

    (338     70        (243     (32

Net change in unrealized appreciation (depreciation) on investments—unaffiliated

    (8,901     (14,857     6,140        (40,837

Net change in unrealized appreciation (depreciation) on investments—affiliated

    (747     —          (1,046     —     

Net change in unrealized gain (loss) on foreign currency

    61        30        207        125   
 

 

 

   

 

 

   

 

 

   

 

 

 

Total net realized and unrealized gain (loss) on investments

    (4,504     (8,155     31,017        (3,524
 

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in net assets resulting from operations

  $ 55,599      $ 59,617      $ 204,970      $ 189,032   
 

 

 

   

 

 

   

 

 

   

 

 

 

Per share information—basic and diluted

       

Net increase (decrease) in net assets resulting from operations (Earnings per Share)

  $ 0.23      $ 0.23      $ 0.81      $ 0.75   
 

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding

    239,548,922        256,108,444        251,603,035        254,322,277   
 

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) See Note 4 for a discussion of the waiver by FB Income Advisor LLC, the Company’s investment adviser, of certain management fees to which it was otherwise entitled during the applicable period.

 

(2) See Note 2 and Note 4 for a discussion of the methodology employed by the Company in calculating the capital gains incentive fees and subordinated income incentive fees.

See notes to unaudited consolidated financial statements.

 

2


Table of Contents

FS Investment Corporation

Unaudited Consolidated Statements of Changes in Net Assets

(in thousands)

 

 

 

     Nine Months Ended
September 30,
 
     2014     2013  

Operations

    

Net investment income (loss)

   $ 173,953      $ 192,556   

Net realized gain (loss) on investments and foreign currency

     25,716        37,188   

Net change in unrealized appreciation (depreciation) on investments

     5,094        (40,837

Net change in unrealized gain (loss) on foreign currency

     207        125   
  

 

 

   

 

 

 

Net increase (decrease) in net assets resulting from operations

     204,970        189,032   
  

 

 

   

 

 

 

Stockholder distributions(1)

    

Distributions from net investment income

     (118,620     (124,747

Distributions from net realized gain on investments

     (71,629     (32,174
  

 

 

   

 

 

 

Net decrease in net assets resulting from stockholder distributions

     (190,249     (156,921
  

 

 

   

 

 

 

Capital share transactions(2)

    

Reinvestment of stockholder distributions

     48,974        80,950   

Repurchases of common stock

     (258,903     (27,109
  

 

 

   

 

 

 

Net increase (decrease) in net assets resulting from capital share transactions

     (209,929     53,841   
  

 

 

   

 

 

 

Total increase (decrease) in net assets

     (195,208     85,952   

Net assets at beginning of period

     2,640,992        2,511,738   
  

 

 

   

 

 

 

Net assets at end of period

   $ 2,445,784      $ 2,597,690   
  

 

 

   

 

 

 

Accumulated undistributed (distributions in excess of) net investment income(1)

   $ 90,655      $ 72,116   
  

 

 

   

 

 

 

 

(1) See Note 5 for a discussion of the sources of distributions paid by the Company.

 

(2) See Note 3 for a discussion of the Company’s capital share transactions.

See notes to unaudited consolidated financial statements.

 

3


Table of Contents

FS Investment Corporation

Unaudited Consolidated Statements of Cash Flows

(in thousands)

 

 

 

     Nine Months Ended
September 30,
 
     2014     2013  

Cash flows from operating activities

    

Net increase (decrease) in net assets resulting from operations

   $ 204,970      $ 189,032   

Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:

    

Purchases of investments

     (1,641,221     (2,204,560

Paid-in-kind interest

     (10,376     (5,437

Proceeds from sales and repayments of investments

     1,523,890        1,974,977   

Net realized (gain) loss on investments

     (25,959     (37,220

Net change in unrealized (appreciation) depreciation on investments

     (5,094     40,837   

Accretion of discount

     (20,183     (34,676

Amortization of deferred financing costs

     4,464        1,978   

(Increase) decrease in receivable for investments sold and repaid

     17,220        (65,181

(Increase) decrease in interest receivable

     (5,028     (6,364

(Increase) decrease in prepaid expenses and other assets

     (877     358   

Increase (decrease) in payable for investments purchased

     82,002        (34,772

Increase (decrease) in management fees payable

     (2,691     1,301   

Increase (decrease) in accrued capital gains incentive fees

     4,604        (12,412

Increase (decrease) in subordinated income incentive fees payable

     491        3,162   

Increase (decrease) in administrative services expense payable

     (165     414   

Increase (decrease) in interest payable

     2,238        303   

Increase (decrease) in directors’ fees payable

     38        229   

Increase (decrease) in other accrued expenses and liabilities

     (4,991     (1,072
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     123,332        (189,103
  

 

 

   

 

 

 

Cash flows from financing activities

    

Reinvestment of stockholder distributions

     48,974        80,950   

Repurchases of common stock

     (258,903     (27,109

Stockholder distributions

     (191,101     (155,985

Borrowings under credit facilities(1)

     288,686        13,375   

Borrowings under unsecured notes(1)

     400,000        —     

Repayments under credit facilities(1)

     (448,074     —     

Borrowings under repurchase agreement(2)

     —          229,416   

Deferred financing costs paid

     (10,258     —     
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (170,676     140,647   
  

 

 

   

 

 

 

Total increase (decrease) in cash

     (47,344     (48,456

Cash at beginning of period

     227,328        338,895   
  

 

 

   

 

 

 

Cash at end of period

   $ 179,984      $ 290,439   
  

 

 

   

 

 

 

Supplemental disclosure

    

Local and excise taxes paid

   $ 5,407      $ 1,298   
  

 

 

   

 

 

 

 

(1) See Note 8 for a discussion of the Company’s credit facilities and unsecured notes. During the nine months ended September 30, 2014 and 2013, the Company paid $15,653 and $17,844, respectively, in interest expense on the credit facilities.

 

(2) See Note 8 for a discussion of the Company’s repurchase transaction. During the nine months ended September 30, 2014 and 2013, the Company paid $23,414 and $16,985, respectively, in interest expense pursuant to the repurchase agreement.

See notes to unaudited consolidated financial statements.

 

4


Table of Contents

FS Investment Corporation

Unaudited Consolidated Schedule of Investments

As of September 30, 2014

(in thousands, except share amounts)

 

 

 

Portfolio Company(a)

  Footnotes  

Industry

  Rate(b)   Floor    Maturity   Principal
Amount(c)
    Amortized
Cost
    Fair
Value(d)
 

Senior Secured Loans—First Lien—95.0%

                

A.P. Plasman Inc.

  (f)(h)(i)(k)   Capital Goods   L+775   1.0%    12/29/19   $ 111,266      $ 111,266      $ 111,266   

A.P. Plasman Inc.

  (i)(k)(p)   Capital Goods   L+775   1.0%    12/29/19     65,000        65,000        65,000   

AccentCare, Inc.

  (i)   Health Care Equipment & Services   L+500   1.5%    12/22/16     2,002        1,889        1,752   

American Racing and Entertainment, LLC

  (f)   Consumer Services   L+700      7/1/15     12,750        12,750        12,735   

American Racing and Entertainment, LLC

  (f)   Consumer Services   9.0%      7/1/15     7,750        7,750        7,789   

American Racing and Entertainment, LLC

  (f)   Consumer Services   L+800   1.0%    7/1/18     4,915        4,915        4,946   

American Racing and Entertainment, LLC

  (f)(p)   Consumer Services   L+800   1.0%    7/1/18     1,585        1,585        1,587   

AP Exhaust Acquisition, LLC

  (h)   Automobiles & Components   L+775   1.5%    1/16/21     15,000        15,000        14,850   

Aspect Software, Inc.

  (i)   Software & Services   L+550   1.8%    5/7/16     6,188        6,099        6,194   

Attachmate Corp.

  (i)   Software & Services   L+575   1.5%    11/22/17     5,381        5,313        5,397   

Azure Midstream Energy LLC

  (i)   Energy   L+550   1.0%    11/15/18     4,331        4,276        4,299   

Boomerang Tube, LLC

  (h)(i)   Energy   L+950   1.5%    10/11/17     18,115        17,741        16,259   

BPA Laboratories, Inc.

  (i)   Pharmaceuticals, Biotechnology & Life Sciences   2.5%      7/3/17     682        623        619   

Cadillac Jack, Inc.

  (f)(h)(i)(k)   Consumer Services   L+850   1.0%    5/15/19     74,638        73,445        77,157   

Caesars Entertainment Operating Co., Inc.

  (e)(f)(k)   Consumer Services   L+575      3/1/17     12,621        11,768        11,521   

Caesars Entertainment Operating Co., Inc.

  (f)(k)   Consumer Services   L+675      3/1/17     2,363        2,258        2,161   

Caesars Entertainment Operating Co., Inc.

  (e)(f)(g)(i)(k)   Consumer Services   L+875   1.0%    3/1/17     84,807        84,200        80,597   

Caesars Entertainment Resort Properties, LLC

  (e)(f)(i)   Consumer Services   L+600   1.0%    10/11/20     72,360        68,462        69,465   

Capital Vision Services, LLC

  (f)(h)(i)   Health Care Equipment & Services   L+725   1.3%    12/3/17     24,255        24,255        24,255   

Cengage Learning Acquisitions, Inc.

  (i)   Media   L+600   1.0%    3/6/20     6,723        6,692        6,731   

Corel Corp.

  (f)(g)(h)(i)(k)   Software & Services   L+825      6/7/19     158,000        158,000        158,000   

Corel Corp.

  (i)(k)   Software & Services   Prime+725      6/7/18     5,000        5,000        5,000   

Corel Corp.

  (i)(k)(p)   Software & Services   Prime+725      6/7/18     5,000        5,000        5,000   

Corner Investment PropCo, LLC

  (f)(i)   Consumer Services   L+975   1.3%    11/2/19     44,750        44,915        45,533   

CoSentry.Net, LLC

  (f)(h)(i)   Software & Services   L+800   1.3%    12/31/19     58,091        58,091        58,382   

Crestwood Holdings LLC

  (i)   Energy   L+600   1.0%    6/19/19     5,523        5,501        5,597   

Dent Wizard International Corp.

  (f)(h)(i)   Commercial & Professional Services   L+800      4/25/19     133,917        132,871        136,260   

Dent Wizard International Corp.

  (i)(p)   Commercial & Professional Services   Prime+325      4/25/19     5,000        5,000        5,000   

Eastman Kodak Co.

  (i)   Consumer Durables & Apparel   L+625   1.0%    9/3/19     10,773        10,589        10,867   

EnergySolutions, LLC

  (i)   Energy   L+575   1.0%    5/29/20     4,353        4,270        4,425   

ERC Ireland Holdings Ltd.

  (g)(i)(k)   Telecommunication Services   EURIBOR+450      9/30/19   10,304        11,278        12,571   

Extreme Reach, Inc.

  (i)   Media   L+575   1.0%    1/24/20   $ 4,014        3,960        4,034   

FairPoint Communications, Inc.

  (i)(k)   Telecommunication Services   L+625   1.3%    2/14/19     12,928        12,827        13,146   

 

See notes to unaudited consolidated financial statements.

 

5


Table of Contents

FS Investment Corporation

Unaudited Consolidated Schedule of Investments (continued)

As of September 30, 2014

(in thousands, except share amounts)

 

 

 

Portfolio Company(a)

  Footnotes  

Industry

  Rate(b)   Floor   Maturity   Principal
Amount(c)
    Amortized
Cost
    Fair
Value(d)
 

Flanders Corp.

  (f)(h)   Capital Goods   L+950   1.5%   5/14/18   $ 36,493      $ 35,900      $ 36,994   

FR Utility Services LLC

  (i)   Energy   L+575   1.0%   10/18/19     7,802        7,746        7,841   

Fram Group Holdings Inc.

  (i)   Automobiles & Components   L+500   1.5%   7/29/17     1,337        1,322        1,340   

Fronton Holdings, LLC

  (f)   Consumer Services   15.0%     4/30/19     3,736        3,701        3,736   

HBC Solutions, Inc.

  (f)(g)(i)   Media   L+875   1.5%   2/4/18     85,557        85,557        85,985   

iHeartCommunications, Inc.

  (f)(i)   Media   L+365     1/29/16     7,789        7,015        7,730   

Industrial Group Intermediate Holdings, LLC

  (h)   Materials   L+800   1.3%   5/31/20     13,929        13,929        13,929   

Industry City TI Lessor, L.P.

  (i)   Consumer Services   10.3%     6/30/26     24,563        24,563        24,563   

Infiltrator Systems, Inc.

  (f)(g)(h)(i)   Capital Goods   L+821   1.3%   6/27/18     200,000        200,000        200,000   

Intralinks, Inc.

  (f)(i)(k)   Software & Services   L+525   2.0%   2/24/19     14,925        14,792        14,850   

Lantiq Deutschland GmbH

  (f)(i)(k)   Software & Services   L+900   2.0%   11/16/15     12,425        12,061        12,363   

Larchmont Resources, LLC

  (h)   Energy   L+725   1.0%   8/7/19     11,004        10,911        11,196   

Leading Edge Aviation Services, Inc.

  (f)(g)(h)(i)   Capital Goods   L+875   1.5%   6/30/19     33,188        32,849        33,188   

Leading Edge Aviation Services, Inc.

  (f)(g)(p)   Capital Goods   L+875   1.5%   6/30/19     1,000        1,000        1,000   

LEAS Acquisition Co Ltd.

  (g)(k)   Capital Goods   L+875   1.5%   6/30/19     10,764        10,764        10,764   

LEAS Acquisition Co Ltd.

  (i)(k)   Capital Goods   L+875   1.5%   6/30/19   29,625        40,558        37,407   

Leedsworld Inc.

  (i)   Retailing   L+475   1.3%   6/28/19   $ 9,647        9,571        9,635   

Maritime Telecommunications Network, Inc.

  (f)   Telecommunication Services   L+600   1.5%   3/4/16     3,772        3,754        3,602   

MB Precision Holdings LLC

  (h)   Capital Goods   L+725   1.3%   1/23/20     13,399        13,399        13,265   

Micronics, Inc.

  (h)(i)   Capital Goods   L+800   1.3%   3/28/19     22,326        21,972        22,550   

MMI International Ltd.

  (i)(k)   Technology Hardware & Equipment   L+600   1.3%   11/20/18     5,678        5,546        5,692   

MMM Holdings, Inc.

  (h)(i)   Health Care Equipment & Services   L+825   1.5%   12/12/17     9,227        9,101        9,221   

MModal Inc.

  (i)   Health Care Equipment & Services   L+775   1.3%   1/31/20     4,322        4,301        4,322   

Mood Media Corp.

  (i)(k)   Media   L+600   1.0%   5/1/19     7,699        7,651        7,584   

MSO of Puerto Rico, Inc.

  (h)(i)   Health Care Equipment & Services   L+825   1.5%   12/12/17     6,708        6,617        6,704   

New Star Metals Inc.

  (f)(h)(i)   Capital Goods   L+800   1.3%   3/20/20     36,675        36,675        36,675   

Nova Wildcat Amerock, LLC

  (h)(i)   Consumer Durables & Apparel   L+814   1.3%   9/10/19     20,000        20,000        19,800   

Panda Sherman Power, LLC

  (f)(i)   Energy   L+750   1.5%   9/14/18     9,252        9,192        9,466   

Panda Temple Power, LLC (TLA)

  (f)   Energy   L+700   1.5%   7/17/18     2,583        2,583        2,640   

PHRC License, LLC

  (g)(h)(i)   Consumer Services   L+900   1.5%   8/14/20     45,000        45,000        45,000   

Princeton Review, Inc.

  (i)   Consumer Services   L+550   1.5%   12/7/14     916        906        848   

Production Resource Group, LLC

  (h)(i)   Media   L+750   1.0%   7/23/19     32,500        32,500        31,769   

PRV Aerospace, LLC

  (i)   Capital Goods   L+525   1.3%   5/9/18     4,831        4,823        4,819   

Reddy Ice Holdings, Inc.

  (i)   Food & Staples Retailing   L+550   1.3%   5/1/19     1,173        1,163        1,120   

 

See notes to unaudited consolidated financial statements.

 

6


Table of Contents

FS Investment Corporation

Unaudited Consolidated Schedule of Investments (continued)

As of September 30, 2014

(in thousands, except share amounts)

 

 

 

Portfolio Company(a)

  Footnotes  

Industry

  Rate(b)   Floor    Maturity   Principal
Amount(c)
    Amortized
Cost
    Fair
Value(d)
 

Safariland, LLC

  (f)(h)(i)   Capital Goods   L+800   1.3%    9/20/19   $ 152,000      $ 152,000      $ 155,040   

Shell Topco L.P.

  (h)(i)   Materials   L+750   1.5%    9/28/18     33,000        32,649        33,495   

Sirius Computer Solutions, Inc.

  (i)   Software & Services   L+575   1.3%    12/7/18     7,519        7,464        7,623   

Smile Brands Group Inc.

  (i)   Health Care Equipment & Services   L+625   1.3%    8/15/19     25,295        24,820        24,810   

Sorenson Communications, Inc.

  (e)(f)(h)(i)   Telecommunication Services   L+575   2.3%    4/30/20     93,735        93,297        96,078   

Southcross Holdings Borrower LP

  (i)   Energy   L+500   1.0%    8/4/21     317        315        317   

Sports Authority, Inc.

  (h)   Consumer Durables & Apparel   L+600   1.5%    11/16/17     6,318        6,322        6,034   

Stallion Oilfield Holdings, Inc.

  (h)   Energy   L+675   1.3%    6/19/18     4,823        4,785        4,880   

SunGard Availability Services, Inc.

  (e)(j)   Software & Services   L+500   1.0%    3/31/19     4,987        4,617        4,628   

Swiss Watch International, Inc.

  (f)(h)(i)   Consumer Durables & Apparel   L+725   1.3%    11/8/18     47,375        46,693        46,191   

Therakos, Inc.

  (f)(i)   Pharmaceuticals, Biotechnology & Life Sciences   L+625   1.3%    12/27/17     26,396        25,943        26,627   

ThermaSys Corp.

  (i)   Capital Goods   L+400   1.3%    5/3/19     4,751        4,714        4,743   

U.S. Xpress Enterprises, Inc.

  (f)(g)   Transportation   L+850, 1.5% PIK
(1.5% Max PIK)
  1.5%    5/30/19     75,000        75,000        75,000   

Virtual Radiologic Corp.

  (i)   Health Care Equipment & Services   L+550   1.8%    12/22/16     3,493        3,457        2,628   

VPG Group Holdings LLC

  (f)(h)(i)   Materials   L+900   1.0%    10/4/16     80,880        80,387        81,689   

Waste Pro USA, Inc.

  (f)(g)(h)(j)   Commercial & Professional Services   L+750   1.0%    9/30/20     92,556        92,556        92,556   

Waste Pro USA, Inc.

  (i)(j)(p)   Commercial & Professional Services   L+750   1.0%    9/30/20     9,444        9,444        9,444   

Willbros Group, Inc.

  (h)(i)(k)   Energy   L+975   1.3%    8/7/19     14,094        13,665        14,259   
              

 

 

   

 

 

 

Total Senior Secured Loans—First Lien

                 2,398,139        2,412,035   

Unfunded Loan Commitments

                 (87,029     (87,029
              

 

 

   

 

 

 

Net Senior Secured Loans—First Lien

                 2,311,110        2,325,006   
              

 

 

   

 

 

 

Senior Secured Loans—Second Lien—32.2%

                

Advance Pierre Foods, Inc.

  (e)(f)(g)(i)   Food & Staples Retailing   L+825   1.3%    10/10/17     22,556        22,298        22,443   

Advantage Sales & Marketing Inc.

  (e)   Commercial & Professional Services   L+650   1.0%    7/25/22     1,412        1,402        1,396   

Affordable Care, Inc.

  (f)(g)(i)   Health Care Equipment & Services   L+925   1.3%    12/26/19     40,000        39,557        40,100   

Alison US LLC

  (i)(k)   Capital Goods   L+850   1.0%    8/29/22     4,444        4,267        4,317   

American Energy—Utica, LLC

  (f)(g)   Energy   L+400, 5.5% PIK

(5.5% Max PIK)

  1.5%    9/30/18     78,890        78,890        79,284   

 

See notes to unaudited consolidated financial statements.

 

7


Table of Contents

FS Investment Corporation

Unaudited Consolidated Schedule of Investments (continued)

As of September 30, 2014

(in thousands, except share amounts)

 

 

 

Portfolio Company(a)

  Footnotes  

Industry

  Rate(b)   Floor      Maturity   Principal
Amount(c)
    Amortized
Cost
    Fair
Value(d)
 

American Energy—Utica, LLC

  (g)   Energy   L+400, 5.5% PIK
(5.5% Max PIK)
    1.5%       9/30/18   $ 53,571      $ 53,571      $ 53,839   

American Racing and Entertainment, LLC

  (g)   Consumer Services   12.0%      7/1/18     16,800        16,360        16,821   

Attachmate Corp.

  (f)(i)   Software & Services   L+950     1.5%       11/22/18     31,218        30,553        31,765   

BPA Laboratories, Inc.

  (i)   Pharmaceuticals, Biotechnology & Life Sciences   2.5%      7/3/17     593        464        489   

Brasa (Holdings) Inc.

  (f)   Consumer Services   L+950     1.5%       1/20/20     6,211        6,025        6,277   

Brock Holdings III, Inc.

  (i)   Energy   L+825     1.8%       3/16/18     6,923        6,851        6,819   

Byrider Finance, LLC

  (g)(i)   Automobiles & Components   L+1000     1.3%       8/22/20     10,000        10,000        10,000   

Camp International Holding Co.

  (i)(j)   Capital Goods   L+725     1.0%       11/29/19     3,008        3,053        3,040   

CHG Buyer Corp.

  (i)   Health Care Equipment & Services   L+775     1.3%       11/19/20     5,158        5,073        5,255   

Consolidated Precision Products Corp.

  (f)   Capital Goods   L+775     1.0%       4/30/21     16,750        16,674        16,818   

DEI Sales, Inc.

  (f)(g)   Commercial & Professional Services   L+900     1.5%       1/15/18     57,500        56,945        56,206   

Eastman Kodak Co.

  (f)(g)   Consumer Durables & Apparel   L+950     1.3%       9/3/20     50,000        48,885        50,563   

Fram Group Holdings Inc.

  (i)   Automobiles & Components   L+900     1.5%       1/29/18     1,667        1,662        1,617   

Kronos Inc.

  (f)   Software & Services   L+850     1.3%       4/30/20     25,025        24,817        25,838   

Nielsen & Bainbridge, LLC

  (i)   Consumer Services   L+925     1.0%       8/15/21     15,000        14,778        14,850   

OSP Group, Inc.

  (f)(g)(i)   Consumer Durables & Apparel   L+800     1.3%       9/17/21     145,000        145,000        145,725   

Paw Luxco II Sarl

  (g)(k)   Consumer Durables & Apparel   EURIBOR+950      1/29/19   16,364        20,112        19,613   

Pelican Products, Inc.

  (i)   Capital Goods   L+825     1.0%       4/9/21   $ 6,667        6,620        6,692   

PSAV Acquisition Corp.

  (f)(i)   Technology Hardware & Equipment   L+825     1.0%       1/24/22     80,000        78,872        81,200   

Sensus USA Inc.

  (i)   Capital Goods   L+725     1.3%       5/9/18     3,000        3,028        2,993   

Sequential Brands Group, Inc.

  (f)   Consumer Durables & Apparel   L+800     1.0%       8/15/20     25,000        25,000        25,000   

Stadium Management Corp.

  (f)   Consumer Services   L+825     1.0%       2/27/21     57,500        57,500        58,075   
              

 

 

   

 

 

 

Total Senior Secured Loans—Second Lien

                 778,257        787,035   
              

 

 

   

 

 

 

Senior Secured Bonds—14.2%

                

Advanced Lighting Technologies, Inc.

  (f)(g)   Materials   10.5%      6/1/19     78,500        77,070        60,053   

Allen Systems Group, Inc.

  (f)(g)(i)(m)(q)   Software & Services   10.5%      11/15/16     38,448        31,201        20,570   

Aspect Software, Inc.

  (e)(j)   Software & Services   10.6%      5/15/17     6,000        5,990        6,000   

Avaya Inc.

  (f)   Technology Hardware & Equipment   7.0%      4/1/19     10,000        9,424        9,738   

 

See notes to unaudited consolidated financial statements.

 

8


Table of Contents

FS Investment Corporation

Unaudited Consolidated Schedule of Investments (continued)

As of September 30, 2014

(in thousands, except share amounts)

 

 

 

Portfolio Company(a)

  Footnotes  

Industry

  Rate(b)   Floor    Maturity   Principal
Amount(c)
    Amortized
Cost
    Fair
Value(d)
 

Avaya Inc.

  (e)   Technology Hardware & Equipment   9.0%      4/1/19   $ 5,000      $ 5,000      $ 5,119   

Caesars Entertainment Resort Properties, LLC

  (e)(f)(g)   Consumer Services   11.0%      10/1/21     60,138        59,855        57,271   

FairPoint Communications, Inc.

  (e)(k)   Telecommunication Services   8.8%      8/15/19     10,650        10,650        11,183   

FourPoint Energy, LLC

  (g)   Energy   8.5%      12/31/20     23,625        20,733        20,731   

Global A&T Electronics Ltd.

  (i)(k)   Technology Hardware & Equipment   10.0%      2/1/19     9,000        9,000        8,114   

JW Aluminum Co.

  (f)(g)(i)   Materials   11.5%, 1.0% PIK
(1.0% Max PIK)
     11/15/17     63,297        62,797        64,721   

Kinetic Concepts, Inc.

  (f)   Health Care Equipment & Services   10.5%      11/1/18     11,660        11,209        12,680   

Logan’s Roadhouse Inc.

  (e)(g)   Consumer Services   10.8%      10/15/17     56,294        46,248        42,643   

Ryerson Inc.

  (e)   Capital Goods   9.0%      10/15/17     3,100        3,100        3,282   

Sorenson Communications, Inc.

  (g)   Telecommunication Services   9.0%      10/31/20     19,898        19,136        19,500   

Speedy Cash Intermediate Holdings Corp.

  (f)   Diversified Financials   10.8%      5/15/18     5,000        5,066        5,050   
              

 

 

   

 

 

 

Total Senior Secured Bonds

                 376,479        346,655   
              

 

 

   

 

 

 

Subordinated Debt—19.2%

                

Alta Mesa Holdings, L.P.

  (e)   Energy   9.6%      10/15/18     11,700        11,613        12,168   

Aurora Diagnostics, LLC

  (f)(g)   Pharmaceuticals, Biotechnology & Life Sciences   10.8%      1/15/18     18,065        18,099        14,994   

Avaya Inc.

  (e)(f)(g)   Technology Hardware & Equipment   10.5%      3/1/21     35,400        32,867        31,108   

Brooklyn Basketball Holdings, LLC

  (g)(i)   Consumer Services   L+800      10/15/19     19,873        19,873        19,873   

Cadillac Jack, Inc.

  (g)(k)   Consumer Services   6.0%, 7.0% PIK
(7.0% Max PIK)
     5/15/20     51,350        35,183        54,302   

Comstock Resources, Inc.

  (f)(k)   Energy   9.5%      6/15/20     7,500        7,221        8,193   

Elizabeth Arden, Inc.

  (e)(j)(k)   Food & Staples Retailing   7.4%      3/15/21     1,670        1,486        1,490   

Flanders Corp.

  (f)(g)   Capital Goods   13.8% PIK
(13.8% Max PIK)
     5/14/18     21,577        21,442        18,826   

Flanders Corp.

  (g)(i)   Capital Goods   17.5% PIK
(17.5% Max PIK)
     5/14/18     20,658        19,195        20,658   

Global Jet Capital, Inc.

  (i)   Commercial & Professional Services   8.0% PIK
(8.0% Max PIK)
     11/1/14     313        313        313   

HBC Solutions, Inc.

  (i)   Media   12.5% PIK
(12.5% Max PIK)
     8/4/18     300        300        300   

 

See notes to unaudited consolidated financial statements.

 

9


Table of Contents

FS Investment Corporation

Unaudited Consolidated Schedule of Investments (continued)

As of September 30, 2014

(in thousands, except share amounts)

 

 

 

Portfolio Company(a)

  Footnotes  

Industry

  Rate(b)   Floor    Maturity   Principal
Amount(c)
    Amortized
Cost
    Fair
Value(d)
 

HBC Solutions, Inc.

  (i)(p)   Media   12.5% PIK
(12.5% Max PIK)
     8/4/18   $ 150      $ 150      $ 150   

Kinetic Concepts, Inc.

  (e)(f)   Health Care Equipment & Services   12.5%      11/1/19     15,000        14,232        16,673   

KODA Distribution Group, Inc.

  (f)   Materials   11.3%      9/30/19     35,000        34,412        35,350   

Mood Media Corp.

  (e)(f)(g)(k)   Media   9.3%      10/15/20     43,135        42,097        35,851   

QR Energy, L.P.

  (e)(k)   Energy   9.3%      8/1/20     3,250        3,213        3,698   

RKI Exploration & Production, LLC

  (e)   Energy   8.5%      8/1/21     10,900        10,900        11,268   

Samson Investment Co.

  (f)   Energy   9.8%      2/15/20     10,000        10,000        8,863   

Sequel Industrial Products Holdings, LLC

  (g)   Energy   12.0%, 2.5% PIK
(2.5% Max PIK)
     5/10/18     15,792        15,588        16,187   

Sidewinder Drilling Inc.

  (f)   Capital Goods   9.8%      11/15/19     4,678        4,678        4,701   

Sorenson Communications, Inc.

  (g)   Telecommunication Services   13.0%      10/31/21     15,122        14,093        15,274   

ThermaSys Corp.

  (f)(g)   Capital Goods   9.0%, 1.8% PIK
(5.0% Max PIK)
     5/3/20     132,701        132,701        133,365   

VPG Group Holdings LLC

  (f)   Materials   11.0%, 2.0% PIK
(2.0% Max PIK)
     7/15/19     5,116        5,116        5,321   

Wok Acquisition Corp.

  (e)(j)   Consumer Services   10.3%      6/30/20     1,390        1,383        1,390   
              

 

 

   

 

 

 

Total Subordinated Debt

                 456,155        470,316   

Unfunded Loan Commitments

                 (150     (150
              

 

 

   

 

 

 

Net Subordinated Debt

                 456,005        470,166   
              

 

 

   

 

 

 

Collateralized Securities—4.5%

                

ACASC 2013-2A B

  (g)(i)(k)   Diversified Financials   9.1%      10/15/23     30,500        26,878        27,118   

Dryden CDO 23A Class Subord.

  (i)(k)   Diversified Financials   9.8%      7/17/23     10,000        5,765        8,372   

JPMorgan Chase Bank, N.A. Credit-Linked Notes

  (g)(k)   Diversified Financials   14.6%      12/20/21     16,740        16,585        17,326   

Lightpoint CLO 2006 V Class D

  (g)(k)   Diversified Financials   L+365      8/5/19     6,500        4,000        6,320   

Rampart CLO 2007 1A Class Subord.

  (i)(k)   Diversified Financials   26.7%      10/25/21     10,000        3,142        5,196   

Stone Tower CLO VI Class Subord.

  (g)(k)   Diversified Financials   39.4%      4/17/21     5,000        2,374        4,265   

Wind River CLO Ltd. 2012 1A Class Sub B

  (i)(k)   Diversified Financials   16.6%      1/15/24     42,504        35,173        40,586   
              

 

 

   

 

 

 

Total Collateralized Securities

                 93,917        109,183   
              

 

 

   

 

 

 

 

See notes to unaudited consolidated financial statements.

 

10


Table of Contents

FS Investment Corporation

Unaudited Consolidated Schedule of Investments (continued)

As of September 30, 2014

(in thousands, except share amounts)

 

 

 

Portfolio Company(a)

  Footnotes  

Industry

  Number of
Shares
    Amortized
Cost
    Fair
Value(d)
 
Equity/Other—11.4%(l)                 

Amaya Gaming Group Inc., Warrants

  (i)(k)(m)   Consumer Services            2,000,000      $ 16,832      $ 41,490   

American Energy Ohio Holdings, LLC, Common Equity

  (m)(n)   Energy            9,700,000        9,700        9,700   

AP Exhaust Holdings, LLC, Common Equity

  (i)(m)(o)   Automobiles & Components            811        811        657   

Aquilex Corp., Common Equity, Class A Shares

  (f)   Energy            15,128        1,088        4,189   

Aquilex Corp., Common Equity, Class B Shares

  (f)(g)   Energy            32,637        1,690        9,037   

BPA Laboratories, Inc., Series A Warrants

  (i)(m)   Pharmaceuticals, Biotechnology & Life Sciences            1,979        —          —     

BPA Laboratories, Inc., Series B Warrants

  (i)(m)   Pharmaceuticals, Biotechnology & Life Sciences            3,173        —          —     

Burleigh Point, Ltd., Warrants

  (i)(k)(m)   Retailing            17,256,081        1,898        6,385   

CoSentry.Net, LLC, Preferred Equity

  (g)(m)   Software & Services            2,632        2,500        3,337   

Eastman Kodak Co., Common Equity

  (f)(i)(m)   Consumer Durables & Apparel            61,859        1,202        1,359   

ERC Ireland Holdings Ltd., Common Equity

  (g)(i)(j)(k)(m)   Telecommunication Services            37,547        5,219        6,353   

ERC Ireland Holdings Ltd., Warrants

  (i)(j)(k)(m)   Telecommunication Services            15,809        2,288        2,675   

Flanders Corp., Common Equity

  (g)(m)   Capital Goods            6,177,490        6,531        3,089   

FourPoint Energy, LLC, Common Equity

  (i)(m)(o)   Energy            3,937        2,601        4,900   

Fronton Investor Holdings, LLC, Class B Units

  (i)(m)(o)(s)   Consumer Services            14,943        17,931        16,885   

HBC Solutions, Inc., Common Equity, Class A Units

  (i)(m)   Media            26,774        3,027        3,550   

Industrial Group Intermediate Holdings, LLC, Common Equity

  (i)(m)(o)   Materials            347,107        347        364   

JW Aluminum Co., Common Equity

  (g)(m)   Materials            37,500        3,225        —     

Leading Edge Aviation Services, Inc., Common Equity

  (g)(m)   Capital Goods            4,401        464        108   

Leading Edge Aviation Services, Inc., Preferred Equity

  (g)(m)   Capital Goods            1,303        1,303        1,303   

MB Precision Holdings LLC, Common Equity

  (g)(m)   Capital Goods            450,000        450        405   

Micronics, Inc., Common Equity

  (i)(m)   Capital Goods            50,000        500        570   

Micronics, Inc., Preferred Equity

  (i)(m)   Capital Goods            50        500        500   

Milagro Holdings, LLC, Common Equity

  (g)(m)   Energy            12,057        50        —     

Milagro Holdings, LLC, Preferred Equity

  (i)(m)   Energy            283,947        11,180        1,579   

MModal Inc., Common Equity

  (i)(m)   Health Care Equipment & Services            56,529        933        1,062   

New Star Metals Inc., Common Equity

  (i)   Capital Goods            741,082        750        1,112   

Plains Offshore Operations Inc., Preferred Equity

  (f)(g)   Energy            50,000        60,768        66,288   

Plains Offshore Operations Inc., Warrants

  (f)(g)(m)   Energy            1,067,481        1,722        2,562   

PSAV Holdings LLC, Common Equity

  (g)(m)   Technology Hardware & Equipment            10,000        10,000        14,000   

 

See notes to unaudited consolidated financial statements.

 

11


Table of Contents

FS Investment Corporation

Unaudited Consolidated Schedule of Investments (continued)

As of September 30, 2014

(in thousands, except share amounts)

 

 

 

Portfolio Company(a)

  Footnotes  

Industry

  Number of
Shares
    Amortized
Cost
    Fair
Value(d)
 

Safariland, LLC, Common Equity

  (g)(m)   Capital Goods            25,000      $ 2,500      $ 7,400   

Safariland, LLC, Preferred Equity

  (g)   Capital Goods            2,042        21,599        21,701   

Safariland, LLC, Warrants

  (g)(m)   Capital Goods            4,536        473        1,343   

Sequel Industrial Products Holdings, LLC, Common Equity

  (g)(i)(m)   Energy            33,306        3,400        7,993   

Sequel Industrial Products Holdings, LLC, Preferred Equity

  (g)(i)(m)   Energy            8,000        9,851        9,860   

Sequel Industrial Products Holdings, LLC, Warrants

  (i)(m)(r)   Energy            1,293        1        154   

Sequel Industrial Products Holdings, LLC, Warrants

  (g)(m)(r)   Energy            19,388        12        2,714   

Sorenson Communications, Inc., Common Equity

  (g)(m)   Telecommunication Services            46,163        —          15,294   

ThermaSys Corp., Common Equity

  (g)(m)   Capital Goods            51,813        1        —     

ThermaSys Corp., Preferred Equity

  (g)   Capital Goods            51,813        5,181        4,560   

VPG Group Holdings LLC, Class A-2 Units

  (g)(m)   Materials            3,637,500        3,638        4,001   
              

 

 

   

 

 

 

Total Equity/Other

                 212,166        278,479   
              

 

 

   

 

 

 

TOTAL INVESTMENTS—176.5%

               $ 4,227,934        4,316,524   
              

 

 

   

LIABILITIES IN EXCESS OF OTHER ASSETS—(76.5%)

                   (1,870,740
                

 

 

 

NET ASSETS—100.0%

                 $ 2,445,784   
                

 

 

 

 

(a) Security may be an obligation of one or more entities affiliated with the named company.

 

(b) Certain variable rate securities in the Company’s portfolio bear interest at a rate determined by a publicly disclosed base rate plus a basis point spread. As of September 30, 2014, the three-month London Interbank Offered Rate, or LIBOR, was 0.24%, the Euro Interbank Offered Rate, or EURIBOR, was 0.08% and the U.S. Prime Lending Rate, or Prime, was 3.25%.

 

(c) Denominated in U.S. dollars unless otherwise noted.

 

(d) Fair value determined by the Company’s board of directors (see Note 7).

 

(e) Security or portion thereof held within Broad Street Funding LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with Deutsche Bank AG, New York Branch (see Note 8).

 

See notes to unaudited consolidated financial statements.

 

12


Table of Contents

FS Investment Corporation

Unaudited Consolidated Schedule of Investments (continued)

As of September 30, 2014

(in thousands, except share amounts)

 

 

 

(f) Security or portion thereof held within Locust Street Funding LLC and is pledged as collateral supporting the amounts outstanding under the Class A Notes issued to Race Street Funding LLC pursuant to an indenture with Citibank, N.A., as trustee (see Note 8).

 

(g) Security or portion thereof held within Race Street Funding LLC and is pledged as collateral supporting the amounts outstanding under the repurchase agreement with JPMorgan Chase Bank, N.A., London Branch (see Note 8).

 

(h) Security or portion thereof held within Walnut Street Funding LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with Wells Fargo Bank, National Association (see Note 8).

 

(i) Security or portion thereof is pledged as collateral supporting the amounts outstanding under the revolving credit facility with ING Capital LLC (see Note 8).

 

(j) Position or portion thereof unsettled as of September 30, 2014.

 

(k) The investment is not a qualifying asset under the Investment Company Act of 1940, as amended. A business development company may not acquire any asset other than qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets. As of September 30, 2014, 79.0% of the Company’s total assets represented qualifying assets.

 

(l) Listed investments may be treated as debt for GAAP or tax purposes.

 

(m) Security is non-income producing.

 

(n) Security held within IC American Energy Investments, Inc., a wholly-owned subsidiary of the Company.

 

(o) Security held within FSIC Investments, Inc., a wholly-owned subsidiary of the Company.

 

(p) Security is an unfunded loan commitment.

 

(q) Security was on non-accrual status as of September 30, 2014.

 

(r) Warrants expire on September 28, 2022 and May 10, 2022 and the strike prices are $121.00 and $100.00 per share, respectively.

 

(s) Under the Investment Company Act of 1940, as amended, the Company generally is deemed to be an “affiliated person” of a portfolio company if it owns 5% or more of the portfolio company’s voting securities and generally is deemed to “control” a portfolio company if it owns 25% or more of the portfolio company’s voting securities or it has the power to exercise control over the management or policies of such portfolio company. During the nine months ended September 30, 2014, the Company made an investment in and, in connection with such investment is deemed to be an “affiliated person” of (but would not be deemed to “control”), the following portfolio company:

 

Portfolio Company

   Purchases      Sales and
Repayments
     Interest Income      Fee Income      Net Realized Gain (Loss)      Net Change in Unrealized Appreciation
(Depreciation)
 

Equity/Other

                 

Fronton Investor Holdings, LLC, Class B Units

   $ 17,931         —           —           —           —         $ (1,046

 

See notes to unaudited consolidated financial statements.

 

13


Table of Contents

FS Investment Corporation

Consolidated Schedule of Investments

As of December 31, 2013

(in thousands, except share amounts)

 

 

 

Portfolio Company(a)

   Footnotes  

Industry

  Rate   Floor     Maturity   Principal
Amount(b)
    Amortized
Cost
    Fair
Value(c)
 

Senior Secured Loans—First Lien—80.4%

                

A.P. Plasman Inc.

   (f)(h)(j)   Capital Goods   L+850     1.5%      12/29/16   $ 49,941      $ 49,282      $ 51,502   

AccentCare, Inc.

   (d)   Health Care Equipment & Services   L+500     1.5%      12/22/16     2,017        1,869        1,052   

Alcatel-Lucent USA Inc.

   (d)(j)   Technology Hardware & Equipment   L+475     1.0%      1/30/19     4,069        4,051        4,094   

American Racing and Entertainment, LLC

   (f)   Consumer Services   L+700     6/30/14     13,500        13,500        13,500   

American Racing and Entertainment, LLC

   (f)   Consumer Services   9.0%     6/30/14     7,750        7,750        7,789   

Aspect Software, Inc.

   (d)   Software & Services   L+525     1.8%      5/6/16     6,436        6,307        6,470   

Attachmate Corp.

   (d)(e)   Software & Services   L+575     1.5%      11/22/17     10,311        10,157        10,523   

Audio Visual Services Group, Inc.

   (d)   Technology Hardware & Equipment   L+550     1.3%      11/9/18     3,948        3,959        3,977   

Avaya Inc.

   (d)(e)(i)   Technology Hardware & Equipment   L+450     10/26/17     9,905        9,184        9,717   

Avaya Inc.

   (d)   Technology Hardware & Equipment   L+675     1.3%      3/31/18     14,827        14,891        15,072   

Azure Midstream Energy LLC

   (d)   Energy   L+550     1.0%      11/15/18     4,500        4,434        4,534   

BlackBrush TexStar L.P.

   (d)(f)   Energy   L+650     1.3%      6/4/19     14,179        14,049        14,311   

Boomerang Tube, LLC

   (d)(h)   Energy   L+950     1.5%      10/11/17     18,870        18,408        18,210   

Cadillac Jack, Inc.

   (f)(h)(j)   Consumer Services   L+700     1.0%      12/20/17     35,000        34,655        34,650   

Caesars Entertainment Operating Co.

   (e)(f)(j)   Consumer Services   L+425     1/26/18     16,351        15,017        15,513   

Caesars Entertainment Operating Co.

   (f)(j)   Consumer Services   L+525     1/28/18     2,500        2,369        2,394   

Caesars Entertainment Resort Properties, LLC

   (d)(e)(f)   Consumer Services   L+600     1.0%      10/1/20     72,907        68,627        72,679   

Capital Vision Services, LLC

   (f)(h)   Health Care Equipment & Services   L+725     1.3%      12/3/17     19,828        19,828        19,977   

Cenveo Corp.

   (d)   Commercial & Professional Services   L+500     1.3%      2/13/17     3,628        3,613        3,658   

Citgo Petroleum Corp.

   (e)   Energy   L+600     2.0%      6/24/15     2,536        2,551        2,561   

Citgo Petroleum Corp.

   (e)(f)   Energy   L+700     2.0%      6/23/17     7,571        7,557        7,666   

Clear Channel Communications, Inc.

   (d)(f)   Media   L+365     1/29/16     16,079        13,772        15,604   

Clover Technologies Group, LLC

   (d)   Commercial & Professional Services   L+550     1.3%      5/7/18     6,277        6,249        6,277   

Collective Brands, Inc.

   (d)(f)   Consumer Durables & Apparel   L+600     1.3%      10/9/19     12,782        12,721        12,845   

Corel Corp.

   (d)(f)(h)(j)   Software & Services   L+825     6/7/19     117,000        117,000        117,878   

Corel Corp.

   (j)   Software & Services   L+825     6/7/18     10,000        10,000        10,000   

Corner Investment PropCo, LLC

   (d)(f)(i)   Consumer Services   L+975     1.3%      11/2/19     25,750        25,363        26,265   

CoSentry.Net, LLC

   (d)(g)(h)   Software & Services   L+800     1.3%      12/31/19     54,500        54,500        54,500   

Crestwood Holdings LLC

   (d)   Energy   L+600     1.0%      6/19/19     5,735        5,709        5,907   

Dent Wizard International Corp.

   (d)(f)(g)(h)   Commercial & Professional Services   L+800     4/25/19     136,354        135,127        139,081   

 

See notes to unaudited consolidated financial statements.

 

14


Table of Contents

FS Investment Corporation

Consolidated Schedule of Investments (continued)

As of December 31, 2013

(in thousands, except share amounts)

 

 

 

Portfolio Company(a)

   Footnotes  

Industry

  Rate   Floor     Maturity   Principal
Amount(b)
    Amortized
Cost
    Fair
Value(c)
 

Dent Wizard International Corp.

     Commercial & Professional Services   L+425     4/25/19   $ 15,000      $ 15,000      $ 15,000   

Eastman Kodak Co.

   (d)   Consumer Durables & Apparel   L+625     1.0%      9/3/19     10,855        10,647        10,844   

Education Management LLC

   (f)(j)   Consumer Services   L+400     6/1/16     3,935        3,393        3,788   

Education Management LLC

   (e)(j)   Consumer Services   L+700     1.3%      3/30/18     15,697        15,638        15,771   

ERC Ireland Holdings Ltd.

   (g)(i)(j)   Telecommunication Services   EURIBOR+300, 1.0% PIK     9/30/17   22,006        27,607        36,063   

FairPoint Communications, Inc.

   (d)(e)(j)   Telecommunication Services   L+625     1.3%      2/14/19   $ 21,711        21,517        22,487   

Flanders Corp.

   (f)(h)   Capital Goods   L+950     1.5%      5/14/18     37,793        37,069        38,548   

Florida Gaming Centers, Inc.

   (f)(l)   Consumer Services   16.5%     4/25/16     13,144        13,017        13,407   

FR Utility Services LLC

   (d)   Energy   L+575     1.0%      10/18/19     6,481        6,418        6,481   

Fram Group Holdings Inc.

   (d)   Automobiles & Components   L+500     1.5%      7/29/17     1,344        1,325        1,335   

Harlan Sprague Dawley, Inc.

   (d)   Pharmaceuticals, Biotechnology & Life Sciences   L+550     7/11/14     1,276        1,154        1,148   

HBC Solutions, Inc.

   (d)(f)(g)(h)   Media   L+875     1.5%      2/4/18     81,371        81,371        81,371   

Ikaria Acquisition Inc.

   (d)   Pharmaceuticals, Biotechnology & Life Sciences   L+600     1.3%      7/3/18     5,798        5,718        5,841   

ILC Industries, LLC

   (d)(h)   Capital Goods   L+650     1.5%      7/11/18     9,746        9,592        9,770   

Infiltrator Systems, Inc.

   (f)   Capital Goods   L+825     1.3%      6/27/18     30,000        30,000        30,150   

Infiltrator Systems, Inc.

   (f)(g)(h)   Capital Goods   L+825     1.3%      6/27/18     170,000        170,000        170,850   

Infogroup Inc.

   (d)   Software & Services   L+650     1.5%      5/25/18     3,004        2,699        2,456   

Insight Equity A.P. X, L.P.

   (f)(g)(h)   Household & Personal Products   L+850     1.0%      10/26/18     65,000        63,934        66,300   

Intralinks, Inc.

   (f)(j)   Software & Services   L+450     1.5%      6/15/14     1,022        989        1,022   

inVentiv Health, Inc.

   (e)   Health Care Equipment & Services   L+625     1.5%      5/15/18     2,725        2,708        2,702   

Lantiq Deutschland GmbH

   (f)(j)   Software & Services   L+900     2.0%      11/16/15     12,105        11,519        11,742   

Larchmont Resources, LLC

   (d)   Energy   L+725     1.0%      8/7/19     11,087        10,982        11,294   

Leading Edge Aviation Services, Inc.

   (d)(f)(g)(h)   Capital Goods   L+850     1.5%      4/5/18     35,787        35,206        35,787   

Leading Edge Aviation Services, Inc.

   (f)(g)   Capital Goods   L+850     1.5%      4/5/18     8,250        8,250        8,250   

Leedsworld Inc.

   (d)   Retailing   L+475     1.3%      6/28/19     9,750        9,661        9,787   

Maritime Telecommunications Network, Inc.

   (f)   Telecommunication Services   L+600     1.5%      3/4/16     4,109        4,080        3,575   

McGraw-Hill Global Education Holdings, LLC

   (d)(e)   Media   L+775     1.3%      3/22/19     18,594        18,089        18,969   

MetoKote Corp.

   (h)   Materials   L+800     1.3%      9/30/19     20,000        20,000        20,200   

MetoKote Corp.

     Materials   L+800     1.3%      9/30/19     3,810        3,810        3,848   

 

See notes to unaudited consolidated financial statements.

 

15


Table of Contents

FS Investment Corporation

Consolidated Schedule of Investments (continued)

As of December 31, 2013

(in thousands, except share amounts)

 

 

 

Portfolio Company(a)

   Footnotes  

Industry

  Rate   Floor     Maturity   Principal
Amount(b)
    Amortized
Cost
    Fair
Value(c)
 

Micronics, Inc.

   (d)(h)   Capital Goods   L+800     1.3%      3/28/19   $ 22,529      $ 22,124      $ 22,529   

MMI International Ltd.

   (d)(j)   Technology Hardware & Equipment   L+600     1.3%      11/20/18     10,612        10,323        10,340   

MMM Holdings, Inc.

   (h)   Health Care Equipment & Services   L+825     1.5%      12/12/17     10,040        9,877        10,120   

MModal Inc.

   (d)   Health Care Equipment & Services   L+650     1.3%      8/16/19     7,182        7,070        6,190   

Mood Media Corp.

   (d)(j)   Media   L+550     1.5%      5/7/18     3,014        2,990        3,028   

MSO of Puerto Rico, Inc.

   (h)   Health Care Equipment & Services   L+825     1.5%      12/12/17     7,302        7,184        7,360   

National Mentor Holdings, Inc.

   (d)   Health Care Equipment & Services   L+525     1.3%      2/9/17     4,929        4,929        4,970   

National Vision, Inc.

   (d)   Health Care Equipment & Services   L+575     1.3%      8/2/18     4,672        4,680        4,686   

New HB Acquisition, LLC

   (d)   Food, Beverage & Tobacco   L+550     1.3%      4/9/20     3,896        3,860        4,042   

Nova Wildcat Amerock, LLC

   (h)   Consumer Durables & Apparel   L+825     1.3%      9/10/19     20,000        20,000        20,000   

Panda Sherman Power, LLC

   (d)(f)   Energy   L+750     1.5%      9/14/18     9,273        9,203        9,551   

Panda Temple Power, LLC (TLA)

   (f)   Energy   L+700     1.5%      7/17/18     3,000        3,000        3,081   

Patheon Inc.

   (d)(j)   Pharmaceuticals, Biotechnology & Life Sciences   L+600     1.3%      12/14/18     10,156        9,892        10,275   

Princeton Review, Inc.

   (g)   Consumer Services   L+550     1.5%      12/7/14     1,041        996        859   

PRV Aerospace, LLC

   (d)   Capital Goods   L+525     1.3%      5/9/18     4,939        4,929        4,961   

RBS Holding Co. LLC

   (d)   Commercial & Professional Services   L+800     1.5%      3/23/17     9,788        6,198        4,943   

Reddy Ice Holdings, Inc.

   (d)   Food & Staples Retailing   L+550     1.3%      5/1/19     1,182        1,170        1,181   

Safariland, LLC

   (d)(f)(h)   Capital Goods   L+800     1.3%      9/20/19     156,800        156,800        158,368   

Shell Topco L.P.

   (d)(h)   Energy   L+750     1.5%      9/28/18     33,000        32,594        33,908   

Sirius Computer Solutions, Inc.

   (d)   Software & Services   L+575     1.3%      12/7/18     8,096        8,027        8,228   

Smarte Carte, Inc.

   (d)(f)(h)   Commercial & Professional Services   L+650     1.3%      11/30/17     57,950        57,403        58,819   

Smile Brands Group Inc.

   (d)(e)(h)   Health Care Equipment & Services   L+625     1.3%      8/15/19     30,474        29,825        30,131   

Sorenson Communication, Inc.

   (d)(e)(f)(h)   Telecommunication Services   L+825     1.3%      10/31/14     65,711        65,711        66,697   

Sports Authority, Inc.

   (d)(f)   Consumer Durables & Apparel   L+600     1.5%      11/16/17     22,190        22,041        22,162   

Stallion Oilfield Holdings, Inc.

   (d)   Energy   L+675     1.3%      6/19/18     4,975        4,929        5,087   

Swiss Watch International, Inc.

   (d)(f)(h)   Consumer Durables & Apparel   L+725     1.3%      11/8/18     48,500        47,692        48,985   

Technicolor SA

   (d)(e)(j)   Media   L+600     1.3%      7/10/20     33,885        32,921        34,254   

Tervita Corp.

   (d)(j)   Commercial & Professional Services   L+500     1.3%      5/15/18     8,035        7,965        8,083   

Therakos, Inc.

   (d)(f)   Pharmaceuticals, Biotechnology & Life Sciences   L+625     1.3%      12/27/17     27,060        26,494        27,162   

ThermaSys Corp.

   (d)   Capital Goods   L+400     1.3%      5/3/19     9,875        9,785        9,768   

Totes Isotoner Corp.

   (d)   Consumer Durables & Apparel   L+575     1.5%      7/7/17     6,622        6,546        6,660   

 

See notes to unaudited consolidated financial statements.

 

16


Table of Contents

FS Investment Corporation

Consolidated Schedule of Investments (continued)

As of December 31, 2013

(in thousands, except share amounts)

 

 

 

Portfolio Company(a)

   Footnotes  

Industry

  Rate   Floor     Maturity   Principal
Amount(b)
    Amortized
Cost
    Fair
Value(c)
 

Toys “R” Us-Delaware, Inc.

   (e)   Consumer Durables & Apparel   L+450     1.5%      9/1/16   $ 1,520      $ 1,524      $ 1,379   

TravelCLICK, Inc.

   (d)   Consumer Services   L+450     1.3%      3/16/16     7,776        7,712        7,854   

Tri-Northern Acquisition, Inc.

   (f)(h)   Retailing   L+800     1.3%      7/1/19     54,725        54,725        54,725   

Tri-Northern Acquisition, Inc.

   (f)   Retailing   L+800     1.3%      7/1/19     11,379        11,379        11,379   

Virtual Radiologic Corp.

   (g)   Health Care Equipment & Services   L+550     1.8%      12/22/16     3,492        3,446        2,060   

VPG Group Holdings LLC

   (d)(f)(h)   Materials   L+900     1.0%      10/4/16     64,070        63,409        65,031   

Willbros Group, Inc.

   (h)(j)   Energy   L+975     1.3%      8/5/19     15,960        15,422        16,199   
              

 

 

   

 

 

 

Total Senior Secured Loans—First Lien

                 2,128,667        2,172,047   

Unfunded Loan Commitments

                 (48,439     (48,439
              

 

 

   

 

 

 

Net Senior Secured Loans—First Lien

                 2,080,228        2,123,608   
              

 

 

   

 

 

 

Senior Secured Loans—Second Lien—34.0%

                

Advance Pierre Foods, Inc.

   (e)(f)(g)   Food & Staples Retailing   L+825     1.3%      10/10/17     22,556        22,250        21,879   

Advantage Sales & Marketing Inc.

   (e)   Commercial & Professional Services   L+725     1.0%      6/12/18     14,844        14,844        15,081   

Affordable Care, Inc.

   (d)(f)(g)(h)   Health Care Equipment & Services   L+925     1.3%      12/26/19     40,000        39,493        40,200   

Alliance Laundry Systems LLC

     Capital Goods   L+825     1.3%      12/10/19     2,012        1,994        2,041   

American Energy—Utica, LLC

   (f)   Energy   L+475, 4.75% PIK     1.5%      9/30/18     75,689        75,689        75,689   

American Racing and Entertainment, LLC

   (g)   Consumer Services   12.0%     7/1/18     16,800        16,299        16,821   

Attachmate Corp.

   (e)(f)(i)   Software & Services   L+950     1.5%      11/22/18     31,218        30,464        30,646   

Audio Visual Services Group, Inc.

   (d)(f)(g)   Technology Hardware & Equipment   L+950     1.3%      5/9/18     52,885        51,962        54,603   

Brasa (Holdings) Inc.

   (f)   Consumer Services   L+950     1.5%      1/20/20     11,180        10,813        11,292   

Brock Holdings III, Inc.

   (e)(g)   Energy   L+825     1.8%      3/16/18     7,756        7,678        7,902   

Camp International Holding Co.

   (d)   Capital Goods   L+725     1.0%      11/29/19     6,207        6,301        6,343   

CHG Buyer Corp.

   (d)   Health Care Equipment & Services   L+775     1.3%      11/19/20     5,158        5,065        5,248   

Consolidated Precision Products Corp.

   (f)   Capital Goods   L+775     1.0%      4/30/21     16,750        16,669        17,085   

Crossmark Holdings, Inc.

     Commercial & Professional Services   L+750     1.3%      12/21/20     7,778        7,707        7,749   

DEI Sales, Inc.

   (f)(g)   Commercial & Professional Services   L+900     1.5%      1/15/18     57,500        56,850        57,284   

Eastman Kodak Co.

   (f)   Consumer Durables & Apparel   L+950     1.3%      9/3/20     50,000        48,791        50,438   

EZE Software Group LLC

   (e)   Software & Services   L+725     1.3%      4/5/21     2,381        2,359        2,427   

Fram Group Holdings Inc.

   (e)   Automobiles & Components   L+900     1.5%      1/29/18     2,000        1,993        1,907   

ILC Industries, LLC

   (f)(g)   Capital Goods   L+1000     1.5%      7/11/19     27,976        27,085        26,857   

 

See notes to unaudited consolidated financial statements.

 

17


Table of Contents

FS Investment Corporation

Consolidated Schedule of Investments (continued)

As of December 31, 2013

(in thousands, except share amounts)

 

 

 

Portfolio Company(a)

   Footnotes  

Industry

  Rate   Floor     Maturity   Principal
Amount(b)
    Amortized
Cost
    Fair
Value(c)
 

Keystone Automotive Operations, Inc.

   (f)   Automobiles & Components   L+950     1.3%      8/15/20   $ 44,500      $ 43,644      $ 46,169   

Kronos Inc.

   (e)(f)   Software & Services   L+850     1.3%      4/30/20     27,290        27,042        28,297   

LM U.S. Member LLC

   (g)   Transportation   L+825     1.3%      10/26/20     9,375        9,248        9,510   

Mitchell International, Inc.

   (g)   Software & Services   L+750     1.0%      10/11/21     15,000        14,854        15,258   

OSP Group, Inc.

   (d)(f)(g)(h)   Consumer Durables & Apparel   L+850     1.3%      7/31/20     105,000        105,000        106,575   

P2 Upstream Acquisition Co.

   (g)   Energy   L+800     1.0%      5/1/20     4,091        4,051        4,173   

Paw Luxco II Sarl

   (j)   Consumer Durables & Apparel   EURIBOR+950     1/29/19   20,000        24,230        24,882   

Pelican Products, Inc.

   (d)   Capital Goods   L+1000     1.5%      6/14/19   $ 6,667        6,555        6,700   

Pregis Corp.

   (f)(g)   Capital Goods   L+1000     1.5%      3/23/18     50,000        49,283        50,250   

Ranpak Corp.

   (g)   Commercial & Professional Services   L+725     1.3%      4/23/20     11,324        11,218        11,663   

Sensus USA Inc.

   (d)(e)   Capital Goods   L+725     1.3%      5/9/18     8,571        8,576        8,571   

SESAC Holdings Inc.

   (f)   Media   L+875     1.3%      7/12/19     3,000        2,961        3,075   

Stadium Management Corp.

   (f)   Consumer Services   L+950     1.3%      12/7/18     23,529        23,163        23,647   

TNT Crane & Rigging, Inc.

     Energy   L+900     1.0%      11/27/21     1,500        1,381        1,448   

TravelCLICK, Inc.

   (f)(g)   Consumer Services   L+850     1.3%      3/26/18     34,925        34,620        35,973   

Travelport LLC

   (g)   Consumer Services   4.0%, 4.4% PIK     12/1/16     24,036        20,167        24,546   

TriZetto Group, Inc.

   (g)   Software & Services   L+725     1.3%      3/28/19     8,372        8,265        8,037   

Vertafore, Inc.

   (e)   Software & Services   L+825     1.5%      10/27/17     14,750        14,711        15,027   

Wall Street Systems Holdings, Inc.

   (d)   Software & Services   L+800     1.3%      10/25/20     7,000        6,878        7,068   

WildHorse Resources, LLC

   (f)   Energy   L+625     1.3%      12/13/18     15,407        15,123        15,484   
              

 

 

   

 

 

 

Total Senior Secured Loans—Second Lien

                 875,276        897,845   
              

 

 

   

 

 

 

Senior Secured Bonds—14.6%

                

Advanced Lighting Technologies, Inc.

   (f)(g)   Materials   10.5%     6/1/19     78,500        76,913        56,520   

Allen Systems Group, Inc.

   (f)(g)   Software & Services   10.5%     11/15/16     38,448        30,409        21,723   

Aspect Software, Inc.

   (e)   Software & Services   10.6%     5/15/17     4,000        4,000        4,075   

Avaya Inc.

   (e)(f)(g)   Technology Hardware & Equipment   7.0%     4/1/19     23,500        22,008        23,148   

Avaya Inc.

   (e)   Technology Hardware & Equipment   9.0%     4/1/19     5,000        5,000