FS KKR Capital Corp. II - FORM 10-Q - November 13, 2017

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EX-32.1 - EXHIBIT 32.1 - FS KKR Capital Corp. IIt1702925_ex32-1.htm
EX-31.2 - EXHIBIT 31.2 - FS KKR Capital Corp. IIt1702925_ex31-2.htm
EX-31.1 - EXHIBIT 31.1 - FS KKR Capital Corp. IIt1702925_ex31-1.htm
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
​
FORM 10-Q
​
☑
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
​
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2017
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
​
FOR THE TRANSITION PERIOD FROM           TO          
COMMISSION FILE NUMBER: 814-00926
​
FS Investment Corporation II
(Exact name of registrant as specified in its charter)
​
​
Maryland
​ ​
80-0741103
​
​
(State or other jurisdiction of
incorporation or organization)
​ ​
(I.R.S. Employer
Identification No.)
​
​
201 Rouse Boulevard
Philadelphia, Pennsylvania
​ ​
19112
​
​
(Address of principal executive offices)
​ ​
(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 ☑   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 such 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, a smaller reporting company or a emerging growth company. See the definitions of  “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
​ ​ ​ ​ Large accelerated filer ​ ​ ☐ ​ ​ Accelerated filer ​ ​ ☐ ​
​ ​ ​ ​ Non-accelerated filer ​ ​ ☑   (Do not check if a smaller reporting company) ​ ​ Smaller reporting company ​ ​ ☐ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Emerging growth company ​ ​ ☐ ​
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes ☐   No ☑
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
The issuer had 324,525,565 shares of common stock outstanding as of November 1, 2017.
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​
TABLE OF CONTENTS
​ ​ ​
Page
​
PART I—FINANCIAL INFORMATION ​ ​
​
ITEM 1.
FINANCIAL STATEMENTS
​
 ​ ​
​ ​ ​ ​ 1 ​ ​
​ ​ ​ ​ 2 ​ ​
​ ​ ​ ​ 3 ​ ​
​ ​ ​ ​ 4 ​ ​
​ ​ ​ ​ 17 ​ ​
​ ​ ​ ​ 28 ​ ​
​ ​ ​ ​ 57 ​ ​
​ ​ ​ ​ 74 ​ ​
​ ​ ​ ​ 75 ​ ​
PART II—OTHER INFORMATION ​ ​
​ ​ ​ ​ 77 ​ ​
​ ​ ​ ​ 77 ​ ​
​ ​ ​ ​ 77 ​ ​
​ ​ ​ ​ 77 ​ ​
​ ​ ​ ​ 77 ​ ​
​ ​ ​ ​ 77 ​ ​
​ ​ ​ ​ 78 ​ ​
​ ​ ​ ​ 83 ​ ​
PART I—FINANCIAL INFORMATION
Item 1.
Financial Statements.
​
FS Investment Corporation II
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
​
​ ​ ​
September 30, 2017
(Unaudited)
​ ​
December 31, 2016
​
Assets ​ ​ ​
Investments, at fair value ​ ​ ​
Non-controlled/unaffiliated investments (amortized cost—$4,391,551 and $4,270,442, respectively)
​ ​ ​ $ 4,417,793 ​ ​ ​ ​ $ 4,212,299 ​ ​
Non-controlled/affiliated investments (amortized cost—$175,294 and $266,825, respectively)
​ ​ ​ ​ 195,556 ​ ​ ​ ​ ​ 285,096 ​ ​
Controlled/affiliated investments (amortized cost—$41,923 and $0, respectively)
​ ​ ​ ​ 12,277 ​ ​ ​ ​ ​ — ​ ​
Total investments, at fair value (amortized cost—$4,608,768 and $4,537,267, respectively)
​ ​ ​ ​ 4,625,626 ​ ​ ​ ​ ​ 4,497,395 ​ ​
Cash
​ ​ ​ ​ 521,270 ​ ​ ​ ​ ​ 347,076 ​ ​
Foreign currency, at fair value (cost—$8,331 and $0, respectively)
​ ​ ​ ​ 8,547 ​ ​ ​ ​ ​ — ​ ​
Receivable for investments sold and repaid
​ ​ ​ ​ 2,359 ​ ​ ​ ​ ​ 73,994 ​ ​
Interest receivable
​ ​ ​ ​ 54,706 ​ ​ ​ ​ ​ 43,078 ​ ​
Deferred financing costs
​ ​ ​ ​ 6,119 ​ ​ ​ ​ ​ 6,315 ​ ​
Prepaid expenses and other assets
​ ​ ​ ​ 176 ​ ​ ​ ​ ​ — ​ ​
Total assets
​ ​ ​ $ 5,218,803 ​ ​ ​ ​ $ 4,967,858 ​ ​
Liabilities ​ ​ ​
Payable for investments purchased
​ ​ ​ $ 43,945 ​ ​ ​ ​ $ 14,089 ​ ​
Repurchase agreements payable (net of deferred financing costs of  $0 and $1,065, respectively)(1)
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ 398,935 ​ ​
Credit facilities payable (net of deferred financing costs of  $5,630 and $5,534, respectively)(1)
 ​ ​ ​ ​ 2,175,717 ​ ​ ​ ​ ​ 1,569,845 ​ ​
Secured borrowing, at fair value (amortized proceeds of  $8,152 and $8,139, respectively)(1)
 ​ ​ ​ ​ 8,312 ​ ​ ​ ​ ​ 8,273 ​ ​
Stockholder distributions payable
​ ​ ​ ​ 10,825 ​ ​ ​ ​ ​ 10,181 ​ ​
Management fees payable
​ ​ ​ ​ 22,547 ​ ​ ​ ​ ​ 21,610 ​ ​
Subordinated income incentive fees payable(2)
 ​ ​ ​ ​ 10,137 ​ ​ ​ ​ ​ 16,493 ​ ​
Administrative services expense payable
​ ​ ​ ​ 962 ​ ​ ​ ​ ​ 792 ​ ​
Interest payable
​ ​ ​ ​ 16,017 ​ ​ ​ ​ ​ 13,669 ​ ​
Directors’ fees payable
​ ​ ​ ​ 298 ​ ​ ​ ​ ​ 282 ​ ​
Other accrued expenses and liabilities
​ ​ ​ ​ 1,648 ​ ​ ​ ​ ​ 3,829 ​ ​
Total liabilities
​ ​ ​ ​ 2,290,408 ​ ​ ​ ​ ​ 2,057,998 ​ ​
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, 326,954,161 and 326,909,727 shares issued and outstanding, respectively
​ ​ ​ ​ 327 ​ ​ ​ ​ ​ 327 ​ ​
Capital in excess of par value
​ ​ ​ ​ 3,016,330 ​ ​ ​ ​ ​ 3,015,993 ​ ​
Accumulated undistributed net realized gain/loss on investments and gain/loss on foreign currency(4)
 ​ ​ ​ ​ (169,289) ​ ​ ​ ​ ​ (120,529) ​ ​
Accumulated undistributed net investment income(4)
 ​ ​ ​ ​ 64,699 ​ ​ ​ ​ ​ 54,075 ​ ​
Net unrealized appreciation (depreciation) on investments and secured borrowing
​ ​ ​ ​ 16,328 ​ ​ ​ ​ ​ (40,006) ​ ​
Total stockholders’ equity
​ ​ ​ ​ 2,928,395 ​ ​ ​ ​ ​ 2,909,860 ​ ​
Total liabilities and stockholders’ equity
​ ​ ​ $ 5,218,803 ​ ​ ​ ​ $ 4,967,858 ​ ​
Net asset value per share of common stock at period end
​ ​ ​ $ 8.96 ​ ​ ​ ​ $ 8.90 ​ ​
​
(1)
See Note 8 for a discussion of the Company’s financing arrangements.
​
(2)
See Note 2 for a discussion of the methodology employed by the Company in calculating the 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
FS Investment Corporation II
Unaudited Consolidated Statements of Operations
(in thousands, except share and per share amounts)
​
​ ​ ​
Three Months Ended
September 30,
​ ​
Nine Months Ended
September 30,
​
​ ​ ​
2017
​ ​
2016
​ ​
2017
​ ​
2016
​
Investment income ​ ​ ​ ​ ​
From non-controlled/unaffiliated investments: ​ ​ ​ ​ ​
Interest income
​ ​ ​ $ 97,122 ​ ​ ​ ​ $ 97,750 ​ ​ ​ ​ $ 290,519 ​ ​ ​ ​ $ 316,134 ​ ​
Paid-in-kind interest income
​ ​ ​ ​ 8,863 ​ ​ ​ ​ ​ 8,893 ​ ​ ​ ​ ​ 17,121 ​ ​ ​ ​ ​ 15,004 ​ ​
Fee income
​ ​ ​ ​ 5,874 ​ ​ ​ ​ ​ 8,525 ​ ​ ​ ​ ​ 44,974 ​ ​ ​ ​ ​ 19,388 ​ ​
Dividend income
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 11 ​ ​ ​ ​ ​ — ​ ​
From non-controlled/affiliated investments: ​ ​ ​ ​ ​
Interest income
​ ​ ​ ​ 7,301 ​ ​ ​ ​ ​ 2,891 ​ ​ ​ ​ ​ 18,448 ​ ​ ​ ​ ​ 6,163 ​ ​
Paid-in-kind interest income
​ ​ ​ ​ 393 ​ ​ ​ ​ ​ 1,007 ​ ​ ​ ​ ​ 3,067 ​ ​ ​ ​ ​ 2,878 ​ ​
Fee income
​ ​ ​ ​ 1,349 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,349 ​ ​ ​ ​ ​ 700 ​ ​
From controlled/affiliated investments: ​ ​ ​ ​ ​
Interest income
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,217 ​ ​ ​ ​ ​ — ​ ​
Total investment income
​ ​ ​ ​ 120,902 ​ ​ ​ ​ ​ 119,066 ​ ​ ​ ​ ​ 376,706 ​ ​ ​ ​ ​ 360,267 ​ ​
Operating expenses ​ ​ ​ ​ ​
Management fees(1)
 ​ ​ ​ ​ 25,769 ​ ​ ​ ​ ​ 24,635 ​ ​ ​ ​ ​ 77,005 ​ ​ ​ ​ ​ 72,989 ​ ​
Subordinated income incentive fees(2)
 ​ ​ ​ ​ 10,137 ​ ​ ​ ​ ​ 14,252 ​ ​ ​ ​ ​ 42,352 ​ ​ ​ ​ ​ 45,836 ​ ​
Administrative services expenses
​ ​ ​ ​ 799 ​ ​ ​ ​ ​ 1,039 ​ ​ ​ ​ ​ 2,530 ​ ​ ​ ​ ​ 3,096 ​ ​
Stock transfer agent fees
​ ​ ​ ​ 506 ​ ​ ​ ​ ​ 506 ​ ​ ​ ​ ​ 1,502 ​ ​ ​ ​ ​ 1,549 ​ ​
Accounting and administrative fees
​ ​ ​ ​ 434 ​ ​ ​ ​ ​ 368 ​ ​ ​ ​ ​ 1,303 ​ ​ ​ ​ ​ 1,069 ​ ​
Interest expense
​ ​ ​ ​ 22,786 ​ ​ ​ ​ ​ 17,668 ​ ​ ​ ​ ​ 62,971 ​ ​ ​ ​ ​ 51,827 ​ ​
Directors’ fees
​ ​ ​ ​ 278 ​ ​ ​ ​ ​ 290 ​ ​ ​ ​ ​ 849 ​ ​ ​ ​ ​ 835 ​ ​
Other general and administrative expenses
​ ​ ​ ​ 1,102 ​ ​ ​ ​ ​ 1,166 ​ ​ ​ ​ ​ 2,978 ​ ​ ​ ​ ​ 3,634 ​ ​
Operating expenses
​ ​ ​ ​ 61,811 ​ ​ ​ ​ ​ 59,924 ​ ​ ​ ​ ​ 191,490 ​ ​ ​ ​ ​ 180,835 ​ ​
Management fee waiver(1)
 ​ ​ ​ ​ (3,222) ​ ​ ​ ​ ​ (3,080) ​ ​ ​ ​ ​ (9,626) ​ ​ ​ ​ ​ (9,124) ​ ​
Net expenses
​ ​ ​ ​ 58,589 ​ ​ ​ ​ ​ 56,844 ​ ​ ​ ​ ​ 181,864 ​ ​ ​ ​ ​ 171,711 ​ ​
Net investment income
​ ​ ​ ​ 62,313 ​ ​ ​ ​ ​ 62,222 ​ ​ ​ ​ ​ 194,842 ​ ​ ​ ​ ​ 188,556 ​ ​
Realized and unrealized gain/loss ​ ​ ​ ​ ​
Net realized gain (loss) on investments: ​ ​ ​ ​ ​
Non-controlled/unaffiliated investments
​ ​ ​ ​ (13,262) ​ ​ ​ ​ ​ (40,465) ​ ​ ​ ​ ​ (56,519) ​ ​ ​ ​ ​ (87,286) ​ ​
Non-controlled/affiliated investments
​ ​ ​ ​ 7,320 ​ ​ ​ ​ ​ (14) ​ ​ ​ ​ ​ 7,320 ​ ​ ​ ​ ​ (14) ​ ​
Net realized gain (loss) on foreign currency
​ ​ ​ ​ 122 ​ ​ ​ ​ ​ (5) ​ ​ ​ ​ ​ 439 ​ ​ ​ ​ ​ (2) ​ ​
Net change in unrealized appreciation (depreciation) on investments:
 ​ ​ ​ ​ ​
Non-controlled/unaffiliated investments
​ ​ ​ ​ 14,895 ​ ​ ​ ​ ​ 137,129 ​ ​ ​ ​ ​ 84,385 ​ ​ ​ ​ ​ 218,904 ​ ​
Non-controlled/affiliated investments
​ ​ ​ ​ 8,323 ​ ​ ​ ​ ​ (902) ​ ​ ​ ​ ​ 1,991 ​ ​ ​ ​ ​ 3,532 ​ ​
Controlled/affiliated investments
​ ​ ​ ​ (18,217) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (29,646) ​ ​ ​ ​ ​ — ​ ​
Net change in unrealized appreciation (depreciation) on secured borrowing(3)
 ​ ​ ​ ​ 10 ​ ​ ​ ​ ​ (94) ​ ​ ​ ​ ​ (26) ​ ​ ​ ​ ​ (94) ​ ​
Net change in unrealized gain (loss) on foreign currency
​ ​ ​ ​ (186) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (370) ​ ​ ​ ​ ​ — ​ ​
Total net realized and unrealized gain (loss)
​ ​ ​ ​ (995) ​ ​ ​ ​ ​ 95,649 ​ ​ ​ ​ ​ 7,574 ​ ​ ​ ​ ​ 135,040 ​ ​
Net increase (decrease) in net assets resulting from operations
​ ​ ​ $ 61,318 ​ ​ ​ ​ $ 157,871 ​ ​ ​ ​ $ 202,416 ​ ​ ​ ​ $ 323,596 ​ ​
Per share information—basic and diluted ​ ​ ​ ​ ​
Net increase (decrease) in net assets resulting from operations (Earnings per Share)
​ ​ ​ $ 0.19 ​ ​ ​ ​ $ 0.49 ​ ​ ​ ​ $ 0.62 ​ ​ ​ ​ $ 1.00 ​ ​
Weighted average shares outstanding
​ ​ ​ ​ 324,993,290 ​ ​ ​ ​ ​ 324,468,282 ​ ​ ​ ​ ​ 325,613,608 ​ ​ ​ ​ ​ 323,463,183 ​ ​
​
​
(1)
See Note 4 for a discussion of the waiver by FSIC II 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 for a discussion of the methodology employed by the Company in calculating the subordinated income incentive fees.
​
(3)
See Note 8 for a discussion of the Company’s financing arrangements.
​
​
See notes to unaudited consolidated financial statements.
2
FS Investment Corporation II
Unaudited Consolidated Statements of Changes in Net Assets
(in thousands)
​
​ ​ ​
Nine Months Ended
September 30,
​
​ ​ ​
2017
​ ​
2016
​
Operations ​ ​ ​
Net investment income
​ ​ ​ $ 194,842 ​ ​ ​ ​ $ 188,556 ​ ​
Net realized gain (loss) on investments and foreign currency
​ ​ ​ ​ (48,760) ​ ​ ​ ​ ​ (87,302) ​ ​
Net change in unrealized appreciation (depreciation) on investments
​ ​ ​ ​ 56,730 ​ ​ ​ ​ ​ 222,436 ​ ​
Net change in unrealized appreciation (depreciation) on secured borrowing(1)
 ​ ​ ​ ​ (26) ​ ​ ​ ​ ​ (94) ​ ​
Net change in unrealized gain (loss) on foreign currency
​ ​ ​ ​ (370) ​ ​ ​ ​ ​ — ​ ​
Net increase (decrease) in net assets resulting from operations
​ ​ ​ ​ 202,416 ​ ​ ​ ​ ​ 323,596 ​ ​
Stockholder distributions(2) ​ ​ ​
Distributions from net investment income
​ ​ ​ ​ (184,218) ​ ​ ​ ​ ​ (176,987) ​ ​
Distributions from net realized gain on investments
​ ​ ​ ​ — ​ ​ ​ ​ ​ (5,888) ​ ​
Net decrease in net assets resulting from stockholder distributions
​ ​ ​ ​ (184,218) ​ ​ ​ ​ ​ (182,875) ​ ​
Capital share transactions(3) ​ ​ ​
Reinvestment of stockholder distributions
​ ​ ​ ​ 92,907 ​ ​ ​ ​ ​ 106,401 ​ ​
Repurchases of common stock
​ ​ ​ ​ (92,570) ​ ​ ​ ​ ​ (62,325) ​ ​
Net increase in net assets resulting from capital share transactions
​ ​ ​ ​ 337 ​ ​ ​ ​ ​ 44,076 ​ ​
Total increase (decrease) in net assets
​ ​ ​ ​ 18,535 ​ ​ ​ ​ ​ 184,797 ​ ​
Net assets at beginning of period
​ ​ ​ ​ 2,909,860 ​ ​ ​ ​ ​ 2,690,412 ​ ​
Net assets at end of period
​ ​ ​ $ 2,928,395 ​ ​ ​ ​ $ 2,875,209 ​ ​
Accumulated undistributed net investment income(2)
 ​ ​ ​ $ 64,699 ​ ​ ​ ​ $ 46,593 ​ ​
​
​
(1)
See Note 8 for a discussion of the Company’s financing arrangements.
​
(2)
See Note 5 for a discussion of the sources of distributions paid by the Company.
​
(3)
See Note 3 for a discussion of the Company’s capital share transactions.
​
​
See notes to unaudited consolidated financial statements.
3
FS Investment Corporation II
Unaudited Consolidated Statements of Cash Flows
(in thousands)
​
​ ​ ​
Nine Months Ended
September 30,
​
​ ​ ​
2017
​ ​
2016
​
Cash flows from operating activities ​ ​ ​
Net increase (decrease) in net assets resulting from operations
​ ​ ​ $ 202,416 ​ ​ ​ ​ $ 323,596 ​ ​
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
 ​ ​ ​
Purchases of investments
​ ​ ​ ​ (1,490,626) ​ ​ ​ ​ ​ (806,968) ​ ​
Paid-in-kind interest
​ ​ ​ ​ (20,188) ​ ​ ​ ​ ​ (17,882) ​ ​
Proceeds from sales and repayments of investments
​ ​ ​ ​ 1,409,656 ​ ​ ​ ​ ​ 1,104,157 ​ ​
Net realized (gain) loss on investments
​ ​ ​ ​ 49,199 ​ ​ ​ ​ ​ 87,300 ​ ​
Net change in unrealized (appreciation) depreciation on investments
​ ​ ​ ​ (56,730) ​ ​ ​ ​ ​ (222,436) ​ ​
Net change in unrealized (appreciation) depreciation on secured borrowing
​ ​ ​ ​ 26 ​ ​ ​ ​ ​ 94 ​ ​
Accretion of discount
​ ​ ​ ​ (19,542) ​ ​ ​ ​ ​ (12,864) ​ ​
Amortization of deferred financing costs and discount
​ ​ ​ ​ 3,982 ​ ​ ​ ​ ​ 2,565 ​ ​
Unrealized (gain) loss on borrowings in foreign currency
​ ​ ​ ​ 1,114 ​ ​ ​ ​ ​ — ​ ​
(Increase) decrease in receivable for investments sold and repaid
​ ​ ​ ​ 71,635 ​ ​ ​ ​ ​ (18,363) ​ ​
(Increase) decrease in interest receivable
​ ​ ​ ​ (11,628) ​ ​ ​ ​ ​ (15,805) ​ ​
(Increase) decrease in prepaid expenses and other assets
​ ​ ​ ​ (176) ​ ​ ​ ​ ​ 170 ​ ​
Increase (decrease) in payable for investments purchased
​ ​ ​ ​ 29,856 ​ ​ ​ ​ ​ 30,976 ​ ​
Increase (decrease) in management fees payable
​ ​ ​ ​ 937 ​ ​ ​ ​ ​ 26 ​ ​
Increase (decrease) in subordinated income incentive fees payable
​ ​ ​ ​ (6,356) ​ ​ ​ ​ ​ (2,002) ​ ​
Increase (decrease) in administrative services expense payable
​ ​ ​ ​ 170 ​ ​ ​ ​ ​ (231) ​ ​
Increase (decrease) in interest payable
​ ​ ​ ​ 2,348 ​ ​ ​ ​ ​ 857 ​ ​
Increase (decrease) in directors’ fees payable
​ ​ ​ ​ 16 ​ ​ ​ ​ ​ (6) ​ ​
Increase (decrease) in other accrued expenses and liabilities
​ ​ ​ ​ (2,181) ​ ​ ​ ​ ​ (2,203) ​ ​
Net cash provided by (used in) operating activities
​ ​ ​ ​ 163,928 ​ ​ ​ ​ ​ 450,981 ​ ​
Cash flows from financing activities ​ ​ ​
Reinvestment of stockholder distributions
​ ​ ​ ​ 92,907 ​ ​ ​ ​ ​ 106,401 ​ ​
Repurchases of common stock
​ ​ ​ ​ (92,570) ​ ​ ​ ​ ​ (62,325) ​ ​
Stockholder distributions
​ ​ ​ ​ (183,574) ​ ​ ​ ​ ​ (193,072) ​ ​
Borrowings under credit facilities(1)
 ​ ​ ​ ​ 777,821 ​ ​ ​ ​ ​ 95,000 ​ ​
Proceeds from secured borrowing(1)
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ 8,132 ​ ​
Repayments of credit facilities(1)
 ​ ​ ​ ​ (172,967) ​ ​ ​ ​ ​ (202,961) ​ ​
Repayments of repurchase agreement
​ ​ ​ ​ (400,000) ​ ​ ​ ​ ​ — ​ ​
Deferred financing costs paid
​ ​ ​ ​ (2,804) ​ ​ ​ ​ ​ (2,901) ​ ​
Net cash provided by financing activities
​ ​ ​ ​ 18,813 ​ ​ ​ ​ ​ (251,726) ​ ​
Total increase (decrease) in cash
​ ​ ​ ​ 182,741 ​ ​ ​ ​ ​ 199,255 ​ ​
Cash at beginning of period
​ ​ ​ ​ 347,076 ​ ​ ​ ​ ​ 228,781 ​ ​
Cash at end of period
​ ​ ​ $ 529,817 ​ ​ ​ ​ $ 428,036 ​ ​
Supplemental disclosure ​ ​ ​
Local and excise taxes paid
​ ​ ​ $ 1,826 ​ ​ ​ ​ $ 2,069 ​ ​
​
​
(1)
See Note 8 for a discussion of the Company’s financing arrangements. During the nine months ended September 30, 2017 and 2016, the Company paid $56,294 and $48,405, respectively, in interest expense on the credit facilities, and $347 and $0, respectively, in interest expense on the secured borrowing.
​
​
See notes to unaudited consolidated financial statements.
4
FS Investment Corporation II
Unaudited Consolidated Schedule of Investments
As of September 30, 2017
(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—110.5% ​ ​ ​ ​ ​ ​ ​ ​ ​
5 Arch Income Fund 2, LLC
​ ​
(o)(s)
​ ​ Diversified Financials ​ ​
10.5%
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 11/18/21 ​ ​ ​ ​ $  10,637 ​ ​ ​ ​ $    10,661 ​ ​ ​ ​ $    10,637 ​ ​
5 Arch Income Fund 2, LLC
​ ​
(o)(p)(s)
​ ​ Diversified Financials ​ ​
10.5%
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 11/18/21 ​ ​ ​ ​ ​ 8,363 ​ ​ ​ ​ ​ 8,363 ​ ​ ​ ​ ​ 8,363 ​ ​
A.T. Cross Co.
​ ​
(m)(n)(y)
​ ​ Retailing ​ ​
L+500, 5.0% PIK
(5.0% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 9/6/19 ​ ​ ​ ​ ​ 56,447 ​ ​ ​ ​ ​ 40,680 ​ ​ ​ ​ ​ 12,277 ​ ​
Abaco Energy Technologies LLC
​ ​
(j)
​ ​ Energy ​ ​
L+700, 2.5% PIK
(2.5% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 11/20/20 ​ ​ ​ ​ ​ 26,029 ​ ​ ​ ​ ​ 25,192 ​ ​ ​ ​ ​ 25,509 ​ ​
Actian Corp.
​ ​
(f)(g)(j)
​ ​ Software & Services ​ ​
L+796
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 6/30/22 ​ ​ ​ ​ ​ 45,714 ​ ​ ​ ​ ​ 45,714 ​ ​ ​ ​ ​ 46,057 ​ ​
AG Group Merger Sub, Inc.
​ ​
(f)(h)(j)(k)
​ ​
Commercial & Professional Services
​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 12/29/23 ​ ​ ​ ​ ​ 62,576 ​ ​ ​ ​ ​ 62,576 ​ ​ ​ ​ ​ 63,358 ​ ​
All Systems Holding LLC
​ ​
(h)(j)(k)
​ ​
Commercial & Professional Services
​ ​
L+770
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 10/31/23 ​ ​ ​ ​ ​ 93,000 ​ ​ ​ ​ ​ 93,000 ​ ​ ​ ​ ​ 94,395 ​ ​
Altus Power America, Inc.
​ ​
(k)
​ ​ Energy ​ ​
L+750
​ ​ ​ ​ 1.5% ​ ​ ​ ​ ​ 9/30/21 ​ ​ ​ ​ ​ 2,866 ​ ​ ​ ​ ​ 2,866 ​ ​ ​ ​ ​ 2,905 ​ ​
Altus Power America, Inc.
​ ​
(p)
​ ​ Energy ​ ​
L+750
​ ​ ​ ​ 1.5% ​ ​ ​ ​ ​ 9/30/21 ​ ​ ​ ​ ​ 884 ​ ​ ​ ​ ​ 884 ​ ​ ​ ​ ​ 896 ​ ​
Ascension Insurance, Inc.
​ ​
(f)(g)(h)(j)
​ ​ Insurance ​ ​
L+825
​ ​ ​ ​ 1.3% ​ ​ ​ ​ ​ 3/5/19 ​ ​ ​ ​ ​ 78,519 ​ ​ ​ ​ ​ 78,134 ​ ​ ​ ​ ​ 79,893 ​ ​
Ascension Insurance, Inc.
​ ​
(p)
​ ​ Insurance ​ ​
L+825
​ ​ ​ ​ 1.3% ​ ​ ​ ​ ​ 3/5/19 ​ ​ ​ ​ ​ 27,800 ​ ​ ​ ​ ​ 27,800 ​ ​ ​ ​ ​ 28,287 ​ ​
Aspect Software, Inc.
​ ​ ​ ​ ​ Software & Services ​ ​
L+1000
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 5/25/18 ​ ​ ​ ​ ​ 1,804 ​ ​ ​ ​ ​ 1,804 ​ ​ ​ ​ ​ 1,800 ​ ​
Aspect Software, Inc.
​ ​
(p)
​ ​ Software & Services ​ ​
L+1000
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 5/25/18 ​ ​ ​ ​ ​ 46 ​ ​ ​ ​ ​ 46 ​ ​ ​ ​ ​ 46 ​ ​
Aspect Software, Inc.
​ ​
(j)
​ ​ Software & Services ​ ​
L+1000
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 5/25/20 ​ ​ ​ ​ ​ 3,644 ​ ​ ​ ​ ​ 3,644 ​ ​ ​ ​ ​ 3,644 ​ ​
Aspect Software, Inc.
​ ​
(p)
​ ​ Software & Services ​ ​
L+1200
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 5/25/18 ​ ​ ​ ​ ​ 657 ​ ​ ​ ​ ​ 657 ​ ​ ​ ​ ​ 657 ​ ​
Atlas Aerospace LLC
​ ​
(f)(k)
​ ​ Capital Goods ​ ​
L+802
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 5/8/19 ​ ​ ​ ​ ​ 57,000 ​ ​ ​ ​ ​ 57,000 ​ ​ ​ ​ ​ 57,855 ​ ​
ATX Networks Corp.
​ ​
(f)(g)(o)
​ ​
Technology Hardware & Equipment
​ ​
L+600
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 6/11/21 ​ ​ ​ ​ ​ 1,926 ​ ​ ​ ​ ​ 1,907 ​ ​ ​ ​ ​ 1,906 ​ ​
ATX Networks Corp.
​ ​
(f)(k)(o)
​ ​
Technology Hardware & Equipment
​ ​
L+600
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 6/11/21 ​ ​ ​ ​ ​ 25,766 ​ ​ ​ ​ ​ 25,122 ​ ​ ​ ​ ​ 25,508 ​ ​
AVF Parent, LLC
​ ​
(f)(j)(k)
​ ​ Retailing ​ ​
L+725
​ ​ ​ ​ 1.3% ​ ​ ​ ​ ​ 3/1/24 ​ ​ ​ ​ ​ 42,463 ​ ​ ​ ​ ​ 42,462 ​ ​ ​ ​ ​ 44,063 ​ ​
AVF Parent, LLC
​ ​
(p)
​ ​ Retailing ​ ​
L+725
​ ​ ​ ​ 1.3% ​ ​ ​ ​ ​ 3/1/24 ​ ​ ​ ​ ​ 12,900 ​ ​ ​ ​ ​ 12,900 ​ ​ ​ ​ ​ 13,386 ​ ​
BenefitMall Holdings, Inc.
​ ​
(g)(h)(j)(k)
​ ​
Commercial & Professional Services
​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 11/24/20 ​ ​ ​ ​ ​ 108,102 ​ ​ ​ ​ ​ 108,102 ​ ​ ​ ​ ​ 108,102 ​ ​
Borden Dairy Co.
​ ​
(g)(h)(j)
​ ​ Food, Beverage & Tobacco ​ ​
L+825
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 7/6/23 ​ ​ ​ ​ ​ 52,500 ​ ​ ​ ​ ​ 52,500 ​ ​ ​ ​ ​ 52,261 ​ ​
Cactus Wellhead, LLC
​ ​
(f)(g)
​ ​ Energy ​ ​
L+600
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 7/31/20 ​ ​ ​ ​ ​ 16,253 ​ ​ ​ ​ ​ 15,591 ​ ​ ​ ​ ​ 15,955 ​ ​
Cadence Aerospace Finance, Inc.
​ ​
(f)
​ ​ Capital Goods ​ ​
L+625
​ ​ ​ ​ 1.3% ​ ​ ​ ​ ​ 5/9/18 ​ ​ ​ ​ ​ 2,695 ​ ​ ​ ​ ​ 2,699 ​ ​ ​ ​ ​ 2,589 ​ ​
CEVA Group Plc
​ ​
(o)(p)
​ ​ Transportation ​ ​
L+500
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 3/19/19 ​ ​ ​ ​ ​ 20,000 ​ ​ ​ ​ ​ 20,000 ​ ​ ​ ​ ​ 18,600 ​ ​
Cimarron Energy Inc.
​ ​
(k)
​ ​ Energy ​ ​
L+1150 PIK
(11.5% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 12/15/19 ​ ​ ​ ​ ​ 24,811 ​ ​ ​ ​ ​ 24,811 ​ ​ ​ ​ ​ 21,710 ​ ​
ConnectiveRx, LLC
​ ​
(f)(g)(j)
​ ​
Health Care Equipment & Services
​ ​
L+829
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 11/25/21 ​ ​ ​ ​ ​ 26,000 ​ ​ ​ ​ ​ 26,000 ​ ​ ​ ​ ​ 25,988 ​ ​
Crestwood Holdings LLC
​ ​
(f)
​ ​ Energy ​ ​
L+800
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 6/19/19 ​ ​ ​ ​ ​ 4,203 ​ ​ ​ ​ ​ 4,197 ​ ​ ​ ​ ​ 4,198 ​ ​
CSafe Acquisition Co., Inc.
​ ​ ​ ​ ​ Capital Goods ​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 11/1/21 ​ ​ ​ ​ ​ 2,296 ​ ​ ​ ​ ​ 2,296 ​ ​ ​ ​ ​ 2,310 ​ ​
CSafe Acquisition Co., Inc.
​ ​
(p)
​ ​ Capital Goods ​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 11/1/21 ​ ​ ​ ​ ​ 3,965 ​ ​ ​ ​ ​ 3,965 ​ ​ ​ ​ ​ 3,990 ​ ​
CSafe Acquisition Co., Inc.
​ ​
(f)(g)(h)(j)
​ ​ Capital Goods ​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 10/31/23 ​ ​ ​ ​ ​ 50,061 ​ ​ ​ ​ ​ 50,061 ​ ​ ​ ​ ​ 50,374 ​ ​
CSafe Acquisition Co., Inc.
​ ​
(p)
​ ​ Capital Goods ​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 10/31/23 ​ ​ ​ ​ ​ 26,797 ​ ​ ​ ​ ​ 26,797 ​ ​ ​ ​ ​ 26,964 ​ ​
See notes to unaudited consolidated financial statements.
5
FS Investment Corporation II
Unaudited Consolidated Schedule of Investments (Continued)
As of September 30, 2017
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Rate(b)
 ​ ​
Floor
​ ​
Maturity
​ ​
Principal
Amount(c)
 ​ ​
Amortized
Cost
​ ​
Fair
Value(d)
 ​
Dade Paper & Bag, LLC
​ ​
(f)(g)(h)(j)
​ ​ Capital Goods ​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 6/10/24 ​ ​ ​ ​ $ 137,456 ​ ​ ​ ​ $   137,456 ​ ​ ​ ​ $   139,175 ​ ​
Dayton Superior Corp.
​ ​
(k)
​ ​ Materials ​ ​
L+800
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 11/15/21 ​ ​ ​ ​ ​ 11,579 ​ ​ ​ ​ ​ 11,277 ​ ​ ​ ​ ​ 10,827 ​ ​
Diamond Resorts International, Inc.
​ ​
(g)
​ ​ Consumer Services ​ ​
L+600
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 9/2/23 ​ ​ ​ ​ ​ 6,870 ​ ​ ​ ​ ​ 6,724 ​ ​ ​ ​ ​ 6,917 ​ ​
Eastman Kodak Co.
​ ​
(f)
​ ​ Consumer Durables & Apparel ​ ​
L+625
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 9/3/19 ​ ​ ​ ​ ​ 6,943 ​ ​ ​ ​ ​ 6,897 ​ ​ ​ ​ ​ 6,861 ​ ​
Empire Today, LLC
​ ​
(f)(g)(h)(j)(k)
​ ​ Retailing ​ ​
L+800
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 11/17/22 ​ ​ ​ ​ ​ 89,325 ​ ​ ​ ​ ​ 89,325 ​ ​ ​ ​ ​ 90,218 ​ ​
Fairway Group Acquisition Co.
​ ​
(j)
​ ​ Food & Staples Retailing ​ ​
12.0% PIK
(12.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1/3/20 ​ ​ ​ ​ ​ 2,645 ​ ​ ​ ​ ​ 2,645 ​ ​ ​ ​ ​ 2,632 ​ ​
Fairway Group Acquisition Co.
​ ​ ​ ​ ​ Food & Staples Retailing ​ ​
10.0% PIK
(10.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1/3/20 ​ ​ ​ ​ ​ 1,733 ​ ​ ​ ​ ​ 1,733 ​ ​ ​ ​ ​ 693 ​ ​
Fox Head, Inc.
​ ​
(g)(j)(k)
​ ​ Consumer Durables & Apparel ​ ​
L+850
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 12/19/20 ​ ​ ​ ​ ​ 13,053 ​ ​ ​ ​ ​ 13,053 ​ ​ ​ ​ ​ 13,046 ​ ​
FR Dixie Acquisition Corp.
​ ​
(f)
​ ​ Energy ​ ​
L+475
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 12/18/20 ​ ​ ​ ​ ​ 4,053 ​ ​ ​ ​ ​ 4,042 ​ ​ ​ ​ ​ 2,634 ​ ​
FullBeauty Brands Holdings Corp.
​ ​
(k)
​ ​ Consumer Durables & Apparel ​ ​
L+475
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 10/14/22 ​ ​ ​ ​ ​ 4,962 ​ ​ ​ ​ ​ 4,557 ​ ​ ​ ​ ​ 3,715 ​ ​
FullBeauty Brands Holdings Corp.
​ ​
(k)
​ ​ Consumer Durables & Apparel ​ ​
L+800
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 10/14/20 ​ ​ ​ ​ ​ 55,000 ​ ​ ​ ​ ​ 55,000 ​ ​ ​ ​ ​ 55,825 ​ ​
Greystone Equity Member Corp.
​ ​
(e)(o)
​ ​ Diversified Financials ​ ​
L+1050
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 3/31/21 ​ ​ ​ ​ ​ 18,790 ​ ​ ​ ​ ​ 18,822 ​ ​ ​ ​ ​ 18,837 ​ ​
Greystone Equity Member Corp.
​ ​
(o)
​ ​ Diversified Financials ​ ​
L+1100
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 3/31/21 ​ ​ ​ ​ ​ 10,216 ​ ​ ​ ​ ​ 10,216 ​ ​ ​ ​ ​ 10,407 ​ ​
Greystone Equity Member Corp.
​ ​
(o)(p)
​ ​ Diversified Financials ​ ​
L+1100
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 3/31/21 ​ ​ ​ ​ ​ 10,994 ​ ​ ​ ​ ​ 10,994 ​ ​ ​ ​ ​ 11,200 ​ ​
Gulf Finance, LLC
​ ​
(g)
​ ​ Energy ​ ​
L+525
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 8/25/23 ​ ​ ​ ​ ​ 4,877 ​ ​ ​ ​ ​ 4,752 ​ ​ ​ ​ ​ 4,630 ​ ​
H.M. Dunn Co., Inc.
​ ​
(j)(k)
​ ​ Capital Goods ​ ​
L+947
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 3/26/21 ​ ​ ​ ​ ​ 64,286 ​ ​ ​ ​ ​ 64,286 ​ ​ ​ ​ ​ 64,929 ​ ​
Hybrid Promotions, LLC
​ ​
(g)(j)(k)
​ ​ Consumer Durables & Apparel ​ ​
L+850
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 12/19/20 ​ ​ ​ ​ ​ 47,862 ​ ​ ​ ​ ​ 47,862 ​ ​ ​ ​ ​ 47,835 ​ ​
Industrial Group Intermediate Holdings, LLC
​ ​
(f)(g)(h)(j)(k)
​ ​ Materials ​ ​
L+800
​ ​ ​ ​ 1.3% ​ ​ ​ ​ ​ 5/31/20 ​ ​ ​ ​ ​ 130,558 ​ ​ ​ ​ ​ 130,558 ​ ​ ​ ​ ​ 131,211 ​ ​
Industry City TI Lessor, L.P.
​ ​
(j)
​ ​ Consumer Services ​ ​
10.8%, 1.0% PIK
(1.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 6/30/26 ​ ​ ​ ​ ​ 12,511 ​ ​ ​ ​ ​ 12,511 ​ ​ ​ ​ ​ 12,699 ​ ​
JMC Acquisition Merger Corp.
​ ​
(f)(g)(h)
​ ​ Capital Goods ​ ​
L+854
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 11/6/21 ​ ​ ​ ​ ​ 20,495 ​ ​ ​ ​ ​ 20,495 ​ ​ ​ ​ ​ 20,751 ​ ​
JSS Holdings, Inc.
​ ​
(f)(g)(j)(k)
​ ​ Capital Goods ​ ​
L+800, 0.0% PIK
(2.5% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 3/31/23 ​ ​ ​ ​ ​ 72,852 ​ ​ ​ ​ ​ 72,169 ​ ​ ​ ​ ​ 72,900 ​ ​
JSS Holdings, Inc.
​ ​
(p)
​ ​ Capital Goods ​ ​
L+800, 0.0% PIK
(2.5% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 3/31/23 ​ ​ ​ ​ ​ 13,273 ​ ​ ​ ​ ​ 13,273 ​ ​ ​ ​ ​ 13,281 ​ ​
Latham Pool Products, Inc.
​ ​
(f)(g)(j)
​ ​
Commercial & Professional Services
​ ​
L+775
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 6/29/21 ​ ​ ​ ​ ​ 33,342 ​ ​ ​ ​ ​ 33,342 ​ ​ ​ ​ ​ 33,675 ​ ​
LD Intermediate Holdings, Inc.
​ ​
(k)
​ ​ Software & Services ​ ​
L+588
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 12/9/22 ​ ​ ​ ​ ​ 16,681 ​ ​ ​ ​ ​ 15,217 ​ ​ ​ ​ ​ 15,701 ​ ​
MB Precision Holdings LLC
​ ​
(g)(h)(j)
​ ​ Capital Goods ​ ​
L+588
​ ​ ​ ​ 1.3% ​ ​ ​ ​ ​ 1/23/21 ​ ​ ​ ​ ​ 63,324 ​ ​ ​ ​ ​ 63,324 ​ ​ ​ ​ ​ 58,575 ​ ​
MORSCO, Inc.
​ ​
(e)(f)
​ ​ Capital Goods ​ ​
L+700
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 10/31/23 ​ ​ ​ ​ ​ 3,604 ​ ​ ​ ​ ​ 3,477 ​ ​ ​ ​ ​ 3,641 ​ ​
Moxie Liberty LLC
​ ​
(f)(h)
​ ​ Energy ​ ​
L+650
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 8/21/20 ​ ​ ​ ​ ​ 11,663 ​ ​ ​ ​ ​ 11,682 ​ ​ ​ ​ ​ 10,431 ​ ​
Moxie Patriot LLC
​ ​
(h)
​ ​ Energy ​ ​
L+575
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 12/19/20 ​ ​ ​ ​ ​ 5,397 ​ ​ ​ ​ ​ 5,371 ​ ​ ​ ​ ​ 5,046 ​ ​
Nobel Learning Communities, Inc.
​ ​ ​ ​ ​ Consumer Services ​ ​
L+450
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 5/5/21 ​ ​ ​ ​ ​ 1,957 ​ ​ ​ ​ ​ 1,957 ​ ​ ​ ​ ​ 1,957 ​ ​
Nobel Learning Communities, Inc.
​ ​
(p)
​ ​ Consumer Services ​ ​
L+450
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 5/5/21 ​ ​ ​ ​ ​ 49,689 ​ ​ ​ ​ ​ 49,689 ​ ​ ​ ​ ​ 49,779 ​ ​
Nobel Learning Communities, Inc.
​ ​
(f)(j)(k)
​ ​ Consumer Services ​ ​
L+450
​ ​ ​ ​ 4.5% ​ ​ ​ ​ ​ 5/5/23 ​ ​ ​ ​ ​ 84,472 ​ ​ ​ ​ ​ 84,472 ​ ​ ​ ​ ​ 84,624 ​ ​
See notes to unaudited consolidated financial statements.
6
FS Investment Corporation II
Unaudited Consolidated Schedule of Investments (Continued)
As of September 30, 2017
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Rate(b)
 ​ ​
Floor
​ ​
Maturity
​ ​
Principal
Amount(c)
 ​ ​
Amortized
Cost
​ ​
Fair
Value(d)
 ​
Nobel Learning Communities, Inc.
​ ​
(p)
​ ​ Consumer Services ​ ​
L+375
​ ​ ​ ​ 4.5% ​ ​ ​ ​ ​ 5/5/23 ​ ​ ​ ​ $ 9,224 ​ ​ ​ ​ $     9,224 ​ ​ ​ ​ $     9,224 ​ ​
North Haven Cadence Buyer, Inc.
​ ​
(p)
​ ​ Consumer Services ​ ​
L+500
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 9/2/21 ​ ​ ​ ​ ​ 2,625 ​ ​ ​ ​ ​ 2,625 ​ ​ ​ ​ ​ 2,625 ​ ​
North Haven Cadence Buyer, Inc.
​ ​
(f)(h)(j)(k)
​ ​ Consumer Services ​ ​
L+810
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 9/2/22 ​ ​ ​ ​ ​ 76,079 ​ ​ ​ ​ ​ 76,079 ​ ​ ​ ​ ​ 77,220 ​ ​
North Haven Cadence Buyer, Inc.
​ ​
(p)
​ ​ Consumer Services ​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 9/2/22 ​ ​ ​ ​ ​ 11,375 ​ ​ ​ ​ ​ 11,375 ​ ​ ​ ​ ​ 11,546 ​ ​
Nova Wildcat Amerock, LLC
​ ​
(f)(g)(j)
​ ​ Consumer Durables & Apparel ​ ​
L+803
​ ​ ​ ​ 1.3% ​ ​ ​ ​ ​ 9/10/19 ​ ​ ​ ​ ​ 64,921 ​ ​ ​ ​ ​ 64,921 ​ ​ ​ ​ ​ 64,596 ​ ​
PHRC License, LLC
​ ​
(e)(g)(h)
​ ​ Consumer Services ​ ​
L+850
​ ​ ​ ​ 1.5% ​ ​ ​ ​ ​ 4/28/22 ​ ​ ​ ​ ​ 67,500 ​ ​ ​ ​ ​ 67,500 ​ ​ ​ ​ ​ 68,175 ​ ​
Polymer Additives, Inc.
​ ​
(h)(k)
​ ​ Materials ​ ​
L+834
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 12/19/22 ​ ​ ​ ​ ​ 29,005 ​ ​ ​ ​ ​ 29,005 ​ ​ ​ ​ ​ 29,150 ​ ​
Polymer Additives, Inc.
​ ​
(g)(h)(k)
​ ​ Materials ​ ​
L+888
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 12/19/22 ​ ​ ​ ​ ​ 63,068 ​ ​ ​ ​ ​ 63,068 ​ ​ ​ ​ ​ 64,645 ​ ​
Power Distribution, Inc.
​ ​
(f)(g)(k)
​ ​ Capital Goods ​ ​
L+725
​ ​ ​ ​ 1.3% ​ ​ ​ ​ ​ 1/25/23 ​ ​ ​ ​ ​ 45,006 ​ ​ ​ ​ ​ 45,006 ​ ​ ​ ​ ​ 45,456 ​ ​
Production Resource Group, LLC
​ ​
(g)(j)(k)
​ ​ Media ​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 1/14/19 ​ ​ ​ ​ ​ 137,162 ​ ​ ​ ​ ​ 137,162 ​ ​ ​ ​ ​ 145,735 ​ ​
Production Resource Group, LLC
​ ​
(p)
​ ​ Media ​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 1/14/19 ​ ​ ​ ​ ​ 5,171 ​ ​ ​ ​ ​ 5,171 ​ ​ ​ ​ ​ 5,494 ​ ​
Propulsion Acquisition, LLC
​ ​
(f)(g)(j)(k)
​ ​
Commercial & Professional Services
​ ​
L+600
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 7/13/21 ​ ​ ​ ​ ​ 57,020 ​ ​ ​ ​ ​ 54,867 ​ ​ ​ ​ ​ 56,449 ​ ​
Roadrunner Intermediate Acquisition Co., LLC
​ ​
(f)
​ ​
Health Care Equipment & Services
​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 3/15/23 ​ ​ ​ ​ ​ 7,600 ​ ​ ​ ​ ​ 7,600 ​ ​ ​ ​ ​ 7,635 ​ ​
Rogue Wave Software, Inc.
​ ​
(j)
​ ​ Software & Services ​ ​
L+860
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 9/25/21 ​ ​ ​ ​ ​ 19,913 ​ ​ ​ ​ ​ 19,912 ​ ​ ​ ​ ​ 20,112 ​ ​
Safariland, LLC
​ ​
(h)(j)
​ ​ Capital Goods ​ ​
L+769
​ ​ ​ ​ 1.1% ​ ​ ​ ​ ​ 11/18/23 ​ ​ ​ ​ ​ 70,234 ​ ​ ​ ​ ​ 70,234 ​ ​ ​ ​ ​ 71,112 ​ ​
Safariland, LLC
​ ​
(p)
​ ​ Capital Goods ​ ​
L+725
​ ​ ​ ​ 1.1% ​ ​ ​ ​ ​ 11/18/23 ​ ​ ​ ​ ​ 13,867 ​ ​ ​ ​ ​ 13,867 ​ ​ ​ ​ ​ 14,040 ​ ​
Sequel Youth and Family Services, LLC
​ ​
(f)(j)(k)
​ ​
Health Care Equipment & Services
​ ​
L+796
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 9/1/22 ​ ​ ​ ​ ​ 70,000 ​ ​ ​ ​ ​ 70,000 ​ ​ ​ ​ ​ 69,979 ​ ​
Sequel Youth and Family Services, LLC
​ ​
(f)(j)(k)(p)
​ ​
Health Care Equipment & Services
​ ​
L+700
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 9/1/22 ​ ​ ​ ​ ​ 16,471 ​ ​ ​ ​ ​ 16,471 ​ ​ ​ ​ ​ 16,466 ​ ​
Sequential Brands Group, Inc.
​ ​
(h)(j)(k)
​ ​ Consumer Durables & Apparel ​ ​
L+900
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 7/1/22 ​ ​ ​ ​ ​ 156,899 ​ ​ ​ ​ ​ 156,899 ​ ​ ​ ​ ​ 158,468 ​ ​
Sorenson Communications, Inc.
​ ​
(f)(g)(h)(j)
​ ​ Telecommunication Services ​ ​
L+575
​ ​ ​ ​ 2.3% ​ ​ ​ ​ ​ 4/30/20 ​ ​ ​ ​ ​ 98,695 ​ ​ ​ ​ ​ 98,454 ​ ​ ​ ​ ​ 99,373 ​ ​
Sports Authority, Inc.
​ ​
(f)(m)(n)
​ ​ Retailing ​ ​
L+600
​ ​ ​ ​ 1.5% ​ ​ ​ ​ ​ 11/16/17 ​ ​ ​ ​ ​ 7,818 ​ ​ ​ ​ ​ 5,562 ​ ​ ​ ​ ​ 391 ​ ​
SSC (Lux) Limited S.à r.l.
​ ​
(g)(h)(j)(o)
​ ​
Health Care Equipment & Services
​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 9/10/24 ​ ​ ​ ​ ​ 104,545 ​ ​ ​ ​ ​ 104,545 ​ ​ ​ ​ ​ 105,852 ​ ​
Staples Canada, ULC
​ ​
(o)(w)
​ ​ Retailing ​ ​
L+700
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 9/12/23 ​ ​ ​ ​ ​ C$ 3,229 ​ ​ ​ ​ ​ 2,667 ​ ​ ​ ​ ​ 2,594 ​ ​
Strike, LLC
​ ​ ​ ​ ​ Energy ​ ​
L+800
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 5/30/19 ​ ​ ​ ​ $ 1,000 ​ ​ ​ ​ ​ 935 ​ ​ ​ ​ ​ 1,025 ​ ​
Strike, LLC
​ ​
(p)
​ ​ Energy ​ ​
L+800
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 5/30/19 ​ ​ ​ ​ ​ 4,000 ​ ​ ​ ​ ​ 4,000 ​ ​ ​ ​ ​ 4,100 ​ ​
Strike, LLC
​ ​
(k)
​ ​ Energy ​ ​
L+800
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 11/30/22 ​ ​ ​ ​ ​ 7,219 ​ ​ ​ ​ ​ 7,027 ​ ​ ​ ​ ​ 7,327 ​ ​
SunGard Availability Services Capital, Inc.
​ ​
(f)(i)
​ ​ Software & Services ​ ​
L+700
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 9/30/21 ​ ​ ​ ​ ​ 10,749 ​ ​ ​ ​ ​ 10,647 ​ ​ ​ ​ ​ 10,158 ​ ​
Swift Worldwide Resources US Holdings Corp.
​ ​
(f)(h)
​ ​ Energy ​ ​
L+1000, 1.0% PIK
(1.0% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 7/20/21 ​ ​ ​ ​ ​ 19,489 ​ ​ ​ ​ ​ 19,489 ​ ​ ​ ​ ​ 19,537 ​ ​
ThermaSys Corp.
​ ​
(f)
​ ​ Capital Goods ​ ​
L+400
​ ​ ​ ​ 1.3% ​ ​ ​ ​ ​ 5/3/19 ​ ​ ​ ​ ​ 4,554 ​ ​ ​ ​ ​ 4,555 ​ ​ ​ ​ ​ 4,243 ​ ​
Trace3, LLC
​ ​
(f)(g)(j)
​ ​ Software & Services ​ ​
L+775
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 6/6/23 ​ ​ ​ ​ ​ 53,616 ​ ​ ​ ​ ​ 53,616 ​ ​ ​ ​ ​ 53,884 ​ ​
Transplace Texas, LP
​ ​
(j)
​ ​ Transportation ​ ​
L+742
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 9/16/21 ​ ​ ​ ​ ​ 22,038 ​ ​ ​ ​ ​ 22,038 ​ ​ ​ ​ ​ 22,038 ​ ​
U.S. Xpress Enterprises, Inc.
​ ​
(g)(h)(j)
​ ​ Transportation ​ ​
L+1050, 0.0% PIK
(1.8% Max PIK)
​ ​ ​ ​ 1.5% ​ ​ ​ ​ ​ 5/30/19 ​ ​ ​ ​ ​ 66,971 ​ ​ ​ ​ ​ 66,971 ​ ​ ​ ​ ​ 67,055 ​ ​
USI Senior Holdings, Inc.
​ ​
(h)(j)
​ ​ Capital Goods ​ ​
L+780
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 1/5/22 ​ ​ ​ ​ ​ 41,150 ​ ​ ​ ​ ​ 41,150 ​ ​ ​ ​ ​ 41,272 ​ ​
See notes to unaudited consolidated financial statements.
7
FS Investment Corporation II
Unaudited Consolidated Schedule of Investments (Continued)
As of September 30, 2017
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Rate(b)
 ​ ​
Floor
​ ​
Maturity
​ ​
Principal
Amount(c)
 ​ ​
Amortized
Cost
​ ​
Fair
Value(d)
 ​
USI Senior Holdings, Inc.
​ ​
(p)
​ ​ Capital Goods ​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 1/5/22 ​ ​ ​ ​ $ 8,373 ​ ​ ​ ​ $ 8,373 ​ ​ ​ ​ $ 8,398 ​ ​
UTEX Industries, Inc.
​ ​
(k)(l)
​ ​ Energy ​ ​
L+400
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 5/21/21 ​ ​ ​ ​ ​ 22,114 ​ ​ ​ ​ ​ 20,093 ​ ​ ​ ​ ​ 20,041 ​ ​
Warren Resources, Inc.
​ ​
(e)(j)(x)
​ ​ Energy ​ ​
L+900, 1.0% PIK
(1.0% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 5/22/20 ​ ​ ​ ​ ​ 42,442 ​ ​ ​ ​ ​ 42,442 ​ ​ ​ ​ ​ 41,594 ​ ​
Warren Resources, Inc.
​ ​
(p)(x)
​ ​ Energy ​ ​
L+900, 1.0% PIK
(1.0% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 5/22/20 ​ ​ ​ ​ ​ 3,002 ​ ​ ​ ​ ​ 3,002 ​ ​ ​ ​ ​ 2,942 ​ ​
Waste Pro USA, Inc.
​ ​
(g)(h)(j)(k)
​ ​
Commercial & Professional Services
​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 10/15/20 ​ ​ ​ ​ ​ 121,428 ​ ​ ​ ​ ​ 121,428 ​ ​ ​ ​ ​ 123,097 ​ ​
Westbridge Technologies, Inc.
​ ​
(i)
​ ​ Software & Services ​ ​
L+850
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 4/28/23 ​ ​ ​ ​ ​ 14,906 ​ ​ ​ ​ ​ 14,623 ​ ​ ​ ​ ​ 14,795 ​ ​
York Risk Services Holding Corp.
​ ​ ​ ​ ​ Insurance ​ ​
L+375
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 10/1/21 ​ ​ ​ ​ ​ 992 ​ ​ ​ ​ ​ 986 ​ ​ ​ ​ ​ 978 ​ ​
Zeta Interactive Holdings Corp.
​ ​
(f)(g)(j)
​ ​ Software & Services ​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 7/29/22 ​ ​ ​ ​ ​ 28,076 ​ ​ ​ ​ ​ 28,139 ​ ​ ​ ​ ​ 28,543 ​ ​
Zeta Interactive Holdings Corp.
​ ​
(f)(g)(v)
​ ​ Software & Services ​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 7/29/22 ​ ​ ​ ​ ​ 8,214 ​ ​ ​ ​ ​ 8,152 ​ ​ ​ ​ ​ 8,292 ​ ​
Zeta Interactive Holdings Corp.
​ ​
(p)
​ ​ Software & Services ​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 7/29/22 ​ ​ ​ ​ ​ 5,109 ​ ​ ​ ​ ​ 5,109 ​ ​ ​ ​ ​ 5,186 ​ ​
Zeta Interactive Holdings Corp.
​ ​
(p)(v)
​ ​ Software & Services ​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 7/29/22 ​ ​ ​ ​ ​ 1,314 ​ ​ ​ ​ ​ 1,314 ​ ​ ​ ​ ​ 1,334 ​ ​
Total Senior Secured Loans—First Lien
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 3,501,912 ​ ​ ​ ​ ​ 3,491,311 ​ ​
Unfunded Loan Commitments
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (255,899) ​ ​ ​ ​ ​ (255,899) ​ ​
Net Senior Secured Loans—First Lien
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 3,246,013 ​ ​ ​ ​ ​ 3,235,412 ​ ​
Senior Secured Loans—Second Lien—11.4% ​ ​ ​ ​ ​ ​ ​ ​ ​
American Bath Group, LLC
​ ​
(k)
​ ​ Capital Goods ​ ​
L+975
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 9/30/24 ​ ​ ​ ​ ​ 7,000 ​ ​ ​ ​ ​ 6,482 ​ ​ ​ ​ ​ 7,018 ​ ​
Arena Energy, LP
​ ​
(f)(j)
​ ​ Energy ​ ​
L+900, 4.0% PIK
(4.0% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 1/24/21 ​ ​ ​ ​ ​ 24,595 ​ ​ ​ ​ ​ 24,595 ​ ​ ​ ​ ​ 24,002 ​ ​
Ascent Resources - Marcellus, LLC
​ ​
(f)(m)(n)
​ ​ Energy ​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 8/4/21 ​ ​ ​ ​ ​ 3,333 ​ ​ ​ ​ ​ 3,291 ​ ​ ​ ​ ​ 242 ​ ​
BPA Laboratories Inc.
​ ​
(j)
​ ​ Pharmaceuticals, Biotechnology &
Life Sciences 		​ ​
L+250
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 4/29/20 ​ ​ ​ ​ ​ 3,272 ​ ​ ​ ​ ​ 3,121 ​ ​ ​ ​ ​ 3,190 ​ ​
Byrider Finance, LLC
​ ​
(e)
​ ​ Automobiles & Components ​ ​
L+1000, 0.5% PIK
(4.0% Max PIK)
​ ​ ​ ​ 1.3% ​ ​ ​ ​ ​ 8/22/20 ​ ​ ​ ​ ​ 22,580 ​ ​ ​ ​ ​ 22,580 ​ ​ ​ ​ ​ 22,608 ​ ​
Checkout Holding Corp.
​ ​
(k)
​ ​ Media ​ ​
L+675
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 4/11/22 ​ ​ ​ ​ ​ 10,000 ​ ​ ​ ​ ​ 9,951 ​ ​ ​ ​ ​ 5,881 ​ ​
Chisholm Oil and Gas Operating, LLC
​ ​ ​ ​ ​ Energy ​ ​
L+800
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 3/21/24 ​ ​ ​ ​ ​ 1,000 ​ ​ ​ ​ ​ 1,000 ​ ​ ​ ​ ​ 1,003 ​ ​
Compuware Corp.
​ ​
(j)
​ ​ Software & Services ​ ​
L+825
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 12/15/22 ​ ​ ​ ​ ​ 2,299 ​ ​ ​ ​ ​ 2,072 ​ ​ ​ ​ ​ 2,323 ​ ​
Crossmark Holdings, Inc.
​ ​
(k)
​ ​ Media ​ ​
L+750
​ ​ ​ ​ 1.3% ​ ​ ​ ​ ​ 12/21/20 ​ ​ ​ ​ ​ 7,778 ​ ​ ​ ​ ​ 7,789 ​ ​ ​ ​ ​ 3,111 ​ ​
Fairway Group Acquisition Co.
​ ​ ​ ​ ​ Food & Staples Retailing ​ ​
11.0% PIK
(11.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10/3/21 ​ ​ ​ ​ ​ 1,520 ​ ​ ​ ​ ​ 1,520 ​ ​ ​ ​ ​ 608 ​ ​
Fieldwood Energy LLC
​ ​
(e)(k)
​ ​ Energy ​ ​
L+713
​ ​ ​ ​ 1.3% ​ ​ ​ ​ ​ 9/30/20 ​ ​ ​ ​ ​ 1,947 ​ ​ ​ ​ ​ 1,579 ​ ​ ​ ​ ​ 934 ​ ​
Gruden Acquisition, Inc.
​ ​
(j)
​ ​ Transportation ​ ​
L+850
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 8/18/23 ​ ​ ​ ​ ​ 15,000 ​ ​ ​ ​ ​ 14,417 ​ ​ ​ ​ ​ 14,281 ​ ​
Inmar, Inc.
​ ​
(k)
​ ​ Software & Services ​ ​
L+800
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 5/1/25 ​ ​ ​ ​ ​ 2,615 ​ ​ ​ ​ ​ 2,578 ​ ​ ​ ​ ​ 2,630 ​ ​
Jazz Acquisition, Inc.
​ ​
(f)
​ ​ Capital Goods ​ ​
L+675
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 6/19/22 ​ ​ ​ ​ ​ 3,700 ​ ​ ​ ​ ​ 3,737 ​ ​ ​ ​ ​ 3,524 ​ ​
See notes to unaudited consolidated financial statements.
8
FS Investment Corporation II
Unaudited Consolidated Schedule of Investments (Continued)
As of September 30, 2017
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Rate(b)
 ​ ​
Floor
​ ​
Maturity
​ ​
Principal
Amount(c)
 ​ ​
Amortized
Cost
​ ​
Fair
Value(d)
 ​
JW Aluminum Co.
​ ​
(e)(j)(k)(x)
​ ​ Materials ​ ​
L+850 PIK
(L+850 Max PIK)
​ ​ ​ ​ 0.8% ​ ​ ​ ​ ​ 11/17/20 ​ ​ ​ ​ $  33,950 ​ ​ ​ ​ $    33,942 ​ ​ ​ ​ $    34,460 ​ ​
Logan’s Roadhouse, Inc.
​ ​
(x)
​ ​ Consumer Services ​ ​
L+850 PIK
(L+850 Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 11/23/20 ​ ​ ​ ​ ​ 14,370 ​ ​ ​ ​ ​ 14,275 ​ ​ ​ ​ ​ 9,723 ​ ​
LTI Holdings, Inc.
​ ​
(j)
​ ​ Materials ​ ​
L+875
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 5/16/25 ​ ​ ​ ​ ​ 9,259 ​ ​ ​ ​ ​ 9,082 ​ ​ ​ ​ ​ 9,294 ​ ​
P2 Upstream Acquisition Co.
​ ​
(k)
​ ​ Energy ​ ​
L+800
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 4/30/21 ​ ​ ​ ​ ​ 14,500 ​ ​ ​ ​ ​ 14,662 ​ ​ ​ ​ ​ 13,920 ​ ​
Peak 10 Holding Corp.
​ ​
(k)
​ ​ Software & Services ​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 8/1/25 ​ ​ ​ ​ ​ 2,786 ​ ​ ​ ​ ​ 2,758 ​ ​ ​ ​ ​ 2,808 ​ ​
Production Resource Group, LLC
​ ​
(f)(g)(h)
​ ​ Media ​ ​
L+850
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 7/23/19 ​ ​ ​ ​ ​ 95,599 ​ ​ ​ ​ ​ 95,599 ​ ​ ​ ​ ​ 94,045 ​ ​
Spencer Gifts LLC
​ ​
(k)
​ ​ Retailing ​ ​
L+825
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 6/29/22 ​ ​ ​ ​ ​ 20,000 ​ ​ ​ ​ ​ 20,081 ​ ​ ​ ​ ​ 11,200 ​ ​
Talos Production LLC
​ ​ ​ ​ ​ Energy ​ ​
11.0%
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 4/3/22 ​ ​ ​ ​ ​ 4,500 ​ ​ ​ ​ ​ 4,198 ​ ​ ​ ​ ​ 4,258 ​ ​
Titan Energy Operating, LLC
​ ​
(g)(j)
​ ​ Energy ​ ​
2.0%, L+1100 PIK
(L+1100 Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 2/23/20 ​ ​ ​ ​ ​ 75,984 ​ ​ ​ ​ ​ 66,476 ​ ​ ​ ​ ​ 54,382 ​ ​
WP CPP Holdings, LLC
​ ​
(j)
​ ​ Capital Goods ​ ​
L+775
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 4/30/21 ​ ​ ​ ​ ​ 6,932 ​ ​ ​ ​ ​ 6,912 ​ ​ ​ ​ ​ 6,759 ​ ​
Total Senior Secured Loans—Second Lien
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 372,697 ​ ​ ​ ​ ​ 332,204 ​ ​
Senior Secured Bonds—6.1% ​ ​ ​ ​ ​ ​ ​ ​ ​
Advanced Lighting Technologies, Inc.
​ ​
(e)(j)
​ ​ Materials ​ ​
5.3%, 7.3% PIK
(7.3% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 6/1/19 ​ ​ ​ ​ ​ 38,718 ​ ​ ​ ​ ​ 14,572 ​ ​ ​ ​ ​ 16,649 ​ ​
Black Swan Energy Ltd.
​ ​
(o)
​ ​ Energy ​ ​
9.0%
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1/20/24 ​ ​ ​ ​ ​ 1,333 ​ ​ ​ ​ ​ 1,333 ​ ​ ​ ​ ​ 1,316 ​ ​
Caesars Entertainment Resort Properties, LLC
​ ​
(i)(j)
​ ​ Consumer Services ​ ​
11.0%
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10/1/21 ​ ​ ​ ​ ​ 37,350 ​ ​ ​ ​ ​ 37,837 ​ ​ ​ ​ ​ 39,787 ​ ​
CEVA Group Plc
​ ​
(i)(o)
​ ​ Transportation ​ ​
9.0%
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 9/1/21 ​ ​ ​ ​ ​ 2,000 ​ ​ ​ ​ ​ 2,000 ​ ​ ​ ​ ​ 1,856 ​ ​
CEVA Group Plc
​ ​
(i)(o)
​ ​ Transportation ​ ​
7.0%
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 3/1/21 ​ ​ ​ ​ ​ 5,000 ​ ​ ​ ​ ​ 4,484 ​ ​ ​ ​ ​ 4,862 ​ ​
CH2M Hill Companies, Ltd.
​ ​ ​ ​ ​ Capital Goods ​ ​
10.0%
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 4/28/20 ​ ​ ​ ​ ​ 7,500 ​ ​ ​ ​ ​ 7,500 ​ ​ ​ ​ ​ 8,250 ​ ​
FourPoint Energy, LLC
​ ​
(e)(j)(k)
​ ​ Energy ​ ​
9.0%
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 12/31/21 ​ ​ ​ ​ ​ 46,313 ​ ​ ​ ​ ​ 45,109 ​ ​ ​ ​ ​ 47,181 ​ ​
Global A&T Electronics Ltd.
​ ​
(e)(k)(m)(n)(o)
​ ​ Semiconductors &
Semiconductor Equipment 		​ ​
10.0%
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2/1/19 ​ ​ ​ ​ ​ 19,490 ​ ​ ​ ​ ​ 19,114 ​ ​ ​ ​ ​ 17,508 ​ ​
Mood Media Corp.
​ ​
(e)(j)(o)(x)
​ ​ Media ​ ​
L+600, 8.0% PIK
(8.0% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 6/28/24 ​ ​ ​ ​ ​ 23,104 ​ ​ ​ ​ ​ 23,104 ​ ​ ​ ​ ​ 23,104 ​ ​
Ridgeback Resources Inc.
​ ​
(e)(o)
​ ​ Energy ​ ​
12.0%
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 12/29/20 ​ ​ ​ ​ ​ 331 ​ ​ ​ ​ ​ 325 ​ ​ ​ ​ ​ 331 ​ ​
Sorenson Communications, Inc.
​ ​
(j)
​ ​ Telecommunication Services ​ ​
9.0%, 0.0% PIK
(9.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10/31/20 ​ ​ ​ ​ ​ 7,058 ​ ​ ​ ​ ​ 6,892 ​ ​ ​ ​ ​ 7,066 ​ ​
Sunnova Energy Corp.
​ ​ ​ ​ ​ Energy ​ ​
6.0%, 6.0% PIK
(6.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10/24/18 ​ ​ ​ ​ ​ 2,086 ​ ​ ​ ​ ​ 2,086 ​ ​ ​ ​ ​ 2,086 ​ ​
Velvet Energy Ltd.
​ ​
(o)
​ ​ Energy ​ ​
9.0%
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10/5/23 ​ ​ ​ ​ ​ 10,000 ​ ​ ​ ​ ​ 10,000 ​ ​ ​ ​ ​ 9,927 ​ ​
Total Senior Secured Bonds
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 174,356 ​ ​ ​ ​ ​ 179,923 ​ ​
​
See notes to unaudited consolidated financial statements.
9
FS Investment Corporation II
Unaudited Consolidated Schedule of Investments (Continued)
As of September 30, 2017
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Rate(b)
 ​ ​
Floor
​ ​
Maturity
​ ​
Principal
Amount(c)
 ​ ​
Amortized
Cost
​ ​
Fair
Value(d)
 ​
Subordinated Debt—17.3% ​ ​ ​ ​ ​ ​ ​ ​ ​
Ascent Resources Utica Holdings, LLC
​ ​
(i)
​ ​ Energy ​ ​
10.0%
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 4/1/22 ​ ​ ​ ​ $ 40,000 ​ ​ ​ ​ $    40,000 ​ ​ ​ ​ $    43,150 ​ ​
Aurora Diagnostics, LLC
​ ​
(j)
​ ​
Health Care Equipment & Services
​ ​
10.8%, 1.5% PIK
(1.5% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1/15/20 ​ ​ ​ ​ ​ 6,143 ​ ​ ​ ​ ​ 5,573 ​ ​ ​ ​ ​ 5,677 ​ ​
Avantor, Inc.
​ ​
(k)(l)
​ ​ Materials / Materials ​ ​
9.0%
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10/1/25 ​ ​ ​ ​ ​ 20,000 ​ ​ ​ ​ ​ 20,000 ​ ​ ​ ​ ​ 20,487 ​ ​
Bellatrix Exploration Ltd.
​ ​
(o)
​ ​ Energy ​ ​
8.5%
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 5/15/20 ​ ​ ​ ​ ​ 5,000 ​ ​ ​ ​ ​ 4,942 ​ ​ ​ ​ ​ 4,680 ​ ​
Brooklyn Basketball Holdings, LLC
​ ​
(h)(j)
​ ​ Consumer Services ​ ​
L+725
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10/25/19 ​ ​ ​ ​ ​ 39,746 ​ ​ ​ ​ ​ 39,746 ​ ​ ​ ​ ​ 40,342 ​ ​
CEC Entertainment, Inc.
​ ​
(i)
​ ​ Consumer Services ​ ​
8.0%
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2/15/22 ​ ​ ​ ​ ​ 18,715 ​ ​ ​ ​ ​ 18,565 ​ ​ ​ ​ ​ 19,553 ​ ​
Ceridian HCM Holding, Inc.
​ ​
(i)(k)
​ ​
Commercial & Professional Services
​ ​
11.0%
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 3/15/21 ​ ​ ​ ​ ​ 40,657 ​ ​ ​ ​ ​ 40,295 ​ ​ ​ ​ ​ 43,157 ​ ​
Coveris Holdings S.A.
​ ​
(i)(k)(o)
​ ​ Materials ​ ​
7.9%
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 11/1/19 ​ ​ ​ ​ ​ 31,534 ​ ​ ​ ​ ​ 31,223 ​ ​ ​ ​ ​ 31,081 ​ ​
Eclipse Resources Corp.
​ ​
(i)(o)
​ ​ Energy ​ ​
8.9%
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 7/15/23 ​ ​ ​ ​ ​ 9,175 ​ ​ ​ ​ ​ 9,021 ​ ​ ​ ​ ​ 9,402 ​ ​
EV Energy Partners, L.P.
​ ​
(e)
​ ​ Energy ​ ​
8.0%
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 4/15/19 ​ ​ ​ ​ ​ 259 ​ ​ ​ ​ ​ 245 ​ ​ ​ ​ ​ 94 ​ ​
Global Jet Capital Inc.
​ ​ ​ ​ ​
Commercial & Professional Services
​ ​
15.0% PIK
(15.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1/30/25 ​ ​ ​ ​ ​ 818 ​ ​ ​ ​ ​ 818 ​ ​ ​ ​ ​ 832 ​ ​
Global Jet Capital Inc.
​ ​ ​ ​ ​
Commercial & Professional Services
​ ​
15.0% PIK
(15.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 4/30/25 ​ ​ ​ ​ ​ 5,199 ​ ​ ​ ​ ​ 5,199 ​ ​ ​ ​ ​ 5,289 ​ ​
Global Jet Capital Inc.
​ ​ ​ ​ ​
Commercial & Professional Services
​ ​
15.0% PIK
(15.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 9/3/25 ​ ​ ​ ​ ​ 1,074 ​ ​ ​ ​ ​ 1,074 ​ ​ ​ ​ ​ 1,093 ​ ​
Global Jet Capital Inc.
​ ​ ​ ​ ​
Commercial & Professional Services
​ ​
15.0% PIK
(15.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 9/29/25 ​ ​ ​ ​ ​ 1,011 ​ ​ ​ ​ ​ 1,011 ​ ​ ​ ​ ​ 1,029 ​ ​
Global Jet Capital Inc.
​ ​
(e)(o)
​ ​
Commercial & Professional Services
​ ​
15.0% PIK
(15.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 12/4/25 ​ ​ ​ ​ ​ 7,465 ​ ​ ​ ​ ​ 7,465 ​ ​ ​ ​ ​ 7,596 ​ ​
Global Jet Capital Inc.
​ ​
(e)(o)
​ ​
Commercial & Professional Services
​ ​
15.0% PIK
(15.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 12/9/25 ​ ​ ​ ​ ​ 1,221 ​ ​ ​ ​ ​ 1,221 ​ ​ ​ ​ ​ 1,242 ​ ​
Global Jet Capital Inc.
​ ​
(e)(o)
​ ​
Commercial & Professional Services
​ ​
15.0% PIK
(15.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1/29/26 ​ ​ ​ ​ ​ 639 ​ ​ ​ ​ ​ 639 ​ ​ ​ ​ ​ 651 ​ ​
Global Jet Capital Inc.
​ ​ ​ ​ ​
Commercial & Professional Services
​ ​
15.0% PIK
(15.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 12/2/26 ​ ​ ​ ​ ​ 1,935 ​ ​ ​ ​ ​ 1,935 ​ ​ ​ ​ ​ 1,968 ​ ​
Great Lakes Dredge & Dock Corp.
​ ​
(i)(o)
​ ​ Capital Goods ​ ​
8.0%
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 5/15/22 ​ ​ ​ ​ ​ 9,000 ​ ​ ​ ​ ​ 9,000 ​ ​ ​ ​ ​ 9,342 ​ ​
Greystone Mezzanine Equity Member Corp.
​ ​
(o)(p)
​ ​ Diversified Financials ​ ​
L+650
​ ​ ​ ​ 4.5% ​ ​ ​ ​ ​ 9/15/25 ​ ​ ​ ​ ​ 20,000 ​ ​ ​ ​ ​ 20,000 ​ ​ ​ ​ ​ 20,000 ​ ​
Jupiter Resources Inc.
​ ​
(h)(k)(o)
​ ​ Energy ​ ​
8.5%
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10/1/22 ​ ​ ​ ​ ​ 28,800 ​ ​ ​ ​ ​ 26,974 ​ ​ ​ ​ ​ 20,684 ​ ​
NewStar Financial, Inc.
​ ​
(h)(j)(k)(o)
​ ​ Diversified Financials ​ ​
8.3%, 0.0% PIK
(8.8% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 12/4/24 ​ ​ ​ ​ ​ 150,000 ​ ​ ​ ​ ​ 124,690 ​ ​ ​ ​ ​ 154,500 ​ ​
P.F. Chang’s China Bistro, Inc.
​ ​
(i)(j)
​ ​ Consumer Services ​ ​
10.3%
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 6/30/20 ​ ​ ​ ​ ​ 31,353 ​ ​ ​ ​ ​ 31,263 ​ ​ ​ ​ ​ 30,118 ​ ​
S1 Blocker Buyer Inc.
​ ​ ​ ​ ​
Commercial & Professional Services
​ ​
10.0% PIK
(10.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10/31/22 ​ ​ ​ ​ ​ 268 ​ ​ ​ ​ ​ 268 ​ ​ ​ ​ ​ 293 ​ ​
See notes to unaudited consolidated financial statements.
10
FS Investment Corporation II
Unaudited Consolidated Schedule of Investments (Continued)
As of September 30, 2017
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Rate(b)
 ​ ​
Floor
​ ​
Maturity
​ ​
Principal
Amount(c)
 ​ ​
Amortized
Cost
​ ​
Fair
Value(d)
 ​
Sorenson Communications, Inc.
​ ​
(e)(j)
​ ​ Telecommunication Services ​ ​
13.9%, 0.0% PIK
(13.9% Max PIK)
​ ​ ​ ​ ​ ​ ​ 10/31/21 ​ ​ ​ ​ $   5,364 ​ ​ ​ ​ $     5,108 ​ ​ ​ ​ $     5,096 ​ ​
SunGard Availability Services Capital, Inc.
​ ​
(i)
​ ​ Software & Services ​ ​
8.8%
​ ​ ​ ​ ​ ​ ​ 4/1/22 ​ ​ ​ ​ ​ 5,900 ​ ​ ​ ​ ​ 4,582 ​ ​ ​ ​ ​ 4,005 ​ ​
TI Group Automotive Systems, LLC
​ ​
(i)(o)
​ ​ Automobiles & Components ​ ​
8.8%
​ ​ ​ ​ ​ ​ ​ 7/15/23 ​ ​ ​ ​ ​ 7,302 ​ ​ ​ ​ ​ 7,302 ​ ​ ​ ​ ​ 7,749 ​ ​
York Risk Services Holding Corp.
​ ​
(i)(j)(k)
​ ​ Insurance ​ ​
8.5%
​ ​ ​ ​ ​ ​ ​ 10/1/22 ​ ​ ​ ​ ​ 38,070 ​ ​ ​ ​ ​ 35,112 ​ ​ ​ ​ ​ 37,546 ​ ​
Total Subordinated Debt
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 493,271 ​ ​ ​ ​ ​ 526,656 ​ ​
Unfunded Loan Commitments
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (20,000) ​ ​ ​ ​ ​ (20,000) ​ ​
Net Subordinated Debt
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 473,271 ​ ​ ​ ​ ​ 506,656 ​ ​
Collateralized Securities—0.7% ​ ​ ​ ​ ​ ​ ​ ​ ​
CGMS CLO 2013-3A Class Subord.
​ ​
(o)
​ ​ Diversified Financials ​ ​
10.5%
​ ​ ​ ​ ​ ​ ​ 7/15/25 ​ ​ ​ ​ ​ 17,000 ​ ​ ​ ​ ​ 7,202 ​ ​ ​ ​ ​ 8,136 ​ ​
NewStar Clarendon 2014-1A Class D
​ ​
(o)
​ ​ Diversified Financials ​ ​
L+435
​ ​ ​ ​ ​ ​ ​ 1/25/27 ​ ​ ​ ​ ​ 1,060 ​ ​ ​ ​ ​ 1,007 ​ ​ ​ ​ ​ 1,056 ​ ​
NewStar Clarendon 2014-1A Class Subord. B
​ ​
(o)
​ ​ Diversified Financials ​ ​
15.0%
​ ​ ​ ​ ​ ​ ​ 1/25/27 ​ ​ ​ ​ ​ 12,140 ​ ​ ​ ​ ​ 9,091 ​ ​ ​ ​ ​ 10,068 ​ ​
Total Collateralized Securities
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 17,300 ​ ​ ​ ​ ​ 19,260 ​ ​
​
See notes to unaudited consolidated financial statements.
11
FS Investment Corporation II
Unaudited Consolidated Schedule of Investments (Continued)
As of September 30, 2017
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Number of
Shares
​ ​
Cost
​ ​
Fair
Value(d)
 ​
Equity/Other—12.0% ​ ​ ​ ​ ​ ​
5 Arches, LLC, Common Equity
​ ​
(o)(r)
​ ​ Diversified Financials ​ ​ ​ ​ 10,000 ​ ​ ​ ​ $       250 ​ ​ ​ ​ $       250 ​ ​
A.T. Cross Co., Common Equity, Class A Units
​ ​
(e)(n)(y)
​ ​ Retailing ​ ​ ​ ​ 1,000,000 ​ ​ ​ ​ ​ 1,000 ​ ​ ​ ​ ​ — ​ ​
A.T. Cross Co., Preferred Equity, Class A-1 Units
​ ​
(e)(n)(y)
​ ​ Retailing ​ ​ ​ ​ 243,478 ​ ​ ​ ​ ​ 243 ​ ​ ​ ​ ​ — ​ ​
A.T. Cross Co., GSO Special Unit
​ ​
(n)(y)
​ ​ Retailing ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Abaco Energy Technologies LLC, Common Equity
​ ​
(n)
​ ​ Energy ​ ​ ​ ​ 3,055,556 ​ ​ ​ ​ ​ 3,055 ​ ​ ​ ​ ​ 229 ​ ​
Abaco Energy Technologies LLC, Preferred Equity
​ ​
(n)
​ ​ Energy ​ ​ ​ ​ 12,734,481 ​ ​ ​ ​ ​ 637 ​ ​ ​ ​ ​ 1,273 ​ ​
ACP FH Holdings GP, LLC, Common Equity
​ ​
(e)(n)
​ ​ Consumer Durables & Apparel ​ ​ ​ ​ 88,571 ​ ​ ​ ​ ​ 89 ​ ​ ​ ​ ​ 68 ​ ​
ACP FH Holdings, LP, Common Equity
​ ​
(e)(n)
​ ​ Consumer Durables & Apparel ​ ​ ​ ​ 8,768,572 ​ ​ ​ ​ ​ 8,769 ​ ​ ​ ​ ​ 6,699 ​ ​
Advanced Lighting Technologies, Inc., Preferred Equity
​ ​
(n)
​ ​ Materials ​ ​ ​ ​ 1,652 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 129 ​ ​
Altus Power America Holdings, LLC, Common Equity
​ ​
(n)
​ ​ Energy ​ ​ ​ ​ 462,008 ​ ​ ​ ​ ​ 462 ​ ​ ​ ​ ​ 439 ​ ​
Altus Power America Holdings, LLC, Preferred Equity
​ ​
(t)
​ ​ Energy ​ ​ ​ ​ 955,284 ​ ​ ​ ​ ​ 955 ​ ​ ​ ​ ​ 956 ​ ​
AP Exhaust Holdings, LLC, Class A1 Common Units
​ ​
(n)(r)
​ ​ Automobiles & Components ​ ​ ​ ​ 84 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
AP Exhaust Holdings, LLC, Class A1 Preferred Units
​ ​
(n)(r)
​ ​ Automobiles & Components ​ ​ ​ ​ 8,295 ​ ​ ​ ​ ​ 9,248 ​ ​ ​ ​ ​ 9,249 ​ ​
Ascent Resources Utica Holdings, LLC, Common Equity
​ ​
(n)(q)
​ ​ Energy ​ ​ ​ ​ 128,734,129 ​ ​ ​ ​ ​ 38,700 ​ ​ ​ ​ ​ 32,184 ​ ​
ASG Everglades Holdings, Inc., Common Equity
​ ​
(n)(x)
​ ​ Software & Services ​ ​ ​ ​ 625,178 ​ ​ ​ ​ ​ 13,475 ​ ​ ​ ​ ​ 26,945 ​ ​
ASG Everglades Holdings, Inc., 6/27/2022, Warrants
​ ​
(n)(x)
​ ​ Software & Services ​ ​ ​ ​ 253,704 ​ ​ ​ ​ ​ 7,231 ​ ​ ​ ​ ​ 5,417 ​ ​
Aspect Software Parent, Inc., Common Equity
​ ​
(n)
​ ​ Software & Services ​ ​ ​ ​ 403,955 ​ ​ ​ ​ ​ 19,021 ​ ​ ​ ​ ​ 12,805 ​ ​
ATX Holdings, LLC, Common Equity
​ ​
(n)(o)
​ ​ Technology Hardware & Equipment ​ ​ ​ ​ 72,635 ​ ​ ​ ​ ​ 116 ​ ​ ​ ​ ​ 102 ​ ​
Aurora Diagnostics Holdings, LLC, Warrants, 5/25/2027
​ ​
(j)(n)
​ ​ Health Care Equipment & Services ​ ​ ​ ​ 94,193 ​ ​ ​ ​ ​ 686 ​ ​ ​ ​ ​ 672 ​ ​
BPA Laboratories, Inc., Series A Warrants, 4/29/2024
​ ​
(j)(n)
​ ​ Pharmaceuticals, Biotechnology & Life Sciences ​ ​ ​ ​ 10,924 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
BPA Laboratories, Inc., Series B Warrants, 4/29/2024
​ ​
(j)(n)
​ ​ Pharmaceuticals, Biotechnology & Life Sciences ​ ​ ​ ​ 17,515 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Burleigh Point, Ltd., Warrants, 7/16/2020
​ ​
(n)(o)
​ ​ Retailing ​ ​ ​ ​ 3,451,216 ​ ​ ​ ​ ​ 1,898 ​ ​ ​ ​ ​ — ​ ​
Chisholm Oil and Gas Operating, LLC, Series A Units
​ ​
(n)(r)
​ ​ Energy ​ ​ ​ ​ 58,533 ​ ​ ​ ​ ​ 59 ​ ​ ​ ​ ​ 57 ​ ​
Cimarron Energy Holdco Inc., Common Equity
​ ​
(n)
​ ​ Energy ​ ​ ​ ​ 3,675,487 ​ ​ ​ ​ ​ 3,323 ​ ​ ​ ​ ​ — ​ ​
CSF Group Holdings, Inc., Common Equity
​ ​
(n)
​ ​ Capital Goods ​ ​ ​ ​ 417,400 ​ ​ ​ ​ ​ 417 ​ ​ ​ ​ ​ 355 ​ ​
Eastman Kodak Co., Common Equity
​ ​
(n)
​ ​ Consumer Durables & Apparel ​ ​ ​ ​ 1,846 ​ ​ ​ ​ ​ 36 ​ ​ ​ ​ ​ 14 ​ ​
Escape Velocity Holdings, Inc., Common Equity
​ ​
(n)
​ ​ Software & Services ​ ​ ​ ​ 33,216 ​ ​ ​ ​ ​ 332 ​ ​ ​ ​ ​ 355 ​ ​
Fairway Group Holdings Corp., Common Equity
​ ​
(n)
​ ​ Food & Staples Retailing ​ ​ ​ ​ 31,626 ​ ​ ​ ​ ​ 1,016 ​ ​ ​ ​ ​ — ​ ​
FourPoint Energy, LLC, Common Equity, Class C-II-A Units
​ ​
(n)(r)
​ ​ Energy ​ ​ ​ ​ 13,000 ​ ​ ​ ​ ​ 13,000 ​ ​ ​ ​ ​ 4,485 ​ ​
FourPoint Energy, LLC, Common Equity, Class D Units
​ ​
(n)(r)
​ ​ Energy ​ ​ ​ ​ 2,437 ​ ​ ​ ​ ​ 1,610 ​ ​ ​ ​ ​ 847 ​ ​
FourPoint Energy, LLC, Common Equity, Class E-II Units
​ ​
(n)(r)
​ ​ Energy ​ ​ ​ ​ 54,104 ​ ​ ​ ​ ​ 13,526 ​ ​ ​ ​ ​ 18,125 ​ ​
FourPoint Energy, LLC, Common Equity, Class E-III Units
​ ​
(n)(r)
​ ​ Energy ​ ​ ​ ​ 43,875 ​ ​ ​ ​ ​ 10,969 ​ ​ ​ ​ ​ 15,027 ​ ​
Global Jet Capital Holdings, LP, Preferred Equity
​ ​
(e)(n)
​ ​ Commercial & Professional Services ​ ​ ​ ​ 6,228,866 ​ ​ ​ ​ ​ 6,229 ​ ​ ​ ​ ​ 7,163 ​ ​
H.I.G. Empire Holdco, Inc., Common Equity
​ ​
(n)
​ ​ Retailing ​ ​ ​ ​ 411 ​ ​ ​ ​ ​ 1,227 ​ ​ ​ ​ ​ 1,422 ​ ​
Harvey Holdings, LLC, Common Equity
​ ​
(n)
​ ​ Capital Goods ​ ​ ​ ​ 666,667 ​ ​ ​ ​ ​ 667 ​ ​ ​ ​ ​ 1,467 ​ ​
Industrial Group Intermediate Holdings, LLC, Common Equity
​ ​
(n)(r)
​ ​ Materials ​ ​ ​ ​ 2,678,947 ​ ​ ​ ​ ​ 2,679 ​ ​ ​ ​ ​ 4,152 ​ ​
See notes to unaudited consolidated financial statements.
12
FS Investment Corporation II
Unaudited Consolidated Schedule of Investments (Continued)
As of September 30, 2017
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Number of
Shares
​ ​
Cost
​ ​
Fair
Value(d)
 ​
JMC Acquisition Holdings, LLC, Common Equity
​ ​
(n)
​ ​ Capital Goods ​ ​ ​ ​ 1,449 ​ ​ ​ ​ $ 1,449 ​ ​ ​ ​ $ 1,949 ​ ​
JSS Holdco, LLC, Net Profits Interest
​ ​
(n)
​ ​ Capital Goods ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 324 ​ ​
JW Aluminum Co., Common Equity
​ ​
(e)(k)(n)(x)
​ ​ Materials ​ ​ ​ ​ 256 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 142 ​ ​
JW Aluminum Co., Preferred Equity
​ ​
(e)(k)(x)
​ ​ Materials ​ ​ ​ ​ 1,469 ​ ​ ​ ​ ​ 12,379 ​ ​ ​ ​ ​ 14,690 ​ ​
MB Precision Investment Holdings LLC, Class A-2 Units
​ ​
(n)(r)
​ ​ Capital Goods ​ ​ ​ ​ 2,287,659 ​ ​ ​ ​ ​ 2,288 ​ ​ ​ ​ ​ — ​ ​
Mood Media Corp., Common Equity
​ ​
(n)(o)(x)
​ ​ Media ​ ​ ​ ​ 17,400,835 ​ ​ ​ ​ ​ 12,644 ​ ​ ​ ​ ​ 31,478 ​ ​
NewStar Financial, Inc., Warrants, 11/4/2024
​ ​
(e)(n)(o)
​ ​ Diversified Financials ​ ​ ​ ​ 6,000,000 ​ ​ ​ ​ ​ 30,115 ​ ​ ​ ​ ​ — ​ ​
North Haven Cadence TopCo, LLC, Common Equity
​ ​
(n)
​ ​ Consumer Services ​ ​ ​ ​ 2,916,667 ​ ​ ​ ​ ​ 2,917 ​ ​ ​ ​ ​ 3,938 ​ ​
PDI Parent LLC, Common Equity
​ ​
(n)
​ ​ Capital Goods ​ ​ ​ ​ 2,076,923 ​ ​ ​ ​ ​ 2,077 ​ ​ ​ ​ ​ 2,181 ​ ​
Professional Plumbing Group, Inc., Common Equity
​ ​
(e)(n)
​ ​ Capital Goods ​ ​ ​ ​ 3,000,000 ​ ​ ​ ​ ​ 3,000 ​ ​ ​ ​ ​ 6,900 ​ ​
PSAV Holdings LLC, Common Equity
​ ​ ​ ​ ​ Technology Hardware & Equipment ​ ​ ​ ​ 10,000 ​ ​ ​ ​ ​ 10,000 ​ ​ ​ ​ ​ 36,000 ​ ​
Ridgeback Resources Inc., Common Equity
​ ​
(e)(n)(o)(w)
​ ​ Energy ​ ​ ​ ​ 817,308 ​ ​ ​ ​ ​ 5,022 ​ ​ ​ ​ ​ 4,737 ​ ​
Roadhouse Holding Inc., Common Equity
​ ​
(n)(x)
​ ​ Consumer Services ​ ​ ​ ​ 4,481,763 ​ ​ ​ ​ ​ 4,657 ​ ​ ​ ​ ​ — ​ ​
S1 Blocker Buyer Inc., Common Equity
​ ​ ​ ​ ​ Commercial & Professional Services ​ ​ ​ ​ 124 ​ ​ ​ ​ ​ 1,240 ​ ​ ​ ​ ​ 1,084 ​ ​
SandRidge Energy, Inc., Common Equity
​ ​
(n)(o)
​ ​ Energy ​ ​ ​ ​ 253,009 ​ ​ ​ ​ ​ 5,647 ​ ​ ​ ​ ​ 5,083 ​ ​
Sequential Brands Group, Inc., Common Equity
​ ​
(e)(n)
​ ​ Consumer Durables & Apparel ​ ​ ​ ​ 408,685 ​ ​ ​ ​ ​ 5,517 ​ ​ ​ ​ ​ 1,222 ​ ​
Sorenson Communications, Inc., Common Equity
​ ​
(e)(n)
​ ​ Telecommunication Services ​ ​ ​ ​ 43,796 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 33,999 ​ ​
SSC Holdco Limited, Common Equity
​ ​
(n)(o)
​ ​ Health Care Equipment & Services ​ ​ ​ ​ 261,364 ​ ​ ​ ​ ​ 5,227 ​ ​ ​ ​ ​ 5,959 ​ ​
Sunnova Energy Corp., Common Equity
​ ​
(n)
​ ​ Energy ​ ​ ​ ​ 384,746 ​ ​ ​ ​ ​ 1,444 ​ ​ ​ ​ ​ 2,005 ​ ​
Sunnova Energy Corp., Preferred Equity
​ ​
(n)
​ ​ Energy ​ ​ ​ ​ 36,363 ​ ​ ​ ​ ​ 194 ​ ​ ​ ​ ​ 193 ​ ​
Swift Worldwide Resources Holdco Limited, Common Equity
​ ​
(n)(o)(u)
​ ​ Energy ​ ​ ​ ​ 1,250,000 ​ ​ ​ ​ ​ 2,009 ​ ​ ​ ​ ​ 625 ​ ​
TE Holdings, LLC, Common Equity
​ ​
(e)(n)(r)
​ ​ Energy ​ ​ ​ ​ 717,718 ​ ​ ​ ​ ​ 6,101 ​ ​ ​ ​ ​ 2,153 ​ ​
TE Holdings, LLC, Preferred Equity
​ ​
(e)(n)
​ ​ Energy ​ ​ ​ ​ 475,758 ​ ​ ​ ​ ​ 4,751 ​ ​ ​ ​ ​ 4,520 ​ ​
The Stars Group Inc., Warrants, 5/15/2024
​ ​
(n)(o)
​ ​ Consumer Services ​ ​ ​ ​ 2,000,000 ​ ​ ​ ​ ​ 16,832 ​ ​ ​ ​ ​ 20,520 ​ ​
Titan Energy, LLC, Common Equity
​ ​
(e)(n)
​ ​ Energy ​ ​ ​ ​ 200,040 ​ ​ ​ ​ ​ 6,321 ​ ​ ​ ​ ​ 901 ​ ​
Warren Resources, Inc., Common Equity
​ ​
(n)(x)
​ ​ Energy ​ ​ ​ ​ 2,371,337 ​ ​ ​ ​ ​ 11,145 ​ ​ ​ ​ ​ 8,063 ​ ​
White Star Petroleum Holdings, LLC, Common Equity
​ ​
(n)(r)
​ ​ Energy ​ ​ ​ ​ 1,613,753 ​ ​ ​ ​ ​ 1,372 ​ ​ ​ ​ ​ 1,291 ​ ​
Zeta Interactive Holdings Corp., Preferred Equity, Series E-1
​ ​
(n)
​ ​ Software & Services ​ ​ ​ ​ 620,025 ​ ​ ​ ​ ​ 4,929 ​ ​ ​ ​ ​ 5,895 ​ ​
Zeta Interactive Holdings Corp., Preferred Equity, Series F
​ ​
(n)
​ ​ Software & Services ​ ​ ​ ​ 563,932 ​ ​ ​ ​ ​ 4,929 ​ ​ ​ ​ ​ 5,130 ​ ​
Zeta Interactive Holdings Corp., Warrants, 4/20/2027
​ ​
(n)
​ ​ Software & Services ​ ​ ​ ​ 84,590 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 303 ​ ​
Total Equity/Other
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 325,131 ​ ​ ​ ​ ​ 352,171 ​ ​
TOTAL INVESTMENTS—158.0%
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 4,608,768 ​ ​ ​ ​ ​ 4,625,626 ​ ​
LIABILITIES IN EXCESS OF OTHER ASSETS—(58.0%)
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​
(1,697,231)
 ​ ​
NET ASSETS—100.0%
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 2,928,395 ​ ​
​
​
(a)
Security may be an obligation of one or more entities affiliated with the named company.
​
​
See notes to unaudited consolidated financial statements.
13
FS Investment Corporation II
Unaudited Consolidated Schedule of Investments (Continued)
As of September 30, 2017
(in thousands, except share amounts)
​
 
(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, 2017, the three-month London Interbank Offered Rate, or LIBOR or L, was 1.33%, and the U.S. Prime Lending Rate, or Prime, was 4.25%. PIK means paid-in-kind.
​
(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 Cobbs Creek LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with ING Capital LLC (see Note 8).
​
(f)
Security or portion thereof held within Cooper River LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with Citibank, N.A. (see Note 8).
​
(g)
Security or portion thereof held within Wissahickon Creek LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with Wells Fargo Bank, National Association (see Note 8).
​
(h)
Security or portion thereof held within Darby Creek LLC and is pledged as collateral supporting the amounts outstanding under a revolving credit facility with Deutsche Bank AG, New York Branch (see Note 8).
​
(i)
Security or portion thereof held within Dunning Creek LLC and is pledged as collateral supporting the amounts outstanding under a revolving credit facility with Deutsche Bank AG, New York Branch (see Note 8).
​
(j)
Security or portion thereof held within Juniata River LLC and is pledged as collateral supporting the amounts outstanding under a term loan credit facility with JPMorgan Chase Bank, N.A. (see Note 8).
​
(k)
Security or portion thereof held within Green Creek LLC and is pledged as collateral supporting the amounts outstanding under a term loan credit facility with Goldman Sachs Bank USA (see Note 8).
​
(l)
Position or portion thereof unsettled as of September 30, 2017.
​
(m)
Security was on non-accrual status as of September 30, 2017.
​
(n)
Security is non-income producing.
​
(o)
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, 2017, 89.1% of the Company’s total assets represented qualifying assets.
​
(p)
Security is an unfunded commitment. The stated rate reflects the spread disclosed at the time of commitment and may not indicate the actual rate received upon funding.
​
(q)
Security held within IC II American Energy Investments, Inc., a wholly-owned subsidiary of the Company.
​
(r)
Security held within FSIC II Investments, Inc., a wholly-owned subsidiary of the Company.
​
(s)
Security held within IC II Arches Investments, LLC, a wholly-owned subsidiary of the Company.
​
(t)
Security held within IC II Altus Investments, LLC, a wholly-owned subsidiary of the Company.
​
(u)
Investment denominated in British pounds. Cost and fair value are converted into U.S. dollars at an exchange rate of  £1.00 to $1.34 as of September 30, 2017.
​
(v)
The transfer of a portion of this loan does not qualify for sale accounting under Accounting Standards Codification Topic 860, Transfers and Servicing, and therefore, the entire senior secured loan remains in the unaudited consolidated schedule of investments as of September 30, 2017 (see Note 8).
​
(w)
Investment denominated in Canadian dollars. Cost and fair value are converted into U.S. dollars at an exchange rate of CAD $1.00 to $0.80 as of September 30, 2017.
​
(x)
Under the 1940 Act, 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 more than 25% of the portfolio company’s voting securities or it has the power to exercise control over the management or policies of such portfolio company. As of September 30, 2017, the Company held investments in portfolio companies of which it is deemed to be an “affiliated person” but is not deemed to “control”. The following table presents certain financial information with respect to investments in portfolio companies of which the Company was deemed to be an affiliated person for the nine months ended September 30, 2017:
​
​
See notes to unaudited consolidated financial statements.
14
FS Investment Corporation II
Unaudited Consolidated Schedule of Investments (Continued)
As of September 30, 2017
(in thousands, except share amounts)
​
 
​ ​ ​ ​
Portfolio Company
​ ​
Fair Value at
December 31,
2016
​ ​
Transfers
In or Out
​ ​
Purchases
and
Paid-in-Kind
Interest
​ ​
Sales and
Repayments
​ ​
Accretion
of
Discount
​ ​
Net Realized
Gain (Loss)
​ ​
Net Change in
Unrealized
Appreciation
(Depreciation)
​ ​
Fair Value at
September 30,
2017
​ ​
Interest
Income(3)
 ​ ​
PIK
Income(3)
 ​ ​
Fee
Income(3)
 ​
​ ​ ​ ​ Senior Secured Loans—First Lien ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​
A.T. Cross Co.(1)
 ​ ​ ​ $ 28,081 ​ ​ ​ ​ $ (31,027) ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​ ​ ​ $ (682) ​ ​ ​ ​ $ — ​ ​ ​ ​ $ 3,628 ​ ​ ​ ​ $ — ​ ​ ​ ​ $ (682) ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​
​ ​ ​ ​
ASG Technologies Group, Inc.
​ ​ ​ ​ 80,505 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 12,509 ​ ​ ​ ​ ​ (91,824) ​ ​ ​ ​ ​ 24 ​ ​ ​ ​ ​ 148 ​ ​ ​ ​ ​ (1,362) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 5,048 ​ ​ ​ ​ ​ 508 ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​
Warren Resources, Inc.(2)
 ​ ​ ​ ​ 42,122 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 320 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (908) ​ ​ ​ ​ ​ 41,534 ​ ​ ​ ​ ​ 3,572 ​ ​ ​ ​ ​ 320 ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​ Senior Secured Loans—Second Lien ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​
ASG Everglades Holdings, Inc.
​ ​ ​ ​ 26,179 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (26,989) ​ ​ ​ ​ ​ 408 ​ ​ ​ ​ ​ 6,392 ​ ​ ​ ​ ​ (5,990) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 2,312 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,349 ​ ​
​ ​ ​ ​
JW Aluminum Co.
​ ​ ​ ​ 34,410 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 132 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 2 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (84) ​ ​ ​ ​ ​ 34,460 ​ ​ ​ ​ ​ 2,479 ​ ​ ​ ​ ​ 132 ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​
Logan’s Roadhouse, Inc.
​ ​ ​ ​ 10,355 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 3,436 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 15 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (4,083) ​ ​ ​ ​ ​ 9,723 ​ ​ ​ ​ ​ 1,004 ​ ​ ​ ​ ​ 1,007 ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​ Senior Secured Bonds ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​
Mood Media Corp.
​ ​ ​ ​ — ​ ​ ​ ​ ​ 23,104 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 23,104 ​ ​ ​ ​ ​ 2,937 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​ Subordinated Debt ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​
Mood Media Corp.
​ ​ ​ ​ — ​ ​ ​ ​ ​ 6,103 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (6,930) ​ ​ ​ ​ ​ 47 ​ ​ ​ ​ ​ 780 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 463 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​ Equity/Other ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​
A.T. Cross Co., Common Equity, Class A Units(1)
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ (1,000) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,000 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​
A.T. Cross Co., Preferred Equity, Class A-1 Units(1)
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ (243) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 243 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​
A.T. Cross Co., GSO Special Unit(1)
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​
ASG Everglades Holdings, Inc., Common Equity
​ ​ ​ ​ 29,477 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (2,532) ​ ​ ​ ​ ​ 26,945 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​
ASG Everglades Holdings, Inc., 6/27/2022, Warrants
 ​ ​ ​ ​ 6,444 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (1,027) ​ ​ ​ ​ ​ 5,417 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​
JW Aluminum Co., Common Equity
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 142 ​ ​ ​ ​ ​ 142 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​
JW Aluminum Co., Preferred Equity
​ ​ ​ ​ 11,854 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,100 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,736 ​ ​ ​ ​ ​ 14,690 ​ ​ ​ ​ ​ 1,315 ​ ​ ​ ​ ​ 1,100 ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​
Mood Media Corp.
​ ​ ​ ​ — ​ ​ ​ ​ ​ 7,136 ​ ​ ​ ​ ​ 5,508 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 18,834 ​ ​ ​ ​ ​ 31,478 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​
Roadhouse Holding Inc., Common Equity
​ ​ ​ ​ 5,472 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (5,472) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​
Warren Resources, Inc., Common Equity
​ ​ ​ ​ 10,197 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (2,134) ​ ​ ​ ​ ​ 8,063 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​
Total
​ ​ ​ $ 285,096 ​ ​ ​ ​ $ 4,073 ​ ​ ​ ​ $ 23,005 ​ ​ ​ ​ $ (125,743) ​ ​ ​ ​ $ (186) ​ ​ ​ ​ $ 7,320 ​ ​ ​ ​ $ 1,991 ​ ​ ​ ​ $ 195,556 ​ ​ ​ ​ $ 18,448 ​ ​ ​ ​ $ 3,067 ​ ​ ​ ​ $ 1,349 ​ ​
​
​
(1)
During the nine months ended September 30, 2017, the Company’s ownership increased to over 25% of the portfolio company’s voting securities and it is now deemed to “control” the portfolio company.
​
(2)
Security includes a partially unfunded commitment with an amortized cost of  $3,002 and a fair value of  $2,942.
​
(3)
Interest, PIK, fee and dividend income presented for the full nine months ended September 30, 2017.
​
​
See notes to unaudited consolidated financial statements.
15
FS Investment Corporation II
Unaudited Consolidated Schedule of Investments (Continued)
As of September 30, 2017
(in thousands, except share amounts)
​
 
(y)
Under the Investment Company Act of 1940, as amended, the Company generally is deemed to “control” a portfolio company if it owns more than 25% of the portfolio company’s voting securities or it has the power to exercise control over the management or policies of such portfolio company. As of September 30, 2017, the Company held investments in one portfolio company of which it is deemed to be an “affiliated person” and deemed to “control.” The following table presents certain information with respect to investments in portfolio companies of which the Company was deemed to be an affiliated person and deemed to control for the nine months ended September 30, 2017:
​
​ ​ ​ ​
Portfolio Company
​ ​
Fair Value at
December 31,
2016
​ ​
Transfers
In or Out
​ ​
Purchases and
Paid-in-Kind
Interest
​ ​
Sales and
Repayments
​ ​
Accretion of
Discount
​ ​
Net Realized
Gain (Loss)
​ ​
Net Change in
Unrealized
Appreciation
(Depreciation)
​ ​
Fair Value at
September 30,
2017
​ ​
Interest
Income(2)
 ​
​ ​ ​ ​ Senior Secured Loans—First Lien ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​
A.T. Cross Co.(1)
 ​ ​ ​ $ — ​ ​ ​ ​ $ 31,027 ​ ​ ​ ​ $ 9,653 ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​ ​ ​ $ (28,403) ​ ​ ​ ​ $ 12,277 ​ ​ ​ ​ $ 1,217 ​ ​
​ ​ ​ ​ Equity/Other ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​
A.T. Cross Co., Common Equity, Class A Units(1)
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,000 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (1,000) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​
A.T. Cross Co., Preferred Equity, Class A-1 Units(1)
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ 243 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (243) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​
A.T. Cross Co., GSO Special Unit(1)
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​
Total
​ ​ ​ $ — ​ ​ ​ ​ $ 32,270 ​ ​ ​ ​ $ 9,653 ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​ ​ ​ $ (29,646) ​ ​ ​ ​ $ 12,277 ​ ​ ​ ​ $ 1,217 ​ ​
​
(1)
During the nine months ended September 30, 2017, the Company’s ownership increased to over 25% of the portfolio company’s voting securities and it is now deemed to “control” the portfolio company.
​
(2)
Interest, PIK, fee and dividend income presented for the full nine months ended September 30, 2017.
​
​
See notes to unaudited consolidated financial statements.
16
FS Investment Corporation II
Consolidated Schedule of Investments
As of December 31, 2016
(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—98.4% ​ ​ ​ ​ ​ ​ ​ ​ ​
5 Arch Income Fund 2, LLC
​ ​
(o)(s)
​ ​ Diversified Financials ​ ​
10.5%
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 11/18/21 ​ ​ ​ ​ $   9,781 ​ ​ ​ ​ $     9,806 ​ ​ ​ ​ $     9,781 ​ ​
5 Arch Income Fund 2, LLC
​ ​
(o)(p)(s)
​ ​ Diversified Financials ​ ​
10.5%
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 11/18/21 ​ ​ ​ ​ ​ 9,219 ​ ​ ​ ​ ​ 9,219 ​ ​ ​ ​ ​ 9,219 ​ ​
A.T. Cross Co.
​ ​
(f)(x)
​ ​ Retailing ​ ​
L+500, 5.0% PIK
(5.0% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 9/6/19 ​ ​ ​ ​ ​ 44,750 ​ ​ ​ ​ ​ 31,709 ​ ​ ​ ​ ​ 28,081 ​ ​
Abaco Energy Technologies LLC
​ ​
(f)(j)
​ ​ Energy ​ ​
L+700, 2.5% PIK
(2.5% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 11/20/20 ​ ​ ​ ​ ​ 26,600 ​ ​ ​ ​ ​ 25,531 ​ ​ ​ ​ ​ 20,150 ​ ​
Aeneas Buyer Corp.
​ ​
(f)(g)
​ ​
Health Care Equipment & Services
​ ​
L+500
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 12/18/21 ​ ​ ​ ​ ​ 16,481 ​ ​ ​ ​ ​ 16,481 ​ ​ ​ ​ ​ 16,481 ​ ​
Aeneas Buyer Corp.
​ ​ ​ ​ ​
Health Care Equipment & Services
​ ​
L+815
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 12/18/21 ​ ​ ​ ​ ​ 585 ​ ​ ​ ​ ​ 585 ​ ​ ​ ​ ​ 594 ​ ​
AG Group Merger Sub, Inc.
​ ​
(f)(h)(j)
​ ​
Commercial & Professional Services
​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 12/29/23 ​ ​ ​ ​ ​ 43,750 ​ ​ ​ ​ ​ 43,750 ​ ​ ​ ​ ​ 43,750 ​ ​
AG Group Merger Sub, Inc.
​ ​
(p)
​ ​
Commercial & Professional Services
​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 12/29/23 ​ ​ ​ ​ ​ 19,250 ​ ​ ​ ​ ​ 19,250 ​ ​ ​ ​ ​ 19,250 ​ ​
All Systems Holding LLC
​ ​
(e)(h)(j)(k)
​ ​
Commercial & Professional Services
​ ​
L+770
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 10/31/23 ​ ​ ​ ​ ​ 93,000 ​ ​ ​ ​ ​ 93,000 ​ ​ ​ ​ ​ 93,781 ​ ​
Altus Power America, Inc.
​ ​
(k)
​ ​ Energy ​ ​
L+750
​ ​ ​ ​ 1.5% ​ ​ ​ ​ ​ 9/30/21 ​ ​ ​ ​ ​ 2,665 ​ ​ ​ ​ ​ 2,665 ​ ​ ​ ​ ​ 2,715 ​ ​
Altus Power America, Inc.
​ ​
(p)
​ ​ Energy ​ ​
L+750
​ ​ ​ ​ 1.5% ​ ​ ​ ​ ​ 9/30/21 ​ ​ ​ ​ ​ 1,085 ​ ​ ​ ​ ​ 1,085 ​ ​ ​ ​ ​ 1,106 ​ ​
American Bath Group, LLC
​ ​
(f)(g)
​ ​ Capital Goods ​ ​
L+575
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 9/30/23 ​ ​ ​ ​ ​ 24,938 ​ ​ ​ ​ ​ 23,963 ​ ​ ​ ​ ​ 25,031 ​ ​
AP Exhaust Acquisition, LLC
​ ​
(g)(h)(j)
​ ​ Automobiles & Components ​ ​
L+775
​ ​ ​ ​ 1.5% ​ ​ ​ ​ ​ 1/16/21 ​ ​ ​ ​ ​ 163,378 ​ ​ ​ ​ ​ 163,378 ​ ​ ​ ​ ​ 147,857 ​ ​
Ascension Insurance, Inc.
​ ​
(f)(g)(h)(j)
​ ​ Insurance ​ ​
L+825
​ ​ ​ ​ 1.3% ​ ​ ​ ​ ​ 3/5/19 ​ ​ ​ ​ ​ 76,837 ​ ​ ​ ​ ​ 76,270 ​ ​ ​ ​ ​ 77,702 ​ ​
ASG Technologies Group, Inc.
​ ​
(f)(g)(h)(j)(x)
​ ​ Software & Services ​ ​
L+786, 1.2% PIK
(1.2% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 4/30/20 ​ ​ ​ ​ ​ 79,315 ​ ​ ​ ​ ​ 79,143 ​ ​ ​ ​ ​ 80,505 ​ ​
Aspect Software, Inc.
​ ​ ​ ​ ​ Software & Services ​ ​
L+1000
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 5/25/18 ​ ​ ​ ​ ​ 1,154 ​ ​ ​ ​ ​ 1,154 ​ ​ ​ ​ ​ 1,154 ​ ​
Aspect Software, Inc.
​ ​
(p)
​ ​ Software & Services ​ ​
L+1000
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 5/25/18 ​ ​ ​ ​ ​ 40 ​ ​ ​ ​ ​ 40 ​ ​ ​ ​ ​ 40 ​ ​
Aspect Software, Inc.
​ ​
(j)
​ ​ Software & Services ​ ​
L+1000
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 5/25/20 ​ ​ ​ ​ ​ 3,714 ​ ​ ​ ​ ​ 3,714 ​ ​ ​ ​ ​ 3,756 ​ ​
Atlas Aerospace LLC
​ ​
(f)(k)
​ ​ Capital Goods ​ ​
L+804
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 5/8/19 ​ ​ ​ ​ ​ 57,000 ​ ​ ​ ​ ​ 57,000 ​ ​ ​ ​ ​ 57,855 ​ ​
ATX Networks Corp.
​ ​
(f)(g)(o)
​ ​
Technology Hardware & Equipment
​ ​
L+600
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 6/11/21 ​ ​ ​ ​ ​ 1,950 ​ ​ ​ ​ ​ 1,928 ​ ​ ​ ​ ​ 1,916 ​ ​
ATX Networks Corp.
​ ​
(f)(k)(o)
​ ​
Technology Hardware & Equipment
​ ​
L+600
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 6/11/21 ​ ​ ​ ​ ​ 26,092 ​ ​ ​ ​ ​ 25,311 ​ ​ ​ ​ ​ 25,309 ​ ​
BenefitMall Holdings, Inc.
​ ​
(g)(h)(j)(k)
​ ​
Commercial & Professional Services
​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 11/24/20 ​ ​ ​ ​ ​ 112,700 ​ ​ ​ ​ ​ 112,700 ​ ​ ​ ​ ​ 113,827 ​ ​
Cactus Wellhead, LLC
​ ​
(f)(g)
​ ​ Energy ​ ​
L+600
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 7/31/20 ​ ​ ​ ​ ​ 16,379 ​ ​ ​ ​ ​ 15,579 ​ ​ ​ ​ ​ 14,946 ​ ​
Cadence Aerospace Finance, Inc.
​ ​
(f)
​ ​ Capital Goods ​ ​
L+575
​ ​ ​ ​ 1.3% ​ ​ ​ ​ ​ 5/9/18 ​ ​ ​ ​ ​ 2,709 ​ ​ ​ ​ ​ 2,717 ​ ​ ​ ​ ​ 2,628 ​ ​
Caesars Entertainment Operating Co., Inc.
​ ​
(j)(n)(o)
​ ​ Consumer Services ​ ​
L+575
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 3/1/17 ​ ​ ​ ​ ​ 11,502 ​ ​ ​ ​ ​ 11,425 ​ ​ ​ ​ ​ 11,818 ​ ​
Caesars Entertainment Operating Co., Inc.
​ ​
(j)(n)(o)
​ ​ Consumer Services ​ ​
L+675
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 3/1/17 ​ ​ ​ ​ ​ 3,856 ​ ​ ​ ​ ​ 3,833 ​ ​ ​ ​ ​ 3,943 ​ ​
Caesars Entertainment Operating Co., Inc.
​ ​
(f)(i)(j)(n)(o)
​ ​ Consumer Services ​ ​
L+875
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 3/1/17 ​ ​ ​ ​ ​ 9,086 ​ ​ ​ ​ ​ 9,078 ​ ​ ​ ​ ​ 9,458 ​ ​
Caesars Entertainment Resort Properties, LLC
​ ​
(j)
​ ​ Consumer Services ​ ​
L+600
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 10/11/20 ​ ​ ​ ​ ​ 30,562 ​ ​ ​ ​ ​ 29,416 ​ ​ ​ ​ ​ 30,896 ​ ​
CEVA Group Plc
​ ​
(o)(p)
​ ​ Transportation ​ ​
L+500
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 3/19/19 ​ ​ ​ ​ ​ 20,000 ​ ​ ​ ​ ​ 20,000 ​ ​ ​ ​ ​ 16,000 ​ ​
Cimarron Energy Inc.
​ ​
(k)
​ ​ Energy ​ ​
L+775, 3.8% PIK
(3.8% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 12/15/19 ​ ​ ​ ​ ​ 23,664 ​ ​ ​ ​ ​ 23,664 ​ ​ ​ ​ ​ 24,019 ​ ​
Corner Investment PropCo, LLC
​ ​
(f)(j)
​ ​ Consumer Services ​ ​
L+975
​ ​ ​ ​ 1.3% ​ ​ ​ ​ ​ 11/2/19 ​ ​ ​ ​ ​ 38,758 ​ ​ ​ ​ ​ 39,092 ​ ​ ​ ​ ​ 39,145 ​ ​
See notes to unaudited consolidated financial statements.
17
FS Investment Corporation II
Consolidated Schedule of Investments (continued)
As of December 31, 2016
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Rate(b)
 ​ ​
Floor
​ ​
Maturity
​ ​
Principal
Amount(c)
 ​ ​
Amortized
Cost
​ ​
Fair
Value(d)
 ​
Crestwood Holdings LLC
​ ​
(f)
​ ​ Energy ​ ​
L+800
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 6/19/19 ​ ​ ​ ​ $ 5,021 ​ ​ ​ ​ $     5,010 ​ ​ ​ ​ $     4,927 ​ ​
CSafe Acquisition Co., Inc.
​ ​ ​ ​ ​ Capital Goods ​ ​
L+725
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 11/1/21 ​ ​ ​ ​ ​ 835 ​ ​ ​ ​ ​ 835 ​ ​ ​ ​ ​ 835 ​ ​
CSafe Acquisition Co., Inc.
​ ​
(p)
​ ​ Capital Goods ​ ​
L+725
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 11/1/21 ​ ​ ​ ​ ​ 5,426 ​ ​ ​ ​ ​ 5,426 ​ ​ ​ ​ ​ 5,426 ​ ​
CSafe Acquisition Co., Inc.
​ ​
(f)(g)(h)(j)
​ ​ Capital Goods ​ ​
L+725
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10/31/23 ​ ​ ​ ​ ​ 48,000 ​ ​ ​ ​ ​ 48,000 ​ ​ ​ ​ ​ 48,000 ​ ​
CSafe Acquisition Co., Inc.
​ ​
(p)
​ ​ Capital Goods ​ ​
L+725
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10/31/23 ​ ​ ​ ​ ​ 29,217 ​ ​ ​ ​ ​ 29,217 ​ ​ ​ ​ ​ 29,217 ​ ​
Dayton Superior Corp.
​ ​
(k)
​ ​ Materials ​ ​
L+800
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 11/15/21 ​ ​ ​ ​ ​ 11,667 ​ ​ ​ ​ ​ 11,321 ​ ​ ​ ​ ​ 11,754 ​ ​
Diamond Resorts International, Inc.
​ ​
(g)
​ ​ Consumer Services ​ ​
L+600
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 9/2/23 ​ ​ ​ ​ ​ 14,963 ​ ​ ​ ​ ​ 14,604 ​ ​ ​ ​ ​ 15,031 ​ ​
Eastman Kodak Co.
​ ​
(f)
​ ​ Consumer Durables & Apparel ​ ​
L+625
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 9/3/19 ​ ​ ​ ​ ​ 6,958 ​ ​ ​ ​ ​ 6,895 ​ ​ ​ ​ ​ 7,002 ​ ​
Emerging Markets Communications, LLC
​ ​
(f)(g)
​ ​ Telecommunication Services ​ ​
L+575
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 7/1/21 ​ ​ ​ ​ ​ 12,805 ​ ​ ​ ​ ​ 11,985 ​ ​ ​ ​ ​ 12,613 ​ ​
Empire Today, LLC
​ ​
(f)(g)(h)(j)(k)
​ ​ Retailing ​ ​
L+800
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 11/17/22 ​ ​ ​ ​ ​ 90,000 ​ ​ ​ ​ ​ 90,000 ​ ​ ​ ​ ​ 90,797 ​ ​
Fairway Group Acquisition Co.
​ ​
(j)
​ ​ Food & Staples Retailing ​ ​
L+800
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 1/3/20 ​ ​ ​ ​ ​ 2,492 ​ ​ ​ ​ ​ 2,492 ​ ​ ​ ​ ​ 2,517 ​ ​
Fairway Group Acquisition Co.
​ ​ ​ ​ ​ Food & Staples Retailing ​ ​
10.0% PIK
(10.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1/3/20 ​ ​ ​ ​ ​ 1,608 ​ ​ ​ ​ ​ 1,608 ​ ​ ​ ​ ​ 1,463 ​ ​
Fox Head, Inc.
​ ​
(g)(j)(k)
​ ​ Consumer Durables & Apparel ​ ​
L+850
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 12/19/20 ​ ​ ​ ​ ​ 13,153 ​ ​ ​ ​ ​ 13,153 ​ ​ ​ ​ ​ 12,963 ​ ​
FR Dixie Acquisition Corp.
​ ​
(f)
​ ​ Energy ​ ​
L+475
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 12/18/20 ​ ​ ​ ​ ​ 4,084 ​ ​ ​ ​ ​ 4,072 ​ ​ ​ ​ ​ 2,144 ​ ​
Greystone Equity Member Corp.
​ ​
(e)(o)
​ ​ Diversified Financials ​ ​
L+1050
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 3/31/21 ​ ​ ​ ​ ​ 33,076 ​ ​ ​ ​ ​ 33,209 ​ ​ ​ ​ ​ 33,366 ​ ​
Greystone Equity Member Corp.
​ ​
(e)(o)(p)
​ ​ Diversified Financials ​ ​
L+1100
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 3/31/21 ​ ​ ​ ​ ​ 6,924 ​ ​ ​ ​ ​ 6,924 ​ ​ ​ ​ ​ 6,984 ​ ​
Gulf Finance, LLC
​ ​
(g)
​ ​ Energy ​ ​
L+525
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 8/25/23 ​ ​ ​ ​ ​ 4,988 ​ ​ ​ ​ ​ 4,844 ​ ​ ​ ​ ​ 5,025 ​ ​
H.M. Dunn Co., Inc.
​ ​
(j)(k)
​ ​ Capital Goods ​ ​
L+955
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 3/26/21 ​ ​ ​ ​ ​ 64,286 ​ ​ ​ ​ ​ 64,286 ​ ​ ​ ​ ​ 65,009 ​ ​
H.M. Dunn Co., Inc.
​ ​
(p)
​ ​ Capital Goods ​ ​
L+775
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 3/26/21 ​ ​ ​ ​ ​ 21,429 ​ ​ ​ ​ ​ 21,429 ​ ​ ​ ​ ​ 21,670 ​ ​
Hybrid Promotions, LLC
​ ​
(g)(j)(k)
​ ​ Consumer Durables & Apparel ​ ​
L+850
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 12/19/20 ​ ​ ​ ​ ​ 48,227 ​ ​ ​ ​ ​ 48,227 ​ ​ ​ ​ ​ 47,530 ​ ​
Industrial Group Intermediate Holdings, LLC
​ ​
(f)(g)(h)(j)(k)
​ ​ Materials ​ ​
L+800
​ ​ ​ ​ 1.3% ​ ​ ​ ​ ​ 5/31/20 ​ ​ ​ ​ ​ 126,026 ​ ​ ​ ​ ​ 126,026 ​ ​ ​ ​ ​ 127,916 ​ ​
Industry City TI Lessor, L.P.
​ ​
(j)
​ ​ Consumer Services ​ ​
10.8%, 1.0% PIK
(1.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 6/30/26 ​ ​ ​ ​ ​ 13,045 ​ ​ ​ ​ ​ 13,045 ​ ​ ​ ​ ​ 13,241 ​ ​
Intralinks, Inc.
​ ​
(f)(g)(j)(o)
​ ​ Software & Services ​ ​
L+525
​ ​ ​ ​ 2.0% ​ ​ ​ ​ ​ 2/24/19 ​ ​ ​ ​ ​ 24,313 ​ ​ ​ ​ ​ 24,197 ​ ​ ​ ​ ​ 24,099 ​ ​
JMC Acquisition Merger Corp.
​ ​
(f)(g)(h)
​ ​ Capital Goods ​ ​
L+857
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 11/6/21 ​ ​ ​ ​ ​ 18,995 ​ ​ ​ ​ ​ 18,995 ​ ​ ​ ​ ​ 18,995 ​ ​
JSS Holdings, Inc.
​ ​
(f)
​ ​ Capital Goods ​ ​
L+650
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 8/31/21 ​ ​ ​ ​ ​ 7,500 ​ ​ ​ ​ ​ 7,085 ​ ​ ​ ​ ​ 7,462 ​ ​
Latham Pool Products, Inc.
​ ​
(f)(g)(j)
​ ​
Commercial & Professional Services
​ ​
L+775
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 6/29/21 ​ ​ ​ ​ ​ 35,000 ​ ​ ​ ​ ​ 35,000 ​ ​ ​ ​ ​ 35,350 ​ ​
LD Intermediate Holdings, Inc.
​ ​
(k)
​ ​ Software & Services ​ ​
L+588
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 12/9/22 ​ ​ ​ ​ ​ 17,000 ​ ​ ​ ​ ​ 15,305 ​ ​ ​ ​ ​ 15,810 ​ ​
MB Precision Holdings LLC
​ ​
(g)(h)(j)
​ ​ Capital Goods ​ ​
L+725, 1.5% PIK
(1.5% Max PIK)
​ ​ ​ ​ 1.3% ​ ​ ​ ​ ​ 1/23/20 ​ ​ ​ ​ ​ 59,981 ​ ​ ​ ​ ​ 59,981 ​ ​ ​ ​ ​ 57,657 ​ ​
MMM Holdings, Inc.
​ ​
(f)
​ ​
Health Care Equipment & Services
​ ​
L+825
​ ​ ​ ​ 1.5% ​ ​ ​ ​ ​ 6/30/19 ​ ​ ​ ​ ​ 2,009 ​ ​ ​ ​ ​ 2,013 ​ ​ ​ ​ ​ 1,964 ​ ​
MORSCO, Inc.
​ ​
(e)(f)
​ ​ Capital Goods ​ ​
L+700
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 10/31/23 ​ ​ ​ ​ ​ 20,000 ​ ​ ​ ​ ​ 19,217 ​ ​ ​ ​ ​ 20,200 ​ ​
Moxie Liberty LLC
​ ​
(f)(h)
​ ​ Energy ​ ​
L+650
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 8/21/20 ​ ​ ​ ​ ​ 11,752 ​ ​ ​ ​ ​ 11,777 ​ ​ ​ ​ ​ 11,619 ​ ​
Moxie Patriot LLC
​ ​
(h)
​ ​ Energy ​ ​
L+575
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 12/19/20 ​ ​ ​ ​ ​ 5,438 ​ ​ ​ ​ ​ 5,406 ​ ​ ​ ​ ​ 5,411 ​ ​
See notes to unaudited consolidated financial statements.
18
FS Investment Corporation II
Consolidated Schedule of Investments (continued)
As of December 31, 2016
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Rate(b)
 ​ ​
Floor
​ ​
Maturity
​ ​
Principal
Amount(c)
 ​ ​
Amortized
Cost
​ ​
Fair
Value(d)
 ​
MSO of Puerto Rico, Inc.
​ ​
(f)
​ ​
Health Care Equipment & Services
​ ​
L+825
​ ​ ​ ​ 1.5% ​ ​ ​ ​ ​ 6/30/19 ​ ​ ​ ​ $   1,461 ​ ​ ​ ​ $     1,463 ​ ​ ​ ​ $     1,428 ​ ​
Nobel Learning Communities, Inc.
​ ​ ​ ​ ​ Consumer Services ​ ​
L+450
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 4/27/20 ​ ​ ​ ​ ​ 4,193 ​ ​ ​ ​ ​ 4,193 ​ ​ ​ ​ ​ 4,193 ​ ​
Nobel Learning Communities, Inc.
​ ​
(p)
​ ​ Consumer Services ​ ​
L+450
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 4/27/20 ​ ​ ​ ​ ​ 6,988 ​ ​ ​ ​ ​ 6,988 ​ ​ ​ ​ ​ 6,988 ​ ​
Nobel Learning Communities, Inc.
​ ​
(f)(j)(k)
​ ​ Consumer Services ​ ​
L+841
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 4/27/21 ​ ​ ​ ​ ​ 84,472 ​ ​ ​ ​ ​ 84,472 ​ ​ ​ ​ ​ 85,739 ​ ​
North Haven Cadence Buyer, Inc.
​ ​
(p)
​ ​ Consumer Services ​ ​
L+500
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 9/2/21 ​ ​ ​ ​ ​ 2,625 ​ ​ ​ ​ ​ 2,625 ​ ​ ​ ​ ​ 2,625 ​ ​
North Haven Cadence Buyer, Inc.
​ ​
(f)(h)(j)(k)
​ ​ Consumer Services ​ ​
L+813
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 9/2/22 ​ ​ ​ ​ ​ 74,958 ​ ​ ​ ​ ​ 74,958 ​ ​ ​ ​ ​ 74,958 ​ ​
North Haven Cadence Buyer, Inc.
​ ​
(p)
​ ​ Consumer Services ​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 9/2/22 ​ ​ ​ ​ ​ 12,542 ​ ​ ​ ​ ​ 12,542 ​ ​ ​ ​ ​ 12,542 ​ ​
Nova Wildcat Amerock, LLC
​ ​
(f)(g)(j)
​ ​ Consumer Durables & Apparel ​ ​
L+859
​ ​ ​ ​ 1.3% ​ ​ ​ ​ ​ 9/10/19 ​ ​ ​ ​ ​ 64,759 ​ ​ ​ ​ ​ 64,759 ​ ​ ​ ​ ​ 62,816 ​ ​
PHRC License, LLC
​ ​
(e)(g)(h)
​ ​ Consumer Services ​ ​
L+900
​ ​ ​ ​ 1.5% ​ ​ ​ ​ ​ 8/14/20 ​ ​ ​ ​ ​ 58,506 ​ ​ ​ ​ ​ 58,506 ​ ​ ​ ​ ​ 59,091 ​ ​
Polymer Additives, Inc.
​ ​
(g)(h)(k)
​ ​ Materials ​ ​
L+888
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 12/20/21 ​ ​ ​ ​ ​ 63,068 ​ ​ ​ ​ ​ 63,068 ​ ​ ​ ​ ​ 63,384 ​ ​
Polymer Additives, Inc.
​ ​
(k)
​ ​ Materials ​ ​
L+978
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 12/20/21 ​ ​ ​ ​ ​ 1,941 ​ ​ ​ ​ ​ 1,941 ​ ​ ​ ​ ​ 2,019 ​ ​
Production Resource Group, LLC
​ ​
(f)(g)(h)(k)
​ ​ Media ​ ​
L+850
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 7/23/19 ​ ​ ​ ​ ​ 47,500 ​ ​ ​ ​ ​ 47,500 ​ ​ ​ ​ ​ 47,025 ​ ​
Production Resource Group, LLC
​ ​
(f)(j)(k)
​ ​ Media ​ ​
L+850
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 7/23/19 ​ ​ ​ ​ ​ 48,099 ​ ​ ​ ​ ​ 48,099 ​ ​ ​ ​ ​ 47,617 ​ ​
Propulsion Acquisition, LLC
​ ​
(f)(g)(j)
​ ​
Commercial & Professional Services
​ ​
L+600
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 7/13/21 ​ ​ ​ ​ ​ 37,405 ​ ​ ​ ​ ​ 34,996 ​ ​ ​ ​ ​ 36,657 ​ ​
PSKW, LLC
​ ​
(f)(g)(j)
​ ​
Health Care Equipment & Services
​ ​
L+839
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 11/25/21 ​ ​ ​ ​ ​ 26,000 ​ ​ ​ ​ ​ 26,000 ​ ​ ​ ​ ​ 25,297 ​ ​
Roadrunner Intermediate Acquisition Co., LLC
​ ​
(f)
​ ​
Health Care Equipment & Services
​ ​
L+800
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 9/22/21 ​ ​ ​ ​ ​ 7,750 ​ ​ ​ ​ ​ 7,750 ​ ​ ​ ​ ​ 7,866 ​ ​
Rogue Wave Software, Inc.
​ ​
(j)
​ ​ Software & Services ​ ​
L+802
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 9/25/21 ​ ​ ​ ​ ​ 19,913 ​ ​ ​ ​ ​ 19,913 ​ ​ ​ ​ ​ 19,913 ​ ​
Safariland, LLC
​ ​
(h)(j)
​ ​ Capital Goods ​ ​
L+769
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 11/18/23 ​ ​ ​ ​ ​ 70,234 ​ ​ ​ ​ ​ 70,234 ​ ​ ​ ​ ​ 70,059 ​ ​
Safariland, LLC
​ ​
(p)
​ ​ Capital Goods ​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 11/18/23 ​ ​ ​ ​ ​ 13,867 ​ ​ ​ ​ ​ 13,867 ​ ​ ​ ​ ​ 13,832 ​ ​
Sequential Brands Group, Inc.
​ ​
(h)(j)(k)(o)
​ ​ Consumer Durables & Apparel ​ ​
L+900
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 7/1/22 ​ ​ ​ ​ ​ 159,288 ​ ​ ​ ​ ​ 159,288 ​ ​ ​ ​ ​ 160,881 ​ ​
Sorenson Communications, Inc.
​ ​
(f)(g)(h)(j)
​ ​ Telecommunication Services ​ ​
L+575
​ ​ ​ ​ 2.3% ​ ​ ​ ​ ​ 4/30/20 ​ ​ ​ ​ ​ 99,460 ​ ​ ​ ​ ​ 99,158 ​ ​ ​ ​ ​ 98,714 ​ ​
Sports Authority, Inc.
​ ​
(f)(m)(n)
​ ​ Retailing ​ ​
L+600
​ ​ ​ ​ 1.5% ​ ​ ​ ​ ​ 11/16/17 ​ ​ ​ ​ ​ 7,818 ​ ​ ​ ​ ​ 6,676 ​ ​ ​ ​ ​ 1,593 ​ ​
Strike, LLC
​ ​
(p)
​ ​ Energy ​ ​
L+800
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 5/30/19 ​ ​ ​ ​ ​ 5,000 ​ ​ ​ ​ ​ 4,926 ​ ​ ​ ​ ​ 4,925 ​ ​
Strike, LLC
​ ​
(k)(l)
​ ​ Energy ​ ​
L+800
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 11/30/22 ​ ​ ​ ​ ​ 7,500 ​ ​ ​ ​ ​ 7,275 ​ ​ ​ ​ ​ 7,425 ​ ​
SunGard Availability Services Capital, Inc.
​ ​
(f)(i)
​ ​ Software & Services ​ ​
L+500
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 3/29/19 ​ ​ ​ ​ ​ 10,749 ​ ​ ​ ​ ​ 10,184 ​ ​ ​ ​ ​ 10,436 ​ ​
Sunnova Asset Portfolio 5 Holdings, LLC
​ ​ ​ ​ ​ Energy ​ ​
12.0%, 0.0% PIK
(12.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 11/14/21 ​ ​ ​ ​ ​ 9,406 ​ ​ ​ ​ ​ 9,267 ​ ​ ​ ​ ​ 9,500 ​ ​
Swift Worldwide Resources US Holdings Corp.
​ ​
(f)(h)
​ ​ Energy ​ ​
L+1100
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 7/20/21 ​ ​ ​ ​ ​ 19,538 ​ ​ ​ ​ ​ 19,538 ​ ​ ​ ​ ​ 19,538 ​ ​
ThermaSys Corp.
​ ​
(f)
​ ​ Capital Goods ​ ​
L+400
​ ​ ​ ​ 1.3% ​ ​ ​ ​ ​ 5/3/19 ​ ​ ​ ​ ​ 4,650 ​ ​ ​ ​ ​ 4,651 ​ ​ ​ ​ ​ 4,010 ​ ​
TierPoint, LLC
​ ​
(f)
​ ​ Software & Services ​ ​
L+450
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 12/2/21 ​ ​ ​ ​ ​ 4,526 ​ ​ ​ ​ ​ 4,445 ​ ​ ​ ​ ​ 4,562 ​ ​
Transplace Texas, LP
​ ​
(j)
​ ​ Transportation ​ ​
L+744
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 9/16/21 ​ ​ ​ ​ ​ 22,038 ​ ​ ​ ​ ​ 22,038 ​ ​ ​ ​ ​ 22,038 ​ ​
Transplace Texas, LP
​ ​
(p)
​ ​ Transportation ​ ​
L+700
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 9/16/21 ​ ​ ​ ​ ​ 486 ​ ​ ​ ​ ​ 486 ​ ​ ​ ​ ​ 486 ​ ​
U.S. Xpress Enterprises, Inc.
​ ​
(g)(h)(j)
​ ​ Transportation ​ ​
L+1000, 0.0% PIK
(1.8% Max PIK)
​ ​ ​ ​ 1.5% ​ ​ ​ ​ ​ 5/30/19 ​ ​ ​ ​ ​ 67,684 ​ ​ ​ ​ ​ 67,684 ​ ​ ​ ​ ​ 67,684 ​ ​
UTEX Industries, Inc.
​ ​
(k)
​ ​ Energy ​ ​
L+400
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 5/21/21 ​ ​ ​ ​ ​ 1,125 ​ ​ ​ ​ ​ 1,121 ​ ​ ​ ​ ​ 1,053 ​ ​
See notes to unaudited consolidated financial statements.
19
FS Investment Corporation II
Consolidated Schedule of Investments (continued)
As of December 31, 2016
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Rate(b)
 ​ ​
Floor
​ ​
Maturity
​ ​
Principal
Amount(c)
 ​ ​
Amortized
Cost
​ ​
Fair
Value(d)
 ​
Vertellus Performance Chemicals LLC
​ ​
(j)(k)
​ ​ Materials ​ ​
L+950
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 1/30/20 ​ ​ ​ ​ $  65,000 ​ ​ ​ ​ $    65,000 ​ ​ ​ ​ $    61,054 ​ ​
Warren Resources, Inc.
​ ​
(e)(j)(x)
​ ​ Energy ​ ​
L+900, 1.0% PIK
(1.0% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 5/22/20 ​ ​ ​ ​ ​ 42,122 ​ ​ ​ ​ ​ 42,122 ​ ​ ​ ​ ​ 42,122 ​ ​
Warren Resources, Inc.
​ ​
(p)(x)
​ ​ Energy ​ ​
L+900, 1.0% PIK
(1.0% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 5/22/20 ​ ​ ​ ​ ​ 3,002 ​ ​ ​ ​ ​ 3,002 ​ ​ ​ ​ ​ 3,002 ​ ​
Waste Pro USA, Inc.
​ ​
(g)(h)(j)(k)
​ ​
Commercial & Professional Services
​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 10/15/20 ​ ​ ​ ​ ​ 122,363 ​ ​ ​ ​ ​ 122,363 ​ ​ ​ ​ ​ 124,657 ​ ​
Zeta Interactive Holdings Corp.
​ ​
(f)(g)(j)
​ ​ Software & Services ​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 7/29/22 ​ ​ ​ ​ ​ 28,076 ​ ​ ​ ​ ​ 28,152 ​ ​ ​ ​ ​ 28,356 ​ ​
Zeta Interactive Holdings Corp.
​ ​
(f)(g)(v)
​ ​ Software & Services ​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 7/29/22 ​ ​ ​ ​ ​ 8,214 ​ ​ ​ ​ ​ 8,139 ​ ​ ​ ​ ​ 8,268 ​ ​
Zeta Interactive Holdings Corp.
​ ​
(p)
​ ​ Software & Services ​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 7/29/22 ​ ​ ​ ​ ​ 5,109 ​ ​ ​ ​ ​ 5,109 ​ ​ ​ ​ ​ 5,156 ​ ​
Zeta Interactive Holdings Corp.
​ ​
(p)(v)
​ ​ Software & Services ​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 7/29/22 ​ ​ ​ ​ ​ 1,314 ​ ​ ​ ​ ​ 1,314 ​ ​ ​ ​ ​ 1,319 ​ ​
Total Senior Secured Loans—First Lien
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 3,049,882 ​ ​ ​ ​ ​ 3,027,538 ​ ​
Unfunded Loan Commitments
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (163,449) ​ ​ ​ ​ ​ (163,449) ​ ​
Net Senior Secured Loans—First Lien
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2,886,433 ​ ​ ​ ​ ​ 2,864,089 ​ ​
Senior Secured Loans—Second Lien—24.7% ​ ​ ​ ​ ​ ​ ​ ​ ​
Alison US LLC
​ ​
(i)(o)
​ ​ Capital Goods ​ ​
L+850
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 8/29/22 ​ ​ ​ ​ ​ 4,444 ​ ​ ​ ​ ​ 4,303 ​ ​ ​ ​ ​ 4,311 ​ ​
American Bath Group, LLC
​ ​
(k)
​ ​ Capital Goods ​ ​
L+975
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 9/30/24 ​ ​ ​ ​ ​ 7,000 ​ ​ ​ ​ ​ 6,448 ​ ​ ​ ​ ​ 6,755 ​ ​
AP Exhaust Acquisition, LLC
​ ​ ​ ​ ​ Automobiles & Components ​ ​
12.0% PIK
(12.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 9/28/21 ​ ​ ​ ​ ​ 38,889 ​ ​ ​ ​ ​ 38,889 ​ ​ ​ ​ ​ 33,882 ​ ​
Arena Energy, LP
​ ​
(f)(j)
​ ​ Energy ​ ​
L+900, 4.0% PIK
(4.0% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 1/24/21 ​ ​ ​ ​ ​ 23,864 ​ ​ ​ ​ ​ 23,864 ​ ​ ​ ​ ​ 23,983 ​ ​
Ascent Resources - Marcellus, LLC
​ ​
(f)
​ ​ Energy ​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 8/4/21 ​ ​ ​ ​ ​ 3,333 ​ ​ ​ ​ ​ 3,291 ​ ​ ​ ​ ​ 442 ​ ​
Ascent Resources - Utica, LLC
​ ​
(e)(h)(j)(k)
​ ​ Energy ​ ​
L+950
​ ​ ​ ​ 1.5% ​ ​ ​ ​ ​ 9/30/18 ​ ​ ​ ​ ​ 248,050 ​ ​ ​ ​ ​ 247,400 ​ ​ ​ ​ ​ 250,220 ​ ​
ASG Technologies Group, Inc.
​ ​
(j)(x)
​ ​ Software & Services ​ ​
L+1100, 0.0% PIK
(6.0% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 6/27/22 ​ ​ ​ ​ ​ 26,989 ​ ​ ​ ​ ​ 20,189 ​ ​ ​ ​ ​ 26,179 ​ ​
BPA Laboratories Inc.
​ ​
(j)
​ ​ Pharmaceuticals, Biotechnology &
Life Sciences 		​ ​
L+250
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 7/3/17 ​ ​ ​ ​ ​ 3,272 ​ ​ ​ ​ ​ 3,129 ​ ​ ​ ​ ​ 2,263 ​ ​
Byrider Finance, LLC
​ ​
(e)
​ ​ Automobiles & Components ​ ​
L+1000, 0.5% PIK
(0.5% Max PIK)
​ ​ ​ ​ 1.3% ​ ​ ​ ​ ​ 8/22/20 ​ ​ ​ ​ ​ 16,745 ​ ​ ​ ​ ​ 16,745 ​ ​ ​ ​ ​ 16,493 ​ ​
Checkout Holding Corp.
​ ​
(k)
​ ​ Media ​ ​
L+675
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 4/11/22 ​ ​ ​ ​ ​ 10,000 ​ ​ ​ ​ ​ 9,945 ​ ​ ​ ​ ​ 7,200 ​ ​
Chief Exploration & Development LLC
​ ​
(f)
​ ​ Energy ​ ​
L+650
​ ​ ​ ​ 1.3% ​ ​ ​ ​ ​ 5/16/21 ​ ​ ​ ​ ​ 1,174 ​ ​ ​ ​ ​ 1,166 ​ ​ ​ ​ ​ 1,154 ​ ​
Compuware Corp.
​ ​
(j)
​ ​ Software & Services ​ ​
L+825
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 12/15/22 ​ ​ ​ ​ ​ 10,000 ​ ​ ​ ​ ​ 8,915 ​ ​ ​ ​ ​ 10,050 ​ ​
Crossmark Holdings, Inc.
​ ​
(k)
​ ​ Media ​ ​
L+750
​ ​ ​ ​ 1.3% ​ ​ ​ ​ ​ 12/21/20 ​ ​ ​ ​ ​ 7,778 ​ ​ ​ ​ ​ 7,791 ​ ​ ​ ​ ​ 3,694 ​ ​
Fairway Group Acquisition Co.
​ ​ ​ ​ ​ Food & Staples Retailing ​ ​
11.0% PIK
(11.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10/3/21 ​ ​ ​ ​ ​ 1,400 ​ ​ ​ ​ ​ 1,400 ​ ​ ​ ​ ​ 1,148 ​ ​
Fieldwood Energy LLC
​ ​
(e)
​ ​ Energy ​ ​
L+713
​ ​ ​ ​ 1.3% ​ ​ ​ ​ ​ 9/30/20 ​ ​ ​ ​ ​ 2,667 ​ ​ ​ ​ ​ 2,040 ​ ​ ​ ​ ​ 1,900 ​ ​
Gruden Acquisition, Inc.
​ ​
(j)
​ ​ Transportation ​ ​
L+850
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 8/18/23 ​ ​ ​ ​ ​ 15,000 ​ ​ ​ ​ ​ 14,366 ​ ​ ​ ​ ​ 11,875 ​ ​
See notes to unaudited consolidated financial statements.
20
FS Investment Corporation II
Consolidated Schedule of Investments (continued)
As of December 31, 2016
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Rate(b)
 ​ ​
Floor
​ ​
Maturity
​ ​
Principal
Amount(c)
 ​ ​
Amortized
Cost
​ ​
Fair
Value(d)
 ​
Inmar, Inc.
​ ​
(k)
​ ​ Software & Services ​ ​
L+700
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 1/27/22 ​ ​ ​ ​ $   2,830 ​ ​ ​ ​ $     2,810 ​ ​ ​ ​ $     2,713 ​ ​
Jazz Acquisition, Inc.
​ ​
(f)
​ ​ Capital Goods ​ ​
L+675
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 6/19/22 ​ ​ ​ ​ ​ 3,700 ​ ​ ​ ​ ​ 3,742 ​ ​ ​ ​ ​ 3,139 ​ ​
Jonah Energy LLC
​ ​
(e)
​ ​ Energy ​ ​
L+650
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 5/12/21 ​ ​ ​ ​ ​ 1,250 ​ ​ ​ ​ ​ 1,095 ​ ​ ​ ​ ​ 1,188 ​ ​
JW Aluminum Co.
​ ​
(e)(j)(k)(x)
​ ​ Materials ​ ​
L+850 PIK
(L+850 Max PIK)
​ ​ ​ ​ 0.8% ​ ​ ​ ​ ​ 11/17/20 ​ ​ ​ ​ ​ 33,818 ​ ​ ​ ​ ​ 33,808 ​ ​ ​ ​ ​ 34,410 ​ ​
Logan’s Roadhouse, Inc.
​ ​
(x)
​ ​ Consumer Services ​ ​
L+850 PIK
(L+850 Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 11/23/20 ​ ​ ​ ​ ​ 10,824 ​ ​ ​ ​ ​ 10,824 ​ ​ ​ ​ ​ 10,355 ​ ​
National Surgical Hospitals, Inc.
​ ​
(j)
​ ​
Health Care Equipment & Services
​ ​
L+900
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 6/1/23 ​ ​ ​ ​ ​ 17,500 ​ ​ ​ ​ ​ 17,500 ​ ​ ​ ​ ​ 17,508 ​ ​
Neff Rental LLC
​ ​
(k)
​ ​ Capital Goods ​ ​
L+625
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 6/9/21 ​ ​ ​ ​ ​ 7,253 ​ ​ ​ ​ ​ 7,227 ​ ​ ​ ​ ​ 7,224 ​ ​
Nielsen & Bainbridge, LLC
​ ​
(f)(g)
​ ​ Consumer Durables & Apparel ​ ​
L+925
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 8/15/21 ​ ​ ​ ​ ​ 16,675 ​ ​ ​ ​ ​ 16,490 ​ ​ ​ ​ ​ 16,341 ​ ​
P2 Upstream Acquisition Co.
​ ​
(k)
​ ​ Energy ​ ​
L+800
​ ​ ​ ​ 1.3% ​ ​ ​ ​ ​ 4/30/21 ​ ​ ​ ​ ​ 14,500 ​ ​ ​ ​ ​ 14,688 ​ ​ ​ ​ ​ 13,286 ​ ​
Paw Luxco II Sarl
​ ​
(o)
​ ​ Consumer Durables & Apparel ​ ​
EURIBOR+950
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1/29/19 ​ ​ ​ ​ € 5,727 ​ ​ ​ ​ ​ 7,241 ​ ​ ​ ​ ​ 719 ​ ​
Payless Inc.
​ ​
(k)
​ ​ Retailing ​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 3/11/22 ​ ​ ​ ​ $ 10,841 ​ ​ ​ ​ ​ 10,762 ​ ​ ​ ​ ​ 1,771 ​ ​
Peak 10, Inc.
​ ​
(g)
​ ​ Software & Services ​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 6/17/22 ​ ​ ​ ​ ​ 5,500 ​ ​ ​ ​ ​ 5,460 ​ ​ ​ ​ ​ 5,184 ​ ​
PSAV Acquisition Corp.
​ ​
(j)
​ ​
Technology Hardware & Equipment
​ ​
L+825
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 1/24/22 ​ ​ ​ ​ ​ 80,000 ​ ​ ​ ​ ​ 79,153 ​ ​ ​ ​ ​ 80,000 ​ ​
Spencer Gifts LLC
​ ​
(k)
​ ​ Retailing ​ ​
L+825
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 6/29/22 ​ ​ ​ ​ ​ 20,000 ​ ​ ​ ​ ​ 20,091 ​ ​ ​ ​ ​ 16,550 ​ ​
Titan Energy Operating, LLC
​ ​
(g)(j)
​ ​ Energy ​ ​
2.0%, L+900 PIK
(L+900 Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 2/23/20 ​ ​ ​ ​ ​ 69,954 ​ ​ ​ ​ ​ 58,348 ​ ​ ​ ​ ​ 57,236 ​ ​
TNS, Inc.
​ ​
(g)(i)(k)
​ ​ Software & Services ​ ​
L+800
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 8/14/20 ​ ​ ​ ​ ​ 43,475 ​ ​ ​ ​ ​ 43,220 ​ ​ ​ ​ ​ 43,222 ​ ​
WP CPP Holdings, LLC
​ ​
(j)
​ ​ Capital Goods ​ ​
L+775
​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 4/30/21 ​ ​ ​ ​ ​ 6,932 ​ ​ ​ ​ ​ 6,909 ​ ​ ​ ​ ​ 6,576 ​ ​
Total Senior Secured Loans—Second Lien
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 749,249 ​ ​ ​ ​ ​ 718,971 ​ ​
Senior Secured Bonds—5.1% ​ ​ ​ ​ ​ ​ ​ ​ ​
Advanced Lighting Technologies, Inc.
​ ​
(e)(j)
​ ​ Materials ​ ​
10.5%
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 6/1/19 ​ ​ ​ ​ ​ 35,500 ​ ​ ​ ​ ​ 33,181 ​ ​ ​ ​ ​ 12,709 ​ ​
Caesars Entertainment Resort Properties, LLC
​ ​
(i)(j)
​ ​ Consumer Services ​ ​
11.0%
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10/1/21 ​ ​ ​ ​ ​ 37,350 ​ ​ ​ ​ ​ 37,903 ​ ​ ​ ​ ​ 40,815 ​ ​
CEVA Group Plc
​ ​
(i)(o)
​ ​ Transportation ​ ​
7.0%
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 3/1/21 ​ ​ ​ ​ ​ 5,000 ​ ​ ​ ​ ​ 4,393 ​ ​ ​ ​ ​ 4,082 ​ ​
CEVA Group Plc
​ ​
(i)(o)
​ ​ Transportation ​ ​
9.0%
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 9/1/21 ​ ​ ​ ​ ​ 2,000 ​ ​ ​ ​ ​ 2,000 ​ ​ ​ ​ ​ 1,310 ​ ​
Diamond Resorts International, Inc.
​ ​
(k)
​ ​ Consumer Services ​ ​
7.8%
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 9/1/23 ​ ​ ​ ​ ​ 10,000 ​ ​ ​ ​ ​ 10,000 ​ ​ ​ ​ ​ 10,083 ​ ​
FourPoint Energy, LLC
​ ​
(e)(j)
​ ​ Energy ​ ​
9.0%
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 12/31/21 ​ ​ ​ ​ ​ 46,313 ​ ​ ​ ​ ​ 44,892 ​ ​ ​ ​ ​ 47,413 ​ ​
Global A&T Electronics Ltd.
​ ​
(e)(k)(o)
​ ​ Semiconductors &
Semiconductor Equipment 		​ ​
10.0%
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2/1/19 ​ ​ ​ ​ ​ 19,490 ​ ​ ​ ​ ​ 18,983 ​ ​ ​ ​ ​ 14,837 ​ ​
Ridgeback Resources Inc.
​ ​
(e)(o)(w)
​ ​ Energy ​ ​
12.0%
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 12/29/20 ​ ​ ​ ​ ​ 331 ​ ​ ​ ​ ​ 324 ​ ​ ​ ​ ​ 331 ​ ​
Sorenson Communications, Inc.
​ ​
(j)
​ ​ Telecommunication Services ​ ​
9.0%, 0.0% PIK
(9.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10/31/20 ​ ​ ​ ​ ​ 7,058 ​ ​ ​ ​ ​ 6,861 ​ ​ ​ ​ ​ 6,281 ​ ​
Velvet Energy Ltd.
​ ​
(o)
​ ​ Energy ​ ​
9.0%
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10/5/23 ​ ​ ​ ​ ​ 10,000 ​ ​ ​ ​ ​ 10,000 ​ ​ ​ ​ ​ 10,224 ​ ​
Total Senior Secured Bonds
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 168,537 ​ ​ ​ ​ ​ 148,085 ​ ​
​
See notes to unaudited consolidated financial statements.
21
FS Investment Corporation II
Consolidated Schedule of Investments (continued)
As of December 31, 2016
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Rate(b)
 ​ ​
Floor
​ ​
Maturity
​ ​
Principal
Amount(c)
 ​ ​
Amortized
Cost
​ ​
Fair
Value(d)
 ​
Subordinated Debt—13.9% ​ ​ ​ ​ ​ ​ ​ ​ ​
Aurora Diagnostics, LLC
​ ​
(j)
​ ​
Health Care Equipment & Services
​ ​
10.8%
​ ​ ​ ​ ​ ​ ​ 1/15/18 ​ ​ ​ ​ $   6,130 ​ ​ ​ ​ $     6,140 ​ ​ ​ ​ $     5,287 ​ ​
Bellatrix Exploration Ltd.
​ ​
(o)
​ ​ Energy ​ ​
8.5%
​ ​ ​ ​ ​ ​ ​ 5/15/20 ​ ​ ​ ​ ​ 5,000 ​ ​ ​ ​ ​ 4,928 ​ ​ ​ ​ ​ 4,922 ​ ​
BMC Software Finance, Inc.
​ ​
(k)
​ ​ Software & Services ​ ​
7.3%
​ ​ ​ ​ ​ ​ ​ 6/1/18 ​ ​ ​ ​ ​ 3,820 ​ ​ ​ ​ ​ 3,651 ​ ​ ​ ​ ​ 3,837 ​ ​
Brooklyn Basketball Holdings, LLC
​ ​
(h)(j)
​ ​ Consumer Services ​ ​
L+725
​ ​ ​ ​ ​ ​ ​ 10/25/19 ​ ​ ​ ​ ​ 39,746 ​ ​ ​ ​ ​ 39,746 ​ ​ ​ ​ ​ 39,944 ​ ​
CEC Entertainment, Inc.
​ ​
(i)
​ ​ Consumer Services ​ ​
8.0%
​ ​ ​ ​ ​ ​ ​ 2/15/22 ​ ​ ​ ​ ​ 18,715 ​ ​ ​ ​ ​ 18,545 ​ ​ ​ ​ ​ 19,152 ​ ​
Ceridian HCM Holding, Inc.
​ ​
(i)(k)
​ ​
Commercial & Professional Services
​ ​
11.0%
​ ​ ​ ​ ​ ​ ​ 3/15/21 ​ ​ ​ ​ ​ 46,250 ​ ​ ​ ​ ​ 45,843 ​ ​ ​ ​ ​ 47,753 ​ ​
Eclipse Resources Corp.
​ ​
(i)(o)
​ ​ Energy ​ ​
8.9%
​ ​ ​ ​ ​ ​ ​ 7/15/23 ​ ​ ​ ​ ​ 9,175 ​ ​ ​ ​ ​ 9,008 ​ ​ ​ ​ ​ 9,573 ​ ​
EV Energy Partners, L.P.
​ ​
(e)
​ ​ Energy ​ ​
8.0%
​ ​ ​ ​ ​ ​ ​ 4/15/19 ​ ​ ​ ​ ​ 259 ​ ​ ​ ​ ​ 239 ​ ​ ​ ​ ​ 184 ​ ​
Global Jet Capital Inc.
​ ​ ​ ​ ​
Commercial & Professional Services
​ ​
15.0% PIK
(15.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ 1/30/25 ​ ​ ​ ​ ​ 732 ​ ​ ​ ​ ​ 732 ​ ​ ​ ​ ​ 727 ​ ​
Global Jet Capital Inc.
​ ​ ​ ​ ​
Commercial & Professional Services
​ ​
15.0% PIK
(15.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ 4/30/25 ​ ​ ​ ​ ​ 4,649 ​ ​ ​ ​ ​ 4,649 ​ ​ ​ ​ ​ 4,620 ​ ​
Global Jet Capital Inc.
​ ​ ​ ​ ​
Commercial & Professional Services
​ ​
15.0% PIK
(15.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ 9/3/25 ​ ​ ​ ​ ​ 961 ​ ​ ​ ​ ​ 961 ​ ​ ​ ​ ​ 955 ​ ​
Global Jet Capital Inc.
​ ​ ​ ​ ​
Commercial & Professional Services
​ ​
15.0% PIK
(15.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ 9/29/25 ​ ​ ​ ​ ​ 904 ​ ​ ​ ​ ​ 904 ​ ​ ​ ​ ​ 899 ​ ​
Global Jet Capital Inc.
​ ​
(e)(o)
​ ​
Commercial & Professional Services
​ ​
15.0% PIK
(15.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ 12/4/25 ​ ​ ​ ​ ​ 6,676 ​ ​ ​ ​ ​ 6,676 ​ ​ ​ ​ ​ 6,635 ​ ​
Global Jet Capital Inc.
​ ​
(e)(o)
​ ​
Commercial & Professional Services
​ ​
15.0% PIK
(15.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ 12/9/25 ​ ​ ​ ​ ​ 1,092 ​ ​ ​ ​ ​ 1,092 ​ ​ ​ ​ ​ 1,085 ​ ​
Global Jet Capital Inc.
​ ​
(e)(o)
​ ​
Commercial & Professional Services
​ ​
15.0% PIK
(15.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ 1/29/26 ​ ​ ​ ​ ​ 572 ​ ​ ​ ​ ​ 572 ​ ​ ​ ​ ​ 568 ​ ​
Global Jet Capital Inc.
​ ​ ​ ​ ​
Commercial & Professional Services
​ ​
15.0% PIK
(15.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ 12/2/26 ​ ​ ​ ​ ​ 1,730 ​ ​ ​ ​ ​ 1,730 ​ ​ ​ ​ ​ 1,730 ​ ​
Jupiter Resources Inc.
​ ​
(h)(o)
​ ​ Energy ​ ​
8.5%
​ ​ ​ ​ ​ ​ ​ 10/1/22 ​ ​ ​ ​ ​ 28,800 ​ ​ ​ ​ ​ 26,772 ​ ​ ​ ​ ​ 25,008 ​ ​
Mood Media Corp.
​ ​
(l)(o)
​ ​ Media ​ ​
10.0%
​ ​ ​ ​ ​ ​ ​ 8/6/23 ​ ​ ​ ​ ​ 6,930 ​ ​ ​ ​ ​ 6,103 ​ ​ ​ ​ ​ 6,410 ​ ​
Mood Media Corp.
​ ​
(e)(j)(o)
​ ​ Media ​ ​
9.3%
​ ​ ​ ​ ​ ​ ​ 10/15/20 ​ ​ ​ ​ ​ 46,207 ​ ​ ​ ​ ​ 45,764 ​ ​ ​ ​ ​ 28,648 ​ ​
NewStar Financial, Inc.
​ ​
(h)(j)(k)(o)
​ ​ Diversified Financials ​ ​
8.3%, 0.0% PIK
(8.8% Max PIK)
​ ​ ​ ​ ​ ​ ​ 12/4/24 ​ ​ ​ ​ ​ 150,000 ​ ​ ​ ​ ​ 123,230 ​ ​ ​ ​ ​ 130,500 ​ ​
P.F. Chang’s China Bistro, Inc.
​ ​
(i)(j)
​ ​ Consumer Services ​ ​
10.3%
​ ​ ​ ​ ​ ​ ​ 6/30/20 ​ ​ ​ ​ ​ 31,353 ​ ​ ​ ​ ​ 31,262 ​ ​ ​ ​ ​ 30,778 ​ ​
S1 Blocker Buyer Inc.
​ ​ ​ ​ ​
Commercial & Professional Services
​ ​
10.0% PIK
(10.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ 10/31/22 ​ ​ ​ ​ ​ 268 ​ ​ ​ ​ ​ 268 ​ ​ ​ ​ ​ 272 ​ ​
SandRidge Energy, Inc.
​ ​
(n)(o)
​ ​ Energy ​ ​
0.0%
​ ​ ​ ​ ​ ​ ​ 10/4/20 ​ ​ ​ ​ ​ 2,643 ​ ​ ​ ​ ​ 3,522 ​ ​ ​ ​ ​ 3,318 ​ ​
Scientific Games Corp.
​ ​
(i)(o)
​ ​ Consumer Services ​ ​
8.1%
​ ​ ​ ​ ​ ​ ​ 9/15/18 ​ ​ ​ ​ ​ 3,340 ​ ​ ​ ​ ​ 3,285 ​ ​ ​ ​ ​ 3,383 ​ ​
Sorenson Communications, Inc.
​ ​
(e)(j)
​ ​ Telecommunication Services ​ ​
13.9%, 0.0% PIK
(13.9% Max PIK)
​ ​ ​ ​ ​ ​ ​ 10/31/21 ​ ​ ​ ​ ​ 5,364 ​ ​ ​ ​ ​ 5,075 ​ ​ ​ ​ ​ 4,935 ​ ​
See notes to unaudited consolidated financial statements.
22
FS Investment Corporation II
Consolidated Schedule of Investments (continued)
As of December 31, 2016
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Rate(b)
 ​ ​
Floor
​ ​
Maturity
​ ​
Principal
Amount(c)
 ​ ​
Amortized
Cost
​ ​
Fair
Value(d)
 ​
SunGard Availability Services Capital, Inc.
​ ​
(i)
​ ​ Software & Services ​ ​
8.8%
​ ​ ​ ​ ​ ​ ​ 4/1/22 ​ ​ ​ ​ $   5,900 ​ ​ ​ ​ $     4,436 ​ ​ ​ ​ $     4,064 ​ ​
Talos Production LLC
​ ​
(e)
​ ​ Energy ​ ​
9.8%
​ ​ ​ ​ ​ ​ ​ 2/15/18 ​ ​ ​ ​ ​ 4,500 ​ ​ ​ ​ ​ 4,291 ​ ​ ​ ​ ​ 2,497 ​ ​
TI Group Automotive Systems, LLC
​ ​
(i)(o)
​ ​ Automobiles & Components ​ ​
8.8%
​ ​ ​ ​ ​ ​ ​ 7/15/23 ​ ​ ​ ​ ​ 7,302 ​ ​ ​ ​ ​ 7,302 ​ ​ ​ ​ ​ 7,699 ​ ​
York Risk Services Holding Corp.
​ ​
(i)(j)
​ ​ Insurance ​ ​
8.5%
​ ​ ​ ​ ​ ​ ​ 10/1/22 ​ ​ ​ ​ ​ 8,350 ​ ​ ​ ​ ​ 7,594 ​ ​ ​ ​ ​ 7,014 ​ ​
Total Subordinated Debt
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 414,320 ​ ​ ​ ​ ​ 402,397 ​ ​
Collateralized Securities—0.8% ​ ​ ​ ​ ​ ​ ​ ​ ​
CGMS CLO 2013-3A Class Subord.
​ ​
(o)
​ ​ Diversified Financials ​ ​
16.8%
​ ​ ​ ​ ​ ​ ​ 7/15/25 ​ ​ ​ ​ ​ 17,000 ​ ​ ​ ​ ​ 7,941 ​ ​ ​ ​ ​ 10,674 ​ ​
NewStar Clarendon 2014-1A Class D
​ ​
(o)
​ ​ Diversified Financials ​ ​
L+435
​ ​ ​ ​ ​ ​ ​ 1/25/27 ​ ​ ​ ​ ​ 1,060 ​ ​ ​ ​ ​ 1,003 ​ ​ ​ ​ ​ 1,000 ​ ​
NewStar Clarendon 2014-1A Class Subord. B
​ ​
(o)
​ ​ Diversified Financials ​ ​
16.4%
​ ​ ​ ​ ​ ​ ​ 1/25/27 ​ ​ ​ ​ ​ 12,140 ​ ​ ​ ​ ​ 9,680 ​ ​ ​ ​ ​ 9,698 ​ ​
Octagon CLO 2012-1A Class Income
​ ​
(o)
​ ​ Diversified Financials ​ ​
5.8%
​ ​ ​ ​ ​ ​ ​ 1/15/24 ​ ​ ​ ​ ​ 4,650 ​ ​ ​ ​ ​ 1,644 ​ ​ ​ ​ ​ 1,801 ​ ​
Total Collateralized Securities
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​    20,268 ​ ​ ​ ​ ​     23,173 ​ ​
​
See notes to unaudited consolidated financial statements.
23
FS Investment Corporation II
Consolidated Schedule of Investments (continued)
As of December 31, 2016
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Number of
Shares
​ ​
Cost
​ ​
Fair
Value(d)
 ​
Equity/Other—11.7% ​ ​ ​ ​ ​ ​
5 Arches, LLC, Common Equity
​ ​
(n)(o)(r)
​ ​ Diversified Financials ​ ​ ​ ​ 4,738 ​ ​ ​ ​ $       125 ​ ​ ​ ​ $       125 ​ ​
A.T. Cross Co., Common Equity, Class A Units
​ ​
(e)(n)(x)
​ ​ Retailing ​ ​ ​ ​ 1,000,000 ​ ​ ​ ​ ​ 1,000 ​ ​ ​ ​ ​ — ​ ​
A.T. Cross Co., Preferred Equity, Class A-1 Units
​ ​
(e)(n)(x)
​ ​ Retailing ​ ​ ​ ​ 243,478 ​ ​ ​ ​ ​ 243 ​ ​ ​ ​ ​ — ​ ​
A.T. Cross Co., GSO Special Unit
​ ​
(n)(x)
​ ​ Retailing ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Abaco Energy Technologies LLC, Common Equity
​ ​
(n)
​ ​ Energy ​ ​ ​ ​ 3,055,556 ​ ​ ​ ​ ​ 3,056 ​ ​ ​ ​ ​ 153 ​ ​
Abaco Energy Technologies LLC, Preferred Equity
​ ​
(n)
​ ​ Energy ​ ​ ​ ​ 12,734,481 ​ ​ ​ ​ ​ 637 ​ ​ ​ ​ ​ 637 ​ ​
ACP FH Holdings GP, LLC, Common Equity
​ ​
(e)(n)
​ ​ Consumer Durables & Apparel ​ ​ ​ ​ 88,571 ​ ​ ​ ​ ​ 89 ​ ​ ​ ​ ​ 71 ​ ​
ACP FH Holdings, LP, Common Equity
​ ​
(e)(n)
​ ​ Consumer Durables & Apparel ​ ​ ​ ​ 8,768,572 ​ ​ ​ ​ ​ 8,769 ​ ​ ​ ​ ​ 7,017 ​ ​
Altus Power America Holdings, LLC, Common Equity
​ ​
(n)
​ ​ Energy ​ ​ ​ ​ 462,008 ​ ​ ​ ​ ​ 462 ​ ​ ​ ​ ​ 462 ​ ​
Altus Power America Holdings, LLC, Preferred Equity
​ ​
(t)
​ ​ Energy ​ ​ ​ ​ 833,333 ​ ​ ​ ​ ​ 888 ​ ​ ​ ​ ​ 888 ​ ​
Amaya Inc., Warrants, 5/15/2024
​ ​
(n)(o)
​ ​ Consumer Services ​ ​ ​ ​ 2,000,000 ​ ​ ​ ​ ​ 16,832 ​ ​ ​ ​ ​ 13,360 ​ ​
AP Exhaust Holdings, LLC, Common Equity
​ ​
(n)(r)
​ ​ Automobiles & Components ​ ​ ​ ​ 8,378 ​ ​ ​ ​ ​ 8,378 ​ ​ ​ ​ ​ 419 ​ ​
Ascent Resources Utica Holdings, LLC, Common Equity
​ ​
(n)(q)
​ ​ Energy ​ ​ ​ ​ 128,734,129 ​ ​ ​ ​ ​ 38,700 ​ ​ ​ ​ ​ 28,836 ​ ​
ASG Technologies Group, Inc., Common Equity
​ ​
(n)(x)
​ ​ Software & Services ​ ​ ​ ​ 625,178 ​ ​ ​ ​ ​ 13,475 ​ ​ ​ ​ ​ 29,477 ​ ​
ASG Technologies Group, Inc., Warrants, 6/27/2022
​ ​
(n)(x)
​ ​ Software & Services ​ ​ ​ ​ 253,704 ​ ​ ​ ​ ​ 7,231 ​ ​ ​ ​ ​ 6,444 ​ ​
Aspect Software, Inc., Common Equity
​ ​
(n)
​ ​ Software & Services ​ ​ ​ ​ 386,092 ​ ​ ​ ​ ​ 18,639 ​ ​ ​ ​ ​ 21,081 ​ ​
ATX Holdings, LLC, Common Equity
​ ​
(n)(o)
​ ​ Technology Hardware & Equipment ​ ​ ​ ​ 72,635 ​ ​ ​ ​ ​ 116 ​ ​ ​ ​ ​ 116 ​ ​
BPA Laboratories, Inc., Series A Warrants, 4/29/2024
​ ​
(j)(n)
​ ​ Pharmaceuticals, Biotechnology & Life Sciences ​ ​ ​ ​ 10,924 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
BPA Laboratories, Inc., Series B Warrants, 4/29/2024
​ ​
(j)(n)
​ ​ Pharmaceuticals, Biotechnology & Life Sciences ​ ​ ​ ​ 17,515 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Burleigh Point, Ltd., Warrants, 7/16/2020
​ ​
(n)(o)
​ ​ Retailing ​ ​ ​ ​ 3,451,216 ​ ​ ​ ​ ​ 1,898 ​ ​ ​ ​ ​ 276 ​ ​
Cimarron Energy Holdco Inc., Common Equity
​ ​
(n)
​ ​ Energy ​ ​ ​ ​ 3,201,631 ​ ​ ​ ​ ​ 2,991 ​ ​ ​ ​ ​ 1,921 ​ ​
CSF Group Holdings, Inc., Common Equity
​ ​
(n)
​ ​ Capital Goods ​ ​ ​ ​ 417,400 ​ ​ ​ ​ ​ 417 ​ ​ ​ ​ ​ 417 ​ ​
DHS Technologies LLC, Common Equity
​ ​
(e)(n)
​ ​ Capital Goods ​ ​ ​ ​ 60,872 ​ ​ ​ ​ ​ 5,000 ​ ​ ​ ​ ​ 626 ​ ​
Eastman Kodak Co., Common Equity
​ ​
(n)
​ ​ Consumer Durables & Apparel ​ ​ ​ ​ 1,846 ​ ​ ​ ​ ​ 36 ​ ​ ​ ​ ​ 29 ​ ​
H.I.G. Empire Holdco, Inc., Common Equity
​ ​
(n)
​ ​ Retailing ​ ​ ​ ​ 411 ​ ​ ​ ​ ​ 1,227 ​ ​ ​ ​ ​ 1,260 ​ ​
Fairway Group Acquisition Co., Common Equity
​ ​
(n)
​ ​ Food & Staples Retailing ​ ​ ​ ​ 31,626 ​ ​ ​ ​ ​ 1,016 ​ ​ ​ ​ ​ 822 ​ ​
FourPoint Energy, LLC, Common Equity, Class C-II-A Units
​ ​
(n)(r)
​ ​ Energy ​ ​ ​ ​ 13,000 ​ ​ ​ ​ ​ 13,000 ​ ​ ​ ​ ​ 6,273 ​ ​
FourPoint Energy, LLC, Common Equity, Class D Units
​ ​
(n)(r)
​ ​ Energy ​ ​ ​ ​ 2,437 ​ ​ ​ ​ ​ 1,610 ​ ​ ​ ​ ​ 1,188 ​ ​
FourPoint Energy, LLC, Common Equity, Class E-II Units
​ ​
(n)(r)
​ ​ Energy ​ ​ ​ ​ 54,104 ​ ​ ​ ​ ​ 13,526 ​ ​ ​ ​ ​ 24,753 ​ ​
FourPoint Energy, LLC, Common Equity, Class E-III Units
​ ​
(e)(n)(r)
​ ​ Energy ​ ​ ​ ​ 43,875 ​ ​ ​ ​ ​ 10,969 ​ ​ ​ ​ ​ 21,170 ​ ​
Global Jet Capital Holdings, LP, Preferred Equity
​ ​
(e)(n)(o)
​ ​ Commercial & Professional Services ​ ​ ​ ​ 6,228,866 ​ ​ ​ ​ ​ 6,229 ​ ​ ​ ​ ​ 6,229 ​ ​
Harvey Holdings, LLC, Common Equity
​ ​
(n)
​ ​ Capital Goods ​ ​ ​ ​ 666,667 ​ ​ ​ ​ ​ 667 ​ ​ ​ ​ ​ 1,533 ​ ​
Industrial Group Intermediate Holdings, LLC, Common Equity
​ ​
(n)(r)
​ ​ Materials ​ ​ ​ ​ 2,678,947 ​ ​ ​ ​ ​ 2,679 ​ ​ ​ ​ ​ 4,688 ​ ​
JMC Acquisition Holdings, LLC, Common Equity
​ ​
(n)
​ ​ Capital Goods ​ ​ ​ ​ 1,449 ​ ​ ​ ​ ​ 1,449 ​ ​ ​ ​ ​ 1,616 ​ ​
JW Aluminum Co., Common Equity
​ ​
(e)(k)(n)(x)
​ ​ Materials ​ ​ ​ ​ 256 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
JW Aluminum Co., Preferred Equity
​ ​
(e)(k)(x)
​ ​ Materials ​ ​ ​ ​ 1,184 ​ ​ ​ ​ ​ 11,279 ​ ​ ​ ​ ​ 11,854 ​ ​
See notes to unaudited consolidated financial statements.
24
FS Investment Corporation II
Consolidated Schedule of Investments (continued)
As of December 31, 2016
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Number of
Shares
​ ​
Cost
​ ​
Fair
Value(d)
 ​
MB Precision Investment Holdings LLC, Class A-2 Units
​ ​
(n)(r)
​ ​ Capital Goods ​ ​ ​ ​ 2,287,659 ​ ​ ​ ​ $ 2,288 ​ ​ ​ ​ $ 458 ​ ​
NewStar Financial, Inc., Warrants, 11/4/2024
​ ​
(e)(n)(o)
​ ​ Diversified Financials ​ ​ ​ ​ 6,000,000 ​ ​ ​ ​ ​ 30,115 ​ ​ ​ ​ ​ 16,620 ​ ​
North Haven Cadence Buyer, Inc., Common Equity
​ ​
(n)
​ ​ Consumer Services ​ ​ ​ ​ 2,916,667 ​ ​ ​ ​ ​ 2,917 ​ ​ ​ ​ ​ 3,063 ​ ​
Professional Plumbing Group, Inc., Common Equity
​ ​
(e)(n)
​ ​ Capital Goods ​ ​ ​ ​ 3,000,000 ​ ​ ​ ​ ​ 3,000 ​ ​ ​ ​ ​ 7,500 ​ ​
PSAV Holdings LLC, Common Equity
​ ​ ​ ​ ​ Technology Hardware & Equipment ​ ​ ​ ​ 10,000 ​ ​ ​ ​ ​ 10,000 ​ ​ ​ ​ ​ 28,500 ​ ​
Ridgeback Resources Inc., Common Equity
​ ​
(e)(n)(o)(w)
​ ​ Energy ​ ​ ​ ​ 817,308 ​ ​ ​ ​ ​ 5,022 ​ ​ ​ ​ ​ 5,022 ​ ​
Roadhouse Holding Inc., Common Equity
​ ​
(n)(x)
​ ​ Consumer Services ​ ​ ​ ​ 4,481,763 ​ ​ ​ ​ ​ 4,657 ​ ​ ​ ​ ​ 5,472 ​ ​
S1 Blocker Buyer Inc., Common Equity
​ ​ ​ ​ ​ Commercial & Professional Services ​ ​ ​ ​ 124 ​ ​ ​ ​ ​ 1,240 ​ ​ ​ ​ ​ 1,208 ​ ​
SandRidge Energy, Inc., Common Equity
​ ​
(n)(o)
​ ​ Energy ​ ​ ​ ​ 112,112 ​ ​ ​ ​ ​ 2,803 ​ ​ ​ ​ ​ 2,640 ​ ​
Sequential Brands Group, Inc., Common Equity
​ ​
(e)(n)(o)
​ ​ Consumer Durables & Apparel ​ ​ ​ ​ 408,685 ​ ​ ​ ​ ​ 5,517 ​ ​ ​ ​ ​ 1,913 ​ ​
Sorenson Communications, Inc., Common Equity
​ ​
(e)(n)
​ ​ Telecommunication Services ​ ​ ​ ​ 43,796 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 36,990 ​ ​
Sunnova Energy Corp., Common Equity
​ ​
(n)
​ ​ Energy ​ ​ ​ ​ 384,746 ​ ​ ​ ​ ​ 1,444 ​ ​ ​ ​ ​ 2,089 ​ ​
Sunnova Energy Corp., Preferred Equity
​ ​
(n)
​ ​ Energy ​ ​ ​ ​ 36,363 ​ ​ ​ ​ ​ 194 ​ ​ ​ ​ ​ 197 ​ ​
Swift Worldwide Resources Holdco Limited, Common Equity
​ ​
(n)(o)(u)
​ ​ Energy ​ ​ ​ ​ 1,250,000 ​ ​ ​ ​ ​ 2,010 ​ ​ ​ ​ ​ 625 ​ ​
TE Holdings, LLC, Common Equity
​ ​
(e)(n)(r)
​ ​ Energy ​ ​ ​ ​ 717,718 ​ ​ ​ ​ ​ 6,101 ​ ​ ​ ​ ​ 5,383 ​ ​
TE Holdings, LLC, Preferred Equity
​ ​
(e)(n)
​ ​ Energy ​ ​ ​ ​ 475,758 ​ ​ ​ ​ ​ 4,751 ​ ​ ​ ​ ​ 7,136 ​ ​
Titan Energy LLC, Common Equity
​ ​
(e)(n)
​ ​ Energy ​ ​ ​ ​ 200,040 ​ ​ ​ ​ ​ 6,322 ​ ​ ​ ​ ​ 4,801 ​ ​
Warren Resources, Inc., Common Equity
​ ​
(n)(x)
​ ​ Energy ​ ​ ​ ​ 2,371,337 ​ ​ ​ ​ ​ 11,145 ​ ​ ​ ​ ​ 10,197 ​ ​
White Star Petroleum Holdings, LLC, Common Equity
​ ​
(e)(n)
​ ​ Energy ​ ​ ​ ​ 1,613,753 ​ ​ ​ ​ ​ 1,372 ​ ​ ​ ​ ​ 1,573 ​ ​
Zeta Interactive Holdings Corp., Preferred Equity
​ ​
(n)
​ ​ Software & Services ​ ​ ​ ​ 620,025 ​ ​ ​ ​ ​ 4,929 ​ ​ ​ ​ ​ 5,552 ​ ​
Total Equity/Other
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 298,460 ​ ​ ​ ​ ​ 340,680 ​ ​
TOTAL INVESTMENTS—154.6%
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 4,537,267 ​ ​ ​ ​ ​ 4,497,395 ​ ​
LIABILITIES IN EXCESS OF OTHER ASSETS—(54.6%)
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (1,587,535) ​ ​
NET ASSETS—100.0%
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 2,909,860 ​ ​
​
​
(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 December 31, 2016, the three-month London Interbank Offered Rate, or LIBOR or L, was 1.00%, the Euro Interbank Offered Rate, or EURIBOR, was (0.32)% and the U.S. Prime Lending Rate, or Prime, was 3.75%. PIK means paid-in-kind.
​
(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 Cobbs Creek LLC and is pledged as collateral supporting the obligations of Cobbs Creek LLC under the repurchase transaction with JPMorgan Chase Bank, N.A., London Branch (see Note 8).
​
(f)
Security or portion thereof held within Cooper River LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with Citibank, N.A. (see Note 8).
​
(g)
Security or portion thereof held within Wissahickon Creek LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with Wells Fargo Bank, National Association (see Note 8).
​
(h)
Security or portion thereof held within Darby Creek LLC and is pledged as collateral supporting the amounts outstanding under a revolving credit facility with Deutsche Bank AG, New York Branch (see Note 8).
​
​
See notes to unaudited consolidated financial statements.
25
FS Investment Corporation II
Consolidated Schedule of Investments (continued)
As of December 31, 2016
(in thousands, except share amounts)
​
 
(i)
Security or portion thereof held within Dunning Creek LLC and is pledged as collateral supporting the amounts outstanding under a revolving credit facility with Deutsche Bank AG, New York Branch (see Note 8).
​
(j)
Security or portion thereof held within Juniata River LLC and is pledged as collateral supporting the amounts outstanding under a term loan credit facility with JPMorgan Chase Bank, N.A. (see Note 8).
​
(k)
Security or portion thereof held within Green Creek LLC and is pledged as collateral supporting the amounts outstanding under the Notes issued to Schuylkill River LLC pursuant to an indenture with Citibank, N.A., as trustee (see Note 8).
​
(l)
Position or portion thereof unsettled as of December 31, 2016.
​
(m)
Security was on non-accrual status as of December 31, 2016.
​
(n)
Security is non-income producing.
​
(o)
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 December 31, 2016, 87.9% of the Company’s total assets represented qualifying assets.
​
(p)
Security is an unfunded commitment. The stated rate reflects the spread disclosed at the time of commitment and may not indicate the actual rate received upon funding.
​
(q)
Security held within IC II American Energy Investments, Inc., a wholly-owned subsidiary of the Company.
​
(r)
Security held within FSIC II Investments, Inc., a wholly-owned subsidiary of the Company.
​
(s)
Security held within IC II Arches Investments, LLC, a wholly-owned subsidiary of the Company.
​
(t)
Security held within IC II Altus Investments, LLC, a wholly-owned subsidiary of the Company.
​
(u)
Investment denominated in British pounds. Cost and fair value are converted into U.S. dollars, at an exchange rate of  £1.00 to USD$1.23 as of December 31, 2016.
​
(v)
The transfer of a portion of this loan does not qualify for sale accounting under Accounting Standards Codification Topic 860, Transfers and Servicing, and therefore, the entire senior secured loan remains in the consolidated schedule of investments as of December 31, 2016 (see Note 8).
​
(w)
Investment denominated in Canadian dollars. Cost and fair value are converted into U.S. dollars at an exchange rate of CAD$1.00 to USD$0.74 as of December 31, 2016.
​
(x)
Under the 1940 Act, 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 more than 25% of the portfolio company’s voting securities or it has the power to exercise control over the management or policies of such portfolio company. As of December 31, 2016, the Company held investments in portfolio companies of which it is deemed to be an “affiliated person” but is not deemed to “control”. The following table presents certain financial information with respect to investments in portfolio companies of which the Company was deemed to be an affiliated person for the year ended December 31, 2016:
​
​
See notes to unaudited consolidated financial statements.
26
FS Investment Corporation II
Consolidated Schedule of Investments (continued)
As of December 31, 2016
(in thousands, except share amounts)
​
 
​ ​ ​ ​
Portfolio Company
​ ​
Fair Value at
December 31,
2015
​ ​
Purchases and
Paid-in-Kind
Interest
​ ​
Sales and
Repayments
​ ​
Accretion of
Discount
​ ​
Net Realized
Gain (Loss)
​ ​
Net Change in
Unrealized
Appreciation
(Depreciation)
​ ​
Fair Value at
December 31,
2016
​ ​
Interest
Income
​ ​
Fee
Income
​ ​
Dividend
Income
​
​ ​ ​ ​ Senior Secured Loans—First Lien ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​
A.T. Cross Co.
​ ​ ​ ​ — ​ ​ ​ ​ $ 31,027 ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 682 ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ (3,628) ​ ​ ​ ​ $ 28,081 ​ ​ ​ ​ $ 1,807 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​
ASG Technologies Group, Inc.(1)
 ​ ​ ​ $ 71,389 ​ ​ ​ ​ $ 8,439 ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 22 ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 655 ​ ​ ​ ​ $ 80,505 ​ ​ ​ ​ $ 7,735 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​
Warren Resources, Inc.(2)
 ​ ​ ​ ​ — ​ ​ ​ ​ $ 42,122 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 42,122 ​ ​ ​ ​ $ 1,095 ​ ​ ​ ​ $ 180 ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​ Senior Secured Loans—Second Lien ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​
ASG Technologies Group, Inc.(1)
 ​ ​ ​ ​ — ​ ​ ​ ​ $ 19,758 ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 431 ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 5,990 ​ ​ ​ ​ $ 26,179 ​ ​ ​ ​ $ 1,926 ​ ​ ​ ​ $ 810 ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​
JW Aluminum Co.
​ ​ ​ $ 30,061 ​ ​ ​ ​ $ 3,747 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 602 ​ ​ ​ ​ $ 34,410 ​ ​ ​ ​ $ 3,040 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​
Logan’s Roadhouse, Inc.
​ ​ ​ ​ — ​ ​ ​ ​ $ 10,824 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ (469) ​ ​ ​ ​ $ 10,355 ​ ​ ​ ​ $ 111 ​ ​ ​ ​ $ 9 ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​ Senior Secured Bonds ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​
JW Aluminum Co.
​ ​ ​ ​ — ​ ​ ​ ​ $ 4,421 ​ ​ ​ ​ $ (4,466) ​ ​ ​ ​ $ 59 ​ ​ ​ ​ $ (14) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 115 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​ Equity/Other ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​
A.T. Cross Co., Common Equity, Class A Units(3)
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ (1,000) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​
A.T. Cross Co., Preferred Equity, Class A-1 Units(3)
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ (243) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​
A.T. Cross Co., GSO Special Unit
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​
ASG Technologies Group, Inc. Common Equity(1)
 ​ ​ ​ $ 28,821 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 656 ​ ​ ​ ​ $ 29,477 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​
ASG Technologies Group, Inc., Warrants, 6/27/2022(1)
 ​ ​ ​ ​ — ​ ​ ​ ​ $ 7,231 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ (787) ​ ​ ​ ​ $ 6,444 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​
JW Aluminum Co., Common Equity
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​
JW Aluminum Co., Preferred Equity
​ ​ ​ $ 11,247 ​ ​ ​ ​ $ 223 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 384 ​ ​ ​ ​ $ 11,854 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​
Roadhouse Holding Inc., Common Equity
​ ​ ​ ​ — ​ ​ ​ ​ $ 4,657 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 815 ​ ​ ​ ​ $ 5,472 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
​ ​ ​ ​
Warren Resources, Inc., Common Equity
​ ​ ​ ​ — ​ ​ ​ ​ $ 11,145 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ (948) ​ ​ ​ ​ $ 10,197 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
​
(1)
ASG Technologies Group, Inc. was formerly known as Allen Systems Group, Inc.
​
(2)
Security includes a partially unfunded commitment with an amortized cost of  $3,002 and a fair value of  $3,002.
​
(3)
The Company held this investment as of December 31, 2015 but it was not deemed to be an “affiliated person” of the portfolio company or deemed to “control” the portfolio company as of December 31, 2015.
​
​
See notes to unaudited consolidated financial statements.
27
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements
(in thousands, except share and per share amounts)
​
Note 1. Principal Business and Organization
FS Investment Corporation II, or the Company, was incorporated under the general corporation laws of the State of Maryland on July 13, 2011 and formally commenced investment operations on June 18, 2012. The Company is an externally managed, non-diversified, closed-end management investment company that has elected to be regulated as a business development company, or BDC, under the Investment Company Act of 1940, as amended, or the 1940 Act. In addition, the Company has elected to be treated for U.S. federal income tax purposes, and intends to qualify annually, as a regulated investment company, or RIC, as defined under Subchapter M of the Internal Revenue Code of 1986, as amended, or the Code. As of September 30, 2017, the Company had eight wholly-owned financing subsidiaries, four wholly-owned subsidiaries through which it holds interests in portfolio companies and one wholly-owned subsidiary through which it expects to hold interests in portfolio companies. The unaudited consolidated financial statements include both the Company’s accounts and the accounts of its wholly-owned subsidiaries as of September 30, 2017. All significant intercompany transactions have been eliminated in consolidation. Certain of the Company’s consolidated subsidiaries are subject to U.S. federal and state income taxes.
The Company’s investment objectives are to generate current income and, to a lesser extent, long-term capital appreciation by investing primarily in senior secured loans and second lien secured loans of private U.S. companies. The Company seeks to generate superior risk-adjusted returns by focusing on debt investments in a broad array of private U.S. companies, including middle market companies, which the Company defines as companies with annual revenues of  $50 million to $2.5 billion at the time of investment. The Company may purchase interests in loans or make other debt investments, including investments in senior secured bonds, through secondary market transactions in the “over-the-counter” market or directly from the Company’s target companies as primary market or directly originated investments. In connection with the Company’s debt investments, the Company may on occasion receive equity interests such as warrants or options as additional consideration. The Company may also purchase or otherwise acquire interests in the form of common or preferred equity or equity-related securities, such as rights and warrants that may be converted into or exchanged for common stock or other equity or the cash value of common stock or other equity, in the Company’s target companies, generally in conjunction with one of the Company’s debt investments, including through the restructuring of such investments, or through a co-investment with a financial sponsor, such as an institutional investor or private equity firm. In addition, a portion of the Company’s portfolio may be comprised of corporate bonds, collateralized loan obligations, or CLOs, other debt securities and derivatives, including total return swaps and credit default swaps. The Company’s investment adviser, FSIC II Advisor, LLC, or FSIC II Advisor, will seek to tailor the Company’s investment focus as market conditions evolve. Depending on market conditions, the Company may increase or decrease its exposure to less senior portions of the capital structure or otherwise make opportunistic investments.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation: The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP, for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For a more complete discussion of significant accounting policies and certain other information, the Company’s interim unaudited consolidated financial statements should be read in conjunction with its audited consolidated financial statements as of and for the year ended December 31, 2016 included in the Company’s annual report on Form 10-K for the year ended December 31, 2016. Operating results for the three and nine months ended September 30, 2017 are not necessarily indicative of the results that may be expected for the year ending
28
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 2. Summary of Significant Accounting Policies (continued)
 
December 31, 2017. The December 31, 2016 consolidated balance sheet and consolidated schedule of investments are derived from the Company’s audited consolidated financial statements as of and for the year ended December 31, 2016. The Company is considered an investment company under GAAP and follows the accounting and reporting guidance applicable to investment companies under Accounting Standards Codification Topic 946, Financial Services—Investment Companies. The Company has evaluated the impact of subsequent events through the date the consolidated financial statements were issued and filed with the U.S. Securities and Exchange Commission, or the SEC.
Use of Estimates: The preparation of the unaudited consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Many of the amounts have been rounded and all amounts are in thousands, except share and per share amounts.
Capital Gains Incentive Fee: The Company entered into an investment advisory and administrative services agreement with FSIC II Advisor dated as of February 8, 2012, or the investment advisory and administrative services agreement. Pursuant to the terms of the investment advisory and administrative services agreement, the incentive fee on capital gains is determined and payable in arrears as of the end of each calendar year (or upon termination of the investment advisory and administrative services agreement). Such fee will equal 20.0% of the Company’s incentive fee capital gains (i.e., the Company’s realized capital gains on a cumulative basis from inception, calculated as of the end of the applicable period, net of all realized capital losses and unrealized capital depreciation on a cumulative basis), less the aggregate amount of any previously paid capital gains incentive fees. On a quarterly basis, the Company accrues for the capital gains incentive fee by calculating such fee as if it were due and payable as of the end of such period.
The Company includes unrealized gains in the calculation of the capital gains incentive fee expense and related accrued capital gains incentive fee. This accrual reflects the incentive fees that would be payable to FSIC II Advisor if the Company’s entire portfolio was liquidated at its fair value as of the balance sheet date even though FSIC II Advisor is not entitled to an incentive fee with respect to unrealized gains unless and until such gains are actually realized.
Subordinated Income Incentive Fee: Pursuant to the investment advisory and administrative services agreement, FSIC II Advisor may also be entitled to receive a subordinated incentive fee on income. The subordinated incentive fee on income, which is calculated and payable quarterly in arrears, equals 20.0% of the Company’s “pre-incentive fee net investment income” for the immediately preceding quarter and is subject to a hurdle rate, expressed as a rate of return on adjusted capital equal to 1.875% per quarter, or an annualized hurdle rate of 7.5%. For purposes of this fee, “adjusted capital” means cumulative gross proceeds generated from sales of the Company’s common stock (including proceeds from its distribution reinvestment plan) reduced for distributions paid to stockholders from proceeds of non-liquidating dispositions of the Company’s investments and amounts paid for share repurchases pursuant to the Company’s share repurchase program. As a result, FSIC II Advisor will not earn this part of the incentive fee for any quarter until the Company’s pre-incentive fee net investment income for such quarter exceeds the hurdle rate of 1.875%. Once the Company’s pre-incentive fee net investment income in any quarter exceeds the hurdle rate, FSIC II Advisor will be entitled to a “catch-up” fee equal to the amount of the pre-incentive fee net investment income in excess of the hurdle rate, until the Company’s pre-incentive fee net investment income for such quarter equals 2.34375%, or 9.375% annually, of adjusted capital. Thereafter, FSIC II Advisor will be entitled to receive 20.0% of the Company’s pre-incentive fee net investment income.
Partial Loan Sales: The Company follows the guidance in Accounting Standards Codification Topic 860, Transfers and Servicing, or ASC Topic 860, when accounting for loan participations and other partial loan sales. This guidance requires a participation or other partial loan sale to meet the definition of a
29
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 2. Summary of Significant Accounting Policies (continued)
 
participating interest, as defined in the guidance, in order for sale treatment to be allowed. Participations or other partial loan sales which do not meet the definition of a participating interest remain on the Company’s consolidated balance sheets and the proceeds are recorded as a secured borrowing until the participation or other partial loan sale meets the definition. Secured borrowings are carried at fair value to correspond with the related investments, which are carried at fair value. See Note 8 for additional information regarding the Company’s secured borrowing.
Reclassifications: Certain amounts in the unaudited consolidated financial statements as of and for the three and nine months ended September 30, 2016 and the audited consolidated financial statements as of and for the year ended December 31, 2016 may have been reclassified to conform to the classifications used to prepare the unaudited consolidated financial statements as of and for the three and nine months ended September 30, 2017. These reclassifications had no material impact on the Company’s consolidated financial position, results of operations or cash flows as previously reported.
Revenue Recognition: In May 2014, the Financial Accounting Standards Board, or FASB, issued ASU No. 2014-09, Revenue from Contracts with Customers, which provides for revenue recognition based on the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. When it becomes effective, the new revenue recognition guidance in ASU No. 2014-09 will replace most revenue recognition guidance under existing GAAP. In 2016, the FASB issued additional guidance that clarified, amended and technically corrected prior revenue recognition guidance. The new revenue recognition guidance applies to all entities and all contracts with customers to provide goods or services in the ordinary course of business, excluding, among other things, financial instruments as well as certain other contractual rights and obligations. For public entities, the new standards are effective during the interim and annual periods beginning after December 15, 2017, with early adoption permitted. The standards permit the use of either the retrospective or cumulative effect transition method. The Company is currently evaluating the applicability of the new revenue recognition guidance to the Company’s revenue recognition policies and assessing the impact of this guidance on the Company’s consolidated financial statements.
Note 3. Share Transactions
Below is a summary of transactions with respect to shares of the Company’s common stock during the nine months ended September 30, 2017 and 2016:
​ ​ ​
Nine Months Ended September 30,
​
​ ​ ​
2017
​ ​
2016
​
​ ​ ​
Shares
​ ​
Amount
​ ​
Shares
​ ​
Amount
​
Reinvestment of Distributions
​ ​ ​ ​ 10,255,691 ​ ​ ​ ​ $ 92,907 ​ ​ ​ ​ ​ 12,541,507 ​ ​ ​ ​ $ 106,401 ​ ​
Share Repurchase Program
​ ​ ​ ​ (10,211,257) ​ ​ ​ ​ ​ (92,570) ​ ​ ​ ​ ​ (7,368,833) ​ ​ ​ ​ ​ (62,325) ​ ​
Net Proceeds from Share Transactions
​ ​ ​ ​ 44,434 ​ ​ ​ ​ $ 337 ​ ​ ​ ​ ​ 5,172,674 ​ ​ ​ ​ $ 44,076 ​ ​
​
During the period from October 1, 2017 to November 1, 2017, the Company issued 1,109,802 shares of common stock pursuant to its distribution reinvestment plan for gross proceeds of  $10,044 at an average price per share of  $9.05.
Share Repurchase Program
The Company intends to continue to conduct quarterly tender offers pursuant to its share repurchase program. The Company’s board of directors will consider the following factors, among others, in making its determination regarding whether to cause the Company to offer to repurchase shares of common stock and under what terms:
30
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 3. Share Transactions (continued)
 
•
the effect of such repurchases on the Company’s qualification as a RIC (including the consequences of any necessary asset sales);
​
•
the liquidity of the Company’s assets (including fees and costs associated with disposing of assets);
​
•
the Company’s investment plans and working capital requirements;
​
•
the relative economies of scale with respect to the Company’s size;
​
•
the Company’s history in repurchasing shares of common stock or portions thereof; and
​
•
the condition of the securities markets.
​
Historically, the Company limited the number of shares of common stock to be repurchased during any calendar year to the lesser of  (i) the number of shares of common stock that the Company could repurchase with the proceeds it received from the issuance of shares of common stock under the Company’s distribution reinvestment plan and (ii) 10% of the weighted average number of shares of common stock outstanding in the prior calendar year, or 2.5% in each calendar quarter. On May 8, 2017, the board of directors of the Company amended the share repurchase program. As amended, the Company will limit the maximum number of shares of common stock to be repurchased for any repurchase offer to the greater of (A) the number of shares of common stock that the Company can repurchase with the proceeds it has received from the sale of shares of common stock under the Company’s distribution reinvestment plan during the twelve-month period ending on the date the applicable repurchase offer expires (less the amount of proceeds used to repurchase shares of common stock on each previous repurchase date for repurchase offers conducted during such twelve-month period) (the Company refers to this limitation as the twelve-month repurchase limitation) and (B) the number of shares of common stock that the Company can repurchase with the proceeds it received from the sale of shares of common stock under the Company’s distribution reinvestment plan during the three-month period ending on the date the applicable repurchase offer expires (the Company refers to this limitation as the three-month repurchase limitation). In addition to this limitation, the maximum number of shares of common stock to be repurchased for any repurchase offer will also be limited to 10% of the weighted average number of shares of common stock outstanding in the prior calendar year, or 2.5% in each calendar quarter. As a result, the maximum number of shares of common stock to be repurchased for any repurchase offer will not exceed the lesser of  (i) 10% of the weighted average number of shares of common stock outstanding in the prior calendar year, or 2.5% in each calendar quarter, and (ii) whichever is greater of the twelve-month repurchase limitation described in clause (A) above and the three-month repurchase limitation described in clause (B) above. The purpose of this amendment was to provide the potential for the repurchase of a greater number of shares of common stock under the share repurchase program, particularly in the early quarters of the calendar year, in light of the limitation relating to proceeds received in connection with the Company’s distribution reinvestment plan. At the discretion of the Company’s board of directors, the Company may also use cash on hand, cash available from borrowings and cash from the liquidation of securities investments as of the end of the applicable period to repurchase shares of common stock. The actual number of shares of common stock that the Company offers to repurchase may be less in light of the limitations noted above. The Company’s board of directors may amend, suspend or terminate the share repurchase program at any time upon 30 days’ notice.
Under the Company’s share repurchase program, the Company intends to offer to repurchase shares of common stock at a price equal to the price at which shares of common stock are issued pursuant to the Company’s distribution reinvestment plan on the distribution date coinciding with the applicable share repurchase date. The price at which shares of common stock are issued under the Company’s distribution reinvestment plan is determined by the Company’s board of directors or a committee thereof, in its sole
31
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 3. Share Transactions (continued)
 
discretion, and will be (i) not less than the net asset value per share of the Company’s common stock as determined in good faith by the Company’s board of directors or a committee thereof, in its sole discretion, immediately prior to the payment date of the distribution and (ii) not more than 2.5% greater than the net asset value per share as of such date.
The following table provides information concerning the Company’s repurchases of shares of common stock pursuant to its share repurchase program during the nine months ended September 30, 2017 and 2016:
For the Three Months Ended
​ ​
Repurchase Date
​ ​
Shares
Repurchased
​ ​
Percentage of
Shares
Tendered That
Were
Repurchased
​ ​
Percentage of
Outstanding
Shares
Repurchased
as of the
Repurchase
Date
​ ​
Repurchase
Price Per
Share
​ ​
Aggregate
Consideration
for
Repurchased
Shares
​
Fiscal 2016 ​ ​ ​ ​ ​ ​ ​
December 31, 2015
​ ​
January 4, 2016
​ ​ ​ ​ 1,779,357 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ ​ 0.55% ​ ​ ​ ​ $ 8.550 ​ ​ ​ ​ $ 15,214 ​ ​
March 31, 2016
​ ​
April 1, 2016
​ ​ ​ ​ 2,715,325 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ ​ 0.84% ​ ​ ​ ​ $ 8.300 ​ ​ ​ ​ ​ 22,537 ​ ​
June 30, 2016
​ ​
July 1, 2016
​ ​ ​ ​ 2,874,151 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ ​ 0.88% ​ ​ ​ ​ $ 8.550 ​ ​ ​ ​ ​ 24,574 ​ ​
Total
​ ​ ​ ​ ​ ​ ​ 7,368,833 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 62,325 ​ ​
Fiscal 2017 ​ ​ ​ ​ ​ ​ ​
December 31, 2016
​ ​
January 3, 2017
​ ​ ​ ​ 2,344,810 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ ​ 0.72% ​ ​ ​ ​ $ 8.950 ​ ​ ​ ​ $ 20,986 ​ ​
March 31, 2017
​ ​
April 3, 2017
​ ​ ​ ​ 3,353,328 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ ​ 1.02% ​ ​ ​ ​ $ 9.100 ​ ​ ​ ​ ​ 30,515 ​ ​
June 30, 2017
​ ​
July 3, 2017
​ ​ ​ ​ 4,513,119 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ ​ 1.38% ​ ​ ​ ​ $ 9.100 ​ ​ ​ ​ ​ 41,069 ​ ​
Total
​ ​ ​ ​ ​ ​ ​ 10,211,257 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 92,570 ​ ​
​
On October 2, 2017, the Company repurchased 3,538,398 shares of common stock (representing approximately 55% of the shares of the common stock tendered for repurchase and 1.08% of the shares outstanding as of such date) at $9.050 per share for aggregate consideration totaling $32,022.
Note 4. Related Party Transactions
Compensation of the Investment Adviser
Pursuant to the investment advisory and administrative services agreement, FSIC II Advisor is entitled to an annual base management fee of 2.0% of the average value of the Company’s gross assets (gross assets equal the total assets of the Company as set forth on the Company’s consolidated balance sheets) and an incentive fee based on the Company’s performance. The Company commenced accruing fees under the investment advisory and administrative services agreement on June 18, 2012, upon commencement of the Company’s investment operations. Base management fees are paid on a quarterly basis in arrears. Effective March 5, 2015, FSIC II Advisor agreed to permanently waive 0.25% of its base management fee to which it is entitled under the investment advisory and administrative services agreement, so that the fee received equals 1.75% of the average value of the Company’s gross assets. See Note 2 for a discussion of the capital gains and subordinated income incentive fees that FSIC II Advisor may be entitled to under the investment advisory and administrative services agreement.
Pursuant to an investment sub-advisory agreement, or the investment sub-advisory agreement, between FSIC II Advisor and GSO / Blackstone Debt Funds Management LLC, or GDFM, GDFM will receive 50% of all management and incentive fees payable to FSIC II Advisor under the investment advisory and administrative services agreement with respect to each year.
32
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 4. Related Party Transactions (continued)
 
The Company reimburses FSIC II Advisor for expenses necessary to perform services related to the Company’s administration and operations, including FSIC II Advisor’s allocable portion of the compensation and related expenses of certain personnel of Franklin Square Holdings, L.P. (which does business as FS Investments), or FS Investments, the Company’s sponsor and an affiliate of FSIC II Advisor, providing administrative services to the Company on behalf of FSIC II Advisor. The amount of this reimbursement is set at the lesser of  (1) FSIC II Advisor’s actual costs incurred in providing such services and (2) the amount that the Company estimates it would be required to pay alternative service providers for comparable services in the same geographic location. FSIC II Advisor is required to allocate the cost of such services to the Company based on factors such as total assets, revenues, time allocations and/or other reasonable metrics. The Company’s board of directors reviews the methodology employed in determining how the expenses are allocated to the Company and the proposed allocation of the administrative expenses among the Company and certain affiliates of FSIC II Advisor. The Company’s board of directors then assesses the reasonableness of such reimbursements for expenses allocated to the Company based on the breadth, depth and quality of such services as compared to the estimated cost to the Company of obtaining similar services from third-party service providers known to be available. In addition, the Company’s board of directors considers whether any single third-party service provider would be capable of providing all such services at comparable cost and quality. Finally, the Company’s board of directors compares the total amount paid to FSIC II Advisor for such services as a percentage of the Company’s net assets to the same ratio as reported by other comparable BDCs. The Company does not reimburse FSIC II Advisor for any services for which it receives a separate fee, or for rent, depreciation, utilities, capital equipment or other administrative items allocated to a controlling person of FSIC II Advisor.
The following table describes the fees and expenses the Company accrued under the investment advisory and administrative services agreement during the three and nine months ended September 30, 2017 and 2016:
​ ​ ​ ​ ​ ​ ​ ​ ​
Three Months Ended
September 30,
​ ​
Nine Months Ended
September 30,
​
Related Party
​ ​
Source Agreement
​ ​
Description
​ ​
2017
​ ​
2016
​ ​
2017
​ ​
2016
​
FSIC II Advisor
 ​ ​ Investment Advisory and
Administrative Services
Agreement 		​ ​
Base Management Fee(1)
 ​ ​ ​ $ 22,547 ​ ​ ​ ​ $ 21,555 ​ ​ ​ ​ $ 67,379 ​ ​ ​ ​ $ 63,865 ​ ​
FSIC II Advisor
 ​ ​ Investment Advisory and
Administrative Services
Agreement 		​ ​ Subordinated Incentive
Fee on Income(2)		 ​ ​ ​ $ 10,137 ​ ​ ​ ​ $ 14,252 ​ ​ ​ ​ $ 42,352 ​ ​ ​ ​ $ 45,836 ​ ​
FSIC II Advisor
 ​ ​ Investment Advisory and
Administrative Services
Agreement 		​ ​ Administrative Services
Expenses(3)		 ​ ​ ​ $ 799 ​ ​ ​ ​ $ 1,039 ​ ​ ​ ​ $ 2,530 ​ ​ ​ ​ $ 3,096 ​ ​
​
(1)
FSIC II Advisor agreed, effective March 5, 2015, to permanently waive 0.25% of its base management fee to which it is entitled under the investment advisory and administrative services agreement so that the fee received equals 1.75% of the average value of the Company’s gross assets. As a result, the amounts shown for the three and nine months ended September 30, 2017 are net of waivers of  $3,222 and $9,626, respectively, and the amounts shown for the three and nine months ended September 30, 2016 are net of waivers of  $3,080 and $9,124, respectively. During the nine months ended September 30, 2017 and 2016, $66,442 and $63,839, respectively, in base management fees were paid to FSIC II Advisor. As of September 30, 2017, $22,547 in base management fees were payable to FSIC II Advisor.
​
(2)
During the nine months ended September 30, 2017 and 2016, $48,708 and $47,838, respectively, of subordinated incentive fees on income were paid to FSIC II Advisor. As of September 30, 2017, a subordinated incentive fee on income of  $10,137 was payable to FSIC II Advisor.
​
​
33
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 4. Related Party Transactions (continued)
 
(3)
During the nine months ended September 30, 2017 and 2016, $2,412 and $2,955, respectively, of administrative services expenses related to the allocation of costs of administrative personnel for services rendered to the Company by FSIC II Advisor and the remainder related to other reimbursable expenses. The Company paid $2,360 and $3,327 in administrative services expenses to FSIC II Advisor during the nine months ended September 30, 2017 and 2016, respectively.
​
Potential Conflicts of Interest
FSIC II Advisor’s senior management team is comprised of substantially the same personnel as the senior management teams of the investment advisers to certain other BDCs, open- and closed-end management investment companies and a real estate investment trust sponsored by FS Investments, or the Fund Complex. As a result, such personnel provide or expect to provide investment advisory services to certain other funds in the Fund Complex and such personnel may serve in similar or other capacities for the investment advisers to future investment vehicles in the Fund Complex. While none of the investment advisers are currently providing investment advisory services to clients other than the funds in the Fund Complex, any, or all, may do so in the future. In the event that FSIC II Advisor or its management team undertakes to provide investment advisory services to other clients in the future, it intends to allocate investment opportunities in a fair and equitable manner consistent with the Company’s investment objectives and strategies, if necessary, so that the Company will not be disadvantaged in relation to any other client of FSIC II Advisor or its management team. For additional information regarding potential conflicts of interest, see the Company’s annual report on Form 10-K for the year ended December 31, 2016.
Exemptive Relief
As a BDC, the Company is subject to certain regulatory restrictions in making its investments. For example, BDCs generally are not permitted to co-invest with certain affiliated entities in transactions originated by the BDC or its affiliates in the absence of an exemptive order from the SEC. However, BDCs are permitted to, and may, simultaneously co-invest in transactions where price is the only negotiated term. In an order dated June 4, 2013, the SEC granted exemptive relief permitting the Company, subject to the satisfaction of certain conditions, to co-invest in certain privately negotiated investment transactions with certain affiliates of FSIC II Advisor, including FS Investment Corporation, FS Energy and Power Fund, FS Investment Corporation III, FS Investment Corporation IV and any future BDCs that are advised by FSIC II Advisor or its affiliated investment advisers, or collectively the Company’s co-investment affiliates. The Company believes this relief has and may continue to enhance its ability to further its investment objectives and strategies. The Company believes this relief may also increase favorable investment opportunities for it, in part, by allowing the Company to participate in larger investments, together with its co-investment affiliates, than would be available to the Company if such relief had not been obtained. Because the Company did not seek exemptive relief to engage in co-investment transactions with GDFM and its affiliates, the Company is permitted to co-invest with GDFM and its affiliates only in accordance with existing regulatory guidance (e.g., where price is the only negotiated term).
Expense Reimbursement
Pursuant to an expense support and conditional reimbursement agreement, dated as of May 10, 2012 and amended and restated as of May 16, 2013, or, as amended and restated, the expense reimbursement agreement, FS Investments has agreed to reimburse the Company for expenses in an amount that is sufficient to ensure that no portion of the Company’s distributions to stockholders will be paid from its offering proceeds or borrowings. However, because certain investments the Company may make, including preferred and common equity investments, may generate dividends and other distributions to the Company that are treated for tax purposes as a return of capital, a portion of the Company’s distributions to stockholders may also be deemed to constitute a return of capital to the extent that the Company may use such dividends or other distribution proceeds to fund its distributions to stockholders. Under those
34
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 4. Related Party Transactions (continued)
 
circumstances, FS Investments will not reimburse the Company for the portion of such distributions to stockholders that represent a return of capital, as the purpose of the expense reimbursement agreement is not to prevent tax-advantaged distributions to stockholders.
Under the expense reimbursement agreement, FS Investments will reimburse the Company for expenses in an amount equal to the difference between the Company’s cumulative distributions paid to its stockholders in each quarter, less the sum of its net investment company taxable income, net capital gains and dividends and other distributions paid to the Company on account of preferred and common equity investments in portfolio companies (to the extent such amounts are not included in net investment company taxable income or net capital gains) in each quarter.
Pursuant to the expense reimbursement agreement, the Company has a conditional obligation to reimburse FS Investments for any amounts funded by FS Investments under such agreement if  (and only to the extent that), during any fiscal quarter occurring within three years of the date on which FS Investments funded such amount, the sum of the Company’s net investment company taxable income, net capital gains and the amount of any dividends and other distributions paid to the Company on account of preferred and common equity investments in portfolio companies (to the extent not included in net investment company taxable income or net capital gains) exceeds the regular cash distributions paid by the Company to its stockholders; provided, however, that (i) the Company will only reimburse FS Investments for expense support payments made by FS Investments with respect to any calendar quarter beginning on or after July 1, 2013 to the extent that the payment of such reimbursement (together with any other reimbursement paid during such fiscal year) does not cause “other operating expenses” (as defined below) (on an annualized basis and net of any expense support payments received by the Company during such fiscal year) to exceed the lesser of  (A) 1.75% of the Company’s average net assets attributable to its shares of its common stock for the fiscal year-to-date period after taking such payments into account and (B) the percentage of the Company’s average net assets attributable to shares of its common stock represented by “other operating expenses” during the fiscal year in which such expense support payment from FS Investments was made (provided, however, that this clause (B) shall not apply to any reimbursement payment which relates to an expense support payment from FS Investments made during the same fiscal year) and (ii) the Company will not reimburse FS Investments for expense support payments made by FS Investments if the aggregate amount of distributions per share declared by the Company in such calendar quarter is less than the aggregate amount of distributions per share declared by the Company in the calendar quarter in which FS Investments made the expense support payment to which such reimbursement relates. “Other operating expenses” means the Company’s total “operating expenses” (as defined below), excluding base management fees, incentive fees, organization and offering expenses, financing fees and costs, interest expense, brokerage commissions and extraordinary expenses. “Operating expenses” means all operating costs and expenses incurred, as determined in accordance with GAAP for investment companies.
The Company or FS Investments may terminate the expense reimbursement agreement at any time. The specific amount of expenses reimbursed by FS Investments, if any, will be determined at the end of each quarter. Upon termination of the expense reimbursement agreement by FS Investments, FS Investments will be required to fund any amounts accrued thereunder as of the date of termination. Similarly, the Company’s conditional obligation to reimburse FS Investments pursuant to the terms of the expense reimbursement agreement shall survive the termination of such agreement by either party.
35
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 4. Related Party Transactions (continued)
 
FS Investments is controlled by the Company’s chairman, president and chief executive officer, Michael C. Forman, and its vice-chairman, David J. Adelman. There can be no assurance that the expense reimbursement agreement will remain in effect or that FS Investments will reimburse any portion of the Company’s expenses in future quarters. As of September 30, 2017, there were no unreimbursed expense support payments subject to future reimbursement by the Company.
Note 5. Distributions
The following table reflects the cash distributions per share that the Company declared and paid on its common stock during the nine months ended September 30, 2017 and 2016:
​ ​ ​
Distribution
​
For the Three Months Ended
​ ​
Per Share
​ ​
Amount
​
Fiscal 2016 ​ ​ ​
March 31, 2016
​ ​ ​ $ 0.1885 ​ ​ ​ ​ $ 60,744 ​ ​
June 30, 2016
​ ​ ​ ​ 0.1885 ​ ​ ​ ​ ​ 60,976 ​ ​
September 30, 2016
​ ​ ​ ​ 0.1885 ​ ​ ​ ​ ​ 61,155 ​ ​
Total
​ ​ ​ $ 0.5655 ​ ​ ​ ​ $ 182,875 ​ ​
Fiscal 2017 ​ ​ ​
March 31, 2017
​ ​ ​ $ 0.1885 ​ ​ ​ ​ $ 61,436 ​ ​
June 30, 2017
​ ​ ​ ​ 0.1885 ​ ​ ​ ​ ​ 61,505 ​ ​
September 30, 2017
​ ​ ​ ​ 0.1885 ​ ​ ​ ​ ​ 61,277 ​ ​
Total
​ ​ ​ $ 0.5655 ​ ​ ​ ​ $ 184,218 ​ ​
​
The Company intends to declare regular cash distributions on a quarterly basis and pay such distributions on a monthly basis. On August 3, 2017 and November 2, 2017, the Company’s board of directors declared regular monthly cash distributions for October 2017 through December 2017 and January 2018 through March 2018, respectively, each in the amount of  $0.06283 per share. These distributions have been or will be paid monthly to stockholders of record as of monthly record dates previously determined by the Company’s board of directors. The timing and amount of any future distributions to stockholders are subject to applicable legal restrictions and the sole discretion of the Company’s board of directors.
The Company has adopted an “opt in” distribution reinvestment plan for its stockholders. As a result, if the Company makes a cash distribution, its stockholders will receive the distribution in cash unless they specifically “opt in” to the distribution reinvestment plan so as to have their cash distributions reinvested in additional shares of the Company’s common stock. However, certain state authorities or regulators may impose restrictions from time to time that may prevent or limit a stockholder’s ability to participate in the distribution reinvestment plan.
Under the Company’s distribution reinvestment plan, cash distributions to participating stockholders will be reinvested in additional shares of the Company’s common stock at a purchase price determined by the Company’s board of directors, or a committee thereof, in its sole discretion, that is (i) not less than the net asset value per share of the Company’s common stock as determined in good faith by the Company’s board of directors or a committee thereof, in its sole discretion, immediately prior to the payment of the distribution and (ii) not more than 2.5% greater than the net asset value per share of the Company’s common stock as of such date. Although distributions paid in the form of additional shares of common stock will generally be subject to U.S. federal, state and local taxes in the same manner as cash distributions,
36
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 5. Distributions (continued)
 
stockholders who elect to participate in the Company’s distribution reinvestment plan will not receive any corresponding cash distributions with which to pay any such applicable taxes. Stockholders receiving distributions in the form of additional shares of common stock will be treated as receiving a distribution in the amount of the fair market value of the Company’s shares of common stock.
The Company may fund its cash distributions to stockholders from any sources of funds legally available to it, including proceeds from the sale of the Company’s common stock, borrowings, net investment income from operations, capital gains proceeds from the sale of assets, non-capital gains proceeds from the sale of assets, and dividends or other distributions paid to the Company on account of preferred and common equity investments in portfolio companies and expense reimbursements from FS Investments. The Company has not established limits on the amount of funds it may use from available sources to make distributions. During certain periods, the Company’s distributions may exceed its earnings. As a result, it is possible that a portion of the distributions the Company makes may represent a return of capital. A return of capital generally is a return of a stockholder’s investment rather than a return of earnings or gains derived from the Company’s investment activities. Each year a statement on Form 1099-DIV identifying the sources of the distributions (i.e., paid from ordinary income, paid from net capital gains on the sale of securities, and/or a return of capital, which is a nontaxable distribution) will be mailed to the Company’s stockholders. There can be no assurance that the Company will be able to pay distributions at a specific rate or at all.
The following table reflects the sources of the cash distributions on a tax basis that the Company paid on its common stock during the nine months ended September 30, 2017 and 2016:
​ ​ ​
Nine Months Ended September 30,
​
​ ​ ​
2017
​ ​
2016
​
Source of Distribution
​ ​
Distribution
Amount
​ ​
Percentage
​ ​
Distribution
Amount
​ ​
Percentage
​
Offering proceeds
​ ​ ​ $ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ — ​ ​ ​ ​ ​ — ​ ​
Borrowings
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Net investment income(1)
 ​ ​ ​ ​ 184,218 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ ​ 176,987 ​ ​ ​ ​ ​ 97% ​ ​
Short-term capital gains proceeds from the sale of assets
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Long-term capital gains proceeds from the sale of assets
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 5,888 ​ ​ ​ ​ ​ 3% ​ ​
Non-capital gains proceeds from the sale of assets
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Distributions on account of preferred and common equity
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Expense reimbursement from sponsor
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Total
​ ​ ​ $ 184,218 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ $ 182,875 ​ ​ ​ ​ ​ 100% ​ ​
​
​
(1)
During the nine months ended September 30, 2017 and 2016, 92.6% and 92.6%, respectively, of the Company’s gross investment income was attributable to cash income earned, 2.0% and 2.5%, respectively, was attributable to non-cash accretion of discount and 5.4%% and 4.9%, respectively, was attributable to paid-in-kind, or PIK, interest.
​
The Company’s net investment income on a tax basis for the nine months ended September 30, 2017 and 2016 was $185,239 and $186,883, respectively. As of September 30, 2017 and December 31, 2016, the Company had $60,955 and $59,934, respectively, of undistributed net investment income and $133,150 and $112,726, respectively, of accumulated capital losses on a tax basis.
The difference between the Company’s GAAP-basis net investment income and its tax-basis net investment income is primarily due to the reclassification of unamortized original issue discount and
37
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 5. Distributions (continued)
 
prepayment fees recognized upon prepayment of loans from income for GAAP purposes to realized gains or deferred to future periods for tax purposes, the impact of consolidating certain subsidiaries for purposes of computing GAAP-basis net investment income but not for purposes of computing tax-basis net investment income and income recognized for tax purposes on certain transactions but not recognized for GAAP purposes.
The following table sets forth a reconciliation between GAAP-basis net investment income and tax-basis net investment income during the nine months ended September 30, 2017 and 2016:
​ ​ ​
Nine Months Ended September 30,
​
​ ​ ​
2017
​ ​
2016
​
GAAP-basis net investment income
​ ​ ​ $ 194,842 ​ ​ ​ ​ $ 188,556 ​ ​
Income subject to tax not recorded for GAAP
​ ​ ​ ​ (2,111) ​ ​ ​ ​ ​ 7,074 ​ ​
GAAP versus tax-basis of consolidation of certain subsidiaries
​ ​ ​ ​ 5,901 ​ ​ ​ ​ ​ 3,994 ​ ​
Reclassification or deferral of unamortized original issue discount and prepayment fees
​ ​ ​ ​ (13,822) ​ ​ ​ ​ ​ (12,729) ​ ​
Other miscellaneous differences
​ ​ ​ ​ 429 ​ ​ ​ ​ ​ (12) ​ ​
Tax-basis net investment income
​ ​ ​ $ 185,239 ​ ​ ​ ​ $ 186,883 ​ ​
​
The determination of the tax attributes of the Company’s distributions is made annually as of the end of the Company’s fiscal year based upon the Company’s taxable income for the full year and distributions paid for the full year. Therefore, a determination made on a quarterly basis may not be representative of the actual tax attributes of the Company’s distributions for a full year. The actual tax characteristics of distributions to stockholders are reported to stockholders annually on Form 1099-DIV.
As of September 30, 2017 and December 31, 2016, the components of accumulated earnings on a tax basis were as follows:
​ ​ ​
September 30, 2017
(Unaudited)
​ ​
December 31, 2016
​
Distributable ordinary income
​ ​ ​ $ 60,955 ​ ​ ​ ​ $ 59,934 ​ ​
Capital loss carryover(1)
 ​ ​ ​ ​ (133,150) ​ ​ ​ ​ ​ (112,726) ​ ​
Other temporary differences
​ ​ ​ ​ (155) ​ ​ ​ ​ ​ (165) ​ ​
Net unrealized appreciation (depreciation) on investments and secured borrowing and gain (loss) on foreign currency(2)
 ​ ​ ​ ​ (10,881) ​ ​ ​ ​ ​ (53,503) ​ ​
Total
​ ​ ​ $ (83,231) ​ ​ ​ ​ $ (106,460) ​ ​
​
​
(1)
Net capital losses may be carried forward indefinitely, and their character is retained as short-term or long-term losses. As of September 30, 2017, the Company had short-term and long-term capital loss carryforwards available to offset future realized capital gains of  $19,996 and $113,154, respectively.
​
(2)
As of September 30, 2017 and December 31, 2016, the gross unrealized appreciation on the Company’s investments and secured borrowing and gain on foreign currency was $225,512 and $175,000, respectively. As of September 30, 2017 and December 31, 2016, the gross unrealized depreciation on the Company’s investments and secured borrowing and loss on foreign currency was $236,393 and $228,503, respectively.
​
The aggregate cost of the Company’s investments for U.S. federal income tax purposes totaled $4,635,977 and $4,550,764 as of September 30, 2017 and December 31, 2016, respectively. The aggregate net unrealized appreciation (depreciation) on a tax basis was $(10,881) and $(53,503) as of September 30, 2017 and December 31, 2016, respectively.
38
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 5. Distributions (continued)
 
As of September 30, 2017, the Company had a deferred tax liability of  $10,710 resulting from unrealized appreciation on investments held by the Company’s wholly-owned taxable subsidiaries and a deferred tax asset of  $24,288 resulting from net operating losses of the Company’s wholly-owned taxable subsidiaries. As of September 30, 2017, certain wholly-owned taxable subsidiaries anticipated that they would be unable to fully utilize their generated net operating losses, therefore the deferred tax asset was offset by a valuation allowance of  $13,578. For the nine months ended September 30, 2017, the Company did not record a provision for taxes related to its wholly-owned taxable subsidiaries.
Note 6. Investment Portfolio
The following table summarizes the composition of the Company’s investment portfolio at cost and fair value as of September 30, 2017 and December 31, 2016:
​ ​ ​
September 30, 2017
(Unaudited)
​ ​
December 31, 2016
​
​ ​ ​
Amortized
Cost(1)
 ​ ​
Fair Value
​ ​
Percentage
of Portfolio
​ ​
Amortized
Cost(1)
 ​ ​
Fair Value
​ ​
Percentage
of Portfolio
​
Senior Secured Loans—First Lien
​ ​ ​ $ 3,246,013 ​ ​ ​ ​ $ 3,235,412 ​ ​ ​ ​ ​ 70% ​ ​ ​ ​ $ 2,886,433 ​ ​ ​ ​ $ 2,864,089 ​ ​ ​ ​ ​ 64% ​ ​
Senior Secured Loans—Second Lien
​ ​ ​ ​ 372,697 ​ ​ ​ ​ ​ 332,204 ​ ​ ​ ​ ​ 7% ​ ​ ​ ​ ​ 749,249 ​ ​ ​ ​ ​ 718,971 ​ ​ ​ ​ ​ 16% ​ ​
Senior Secured Bonds
​ ​ ​ ​ 174,356 ​ ​ ​ ​ ​ 179,923 ​ ​ ​ ​ ​ 4% ​ ​ ​ ​ ​ 168,537 ​ ​ ​ ​ ​ 148,085 ​ ​ ​ ​ ​ 3% ​ ​
Subordinated Debt
​ ​ ​ ​ 473,271 ​ ​ ​ ​ ​ 506,656 ​ ​ ​ ​ ​ 11% ​ ​ ​ ​ ​ 414,320 ​ ​ ​ ​ ​ 402,397 ​ ​ ​ ​ ​ 9% ​ ​
Collateralized Securities
​ ​ ​ ​ 17,300 ​ ​ ​ ​ ​ 19,260 ​ ​ ​ ​ ​ 0% ​ ​ ​ ​ ​ 20,268 ​ ​ ​ ​ ​ 23,173 ​ ​ ​ ​ ​ 1% ​ ​
Equity/Other
​ ​ ​ ​ 325,131 ​ ​ ​ ​ ​ 352,171 ​ ​ ​ ​ ​ 8% ​ ​ ​ ​ ​ 298,460 ​ ​ ​ ​ ​ 340,680 ​ ​ ​ ​ ​ 7% ​ ​
Total
​ ​ ​ $ 4,608,768 ​ ​ ​ ​ $ 4,625,626 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ $ 4,537,267 ​ ​ ​ ​ $ 4,497,395 ​ ​ ​ ​ ​ 100% ​ ​
​
​
(1)
Amortized cost represents the original cost adjusted for the amortization of premiums and/or accretion of discounts, as applicable, on investments.
​
In general, under the 1940 Act, the Company would be presumed to “control” a portfolio company if it owned more than 25% of its voting securities or it had the power to exercise control over the management or policies of such portfolio company, and would be an “affiliated person” of a portfolio company if it owned 5% or more of its voting securities.
As of September 30, 2017, the Company held investments in one portfolio company of which it is deemed to “control.” As of September 30, 2017, the Company held investments in five portfolio companies of which it is deemed to be an “affiliated person” but is not deemed to “control.” For additional information with respect to such portfolio companies, see footnotes (x) and (y) to the unaudited consolidated schedule of investments as of September 30, 2017 in this quarterly report on Form 10-Q.
As of December 31, 2016, the Company did not “control” any of its portfolio companies. As of December 31, 2016, the Company held investments in five portfolio companies of which it is deemed to be an “affiliated person” but is not deemed to “control.” For additional information with respect to such portfolio companies, see footnote (x) to the consolidated schedule of investments as of December 31, 2016 in this quarterly report on Form 10-Q.
The Company’s investment portfolio may contain loans and other unfunded arrangements that are in the form of lines of credit, revolving credit facilities, delayed draw credit facilities or other investments, pursuant to which the Company may be required to provide funding when requested by portfolio companies in accordance with the terms of the underlying agreements. As of September 30, 2017, the Company had twenty-three senior secured loan investments with aggregate unfunded commitments of
39
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 6. Investment Portfolio (continued)
 
$255,899, one subordinated debt investment with an unfunded commitment of  $20,000, one unfunded commitment to purchase up to $295 in shares of preferred stock of Altus Power America Holdings, LLC and one unfunded commitment to purchase up to $16 in shares of common stock of Chisholm Oil and Gas, LLC. As of December 31, 2016, the Company had eighteen senior secured loan investments with aggregate unfunded commitments of  $163,449 and one unfunded commitment to purchase up to $362 in shares of preferred stock of Altus Power America Holdings, LLC. The Company maintains sufficient cash on hand, available borrowings and liquid securities to fund such unfunded commitments should the need arise. For additional details regarding the Company’s unfunded debt investments, see the Company’s unaudited consolidated schedule of investments as of September 30, 2017 and audited consolidated schedule of investments as of December 31, 2016.
The table below describes investments by industry classification and enumerates the percentage, by fair value, of the total portfolio assets in such industries as of September 30, 2017 and December 31, 2016:
​ ​ ​
September 30, 2017
(Unaudited)
​ ​
December 31, 2016
​
Industry Classification
​ ​
Fair
Value
​ ​
Percentage
of Portfolio
​ ​
Fair
Value
​ ​
Percentage
of Portfolio
​
Automobiles & Components
​ ​ ​ $ 39,606 ​ ​ ​ ​ ​ 1% ​ ​ ​ ​ $ 206,350 ​ ​ ​ ​ ​ 5% ​ ​
Capital Goods
​ ​ ​ ​ 683,649 ​ ​ ​ ​ ​ 15% ​ ​ ​ ​ ​ 418,102 ​ ​ ​ ​ ​ 9% ​ ​
Commercial & Professional Services
​ ​ ​ ​ 550,473 ​ ​ ​ ​ ​ 12% ​ ​ ​ ​ ​ 520,703 ​ ​ ​ ​ ​ 12% ​ ​
Consumer Durables & Apparel
​ ​ ​ ​ 358,349 ​ ​ ​ ​ ​ 8% ​ ​ ​ ​ ​ 317,282 ​ ​ ​ ​ ​ 7% ​ ​
Consumer Services
​ ​ ​ ​ 415,834 ​ ​ ​ ​ ​ 9% ​ ​ ​ ​ ​ 523,918 ​ ​ ​ ​ ​ 12% ​ ​
Diversified Financials
​ ​ ​ ​ 214,097 ​ ​ ​ ​ ​ 5% ​ ​ ​ ​ ​ 213,625 ​ ​ ​ ​ ​ 5% ​ ​
Energy
​ ​ ​ ​ 523,379 ​ ​ ​ ​ ​ 11% ​ ​ ​ ​ ​ 749,437 ​ ​ ​ ​ ​ 17% ​ ​
Food & Staples Retailing
​ ​ ​ ​ 3,933 ​ ​ ​ ​ ​ 0% ​ ​ ​ ​ ​ 5,950 ​ ​ ​ ​ ​ 0% ​ ​
Food, Beverage & Tobacco
​ ​ ​ ​ 52,261 ​ ​ ​ ​ ​ 1% ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Health Care Equipment & Services
​ ​ ​ ​ 221,757 ​ ​ ​ ​ ​ 5% ​ ​ ​ ​ ​ 76,425 ​ ​ ​ ​ ​ 2% ​ ​
Insurance
​ ​ ​ ​ 118,904 ​ ​ ​ ​ ​ 3% ​ ​ ​ ​ ​ 84,716 ​ ​ ​ ​ ​ 2% ​ ​
Materials
​ ​ ​ ​ 366,917 ​ ​ ​ ​ ​ 8% ​ ​ ​ ​ ​ 329,788 ​ ​ ​ ​ ​ 7% ​ ​
Media
​ ​ ​ ​ 303,677 ​ ​ ​ ​ ​ 7% ​ ​ ​ ​ ​ 140,594 ​ ​ ​ ​ ​ 3% ​ ​
Pharmaceuticals, Biotechnology & Life Sciences
​ ​ ​ ​ 3,190 ​ ​ ​ ​ ​ 0% ​ ​ ​ ​ ​ 2,263 ​ ​ ​ ​ ​ 0% ​ ​
Retailing
​ ​ ​ ​ 162,651 ​ ​ ​ ​ ​ 3% ​ ​ ​ ​ ​ 140,328 ​ ​ ​ ​ ​ 3% ​ ​
Semiconductors & Semiconductor Equipment
​ ​ ​ ​ 17,508 ​ ​ ​ ​ ​ 0% ​ ​ ​ ​ ​ 14,837 ​ ​ ​ ​ ​ 0% ​ ​
Software & Services
​ ​ ​ ​ 271,699 ​ ​ ​ ​ ​ 6% ​ ​ ​ ​ ​ 354,714 ​ ​ ​ ​ ​ 8% ​ ​
Technology Hardware & Equipment
​ ​ ​ ​ 63,516 ​ ​ ​ ​ ​ 1% ​ ​ ​ ​ ​ 135,841 ​ ​ ​ ​ ​ 3% ​ ​
Telecommunication Services
​ ​ ​ ​ 145,534 ​ ​ ​ ​ ​ 3% ​ ​ ​ ​ ​ 159,533 ​ ​ ​ ​ ​ 3% ​ ​
Transportation
​ ​ ​ ​ 108,692 ​ ​ ​ ​ ​ 2% ​ ​ ​ ​ ​ 102,989 ​ ​ ​ ​ ​ 2% ​ ​
Total
​ ​ ​ $ 4,625,626 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ $ 4,497,395 ​ ​ ​ ​ ​ 100% ​ ​
​
Note 7. Fair Value of Financial Instruments
Under existing accounting guidance, fair value is defined as the price that the Company would receive upon selling an investment or pay to transfer a liability in an orderly transaction to a market participant in the principal or most advantageous market for the investment. This accounting guidance emphasizes
40
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 7. Fair Value of Financial Instruments (continued)
 
valuation techniques that maximize the use of observable market inputs and minimize the use of unobservable inputs. Inputs refer broadly to the assumptions that market participants would use in pricing an asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on the best information available in the circumstances. The Company classifies the inputs used to measure these fair values into the following hierarchy as defined by current accounting guidance:
Level 1: Inputs that are quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs that are quoted prices for similar assets or liabilities in active markets.
Level 3: Inputs that are unobservable for an asset or liability.
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
As of September 30, 2017 and December 31, 2016, the Company’s investments and secured borrowing were categorized as follows in the fair value hierarchy:
​ ​ ​
September 30, 2017
(Unaudited)
​ ​
December 31, 2016
​
Valuation Inputs
​ ​
Investments
​ ​
Secured
Borrowing
​ ​
Investments
​ ​
Secured
Borrowing
​
Level 1—Price quotations in active markets
 ​ ​ ​ $ 7,220 ​ ​ ​ ​ $ — ​ ​ ​ ​ $ 9,383 ​ ​ ​ ​ $ — ​ ​
Level 2—Significant other observable inputs
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Level 3—Significant unobservable inputs
​ ​ ​ ​ 4,618,406 ​ ​ ​ ​ ​ (8,312) ​ ​ ​ ​ ​ 4,488,012 ​ ​ ​ ​ ​ (8,273) ​ ​
Total
​ ​ ​ $ 4,625,626 ​ ​ ​ ​ $ (8,312) ​ ​ ​ ​ $ 4,497,395 ​ ​ ​ ​ $ (8,273) ​ ​
​
The Company has elected the fair value option under ASC Topic 825, Financial Instruments, relating to accounting for debt obligations at their fair value for its secured borrowing which arose due to partial loan sales which did not meet the criteria for sale treatment under ASC Topic 860. The Company reports changes in the fair value of its secured borrowing as a component of the net change in unrealized appreciation (depreciation) on secured borrowing in the consolidated statements of operations. The net gain or loss reflects the difference between the fair value and the principal amount due on maturity.
The secured borrowing as of September 30, 2017 was valued using Level 3 inputs under the fair value hierarchy. The Company’s approach to determining fair value of the Level 3 secured borrowing is consistent with its approach to determining fair value of the Level 3 investments that are associated with the secured borrowing. See Note 2 and Note 8 for additional information regarding the Company’s secured borrowing.
The Company’s investments consist primarily of debt investments that were acquired directly from the issuer. Debt investments, for which broker quotes are not available, are valued by independent valuation firms, which determine the fair value of such investments by considering, among other factors, the borrower’s ability to adequately service its debt, prevailing interest rates for like investments, expected cash flows, call features, anticipated prepayments and other relevant terms of the investments. Except as described below, all of the Company’s equity/other investments are also valued by independent valuation firms, which determine the fair value of such investments by considering, among other factors, contractual rights ascribed to such investments, as well as various income scenarios and multiples of earnings before interest, taxes, depreciation and amortization, or EBITDA, cash flows, net income, revenues or in limited
41
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 7. Fair Value of Financial Instruments (continued)
 
instances, book value or liquidation value. An investment that is newly-issued and purchased near the date of the financial statements is valued at cost if the Company’s board of directors determines that the cost of such investment is the best indication of its fair value. Investments that are traded on an active public market are valued at their closing price as of the date of the financial statements. Except as described above, the Company values its other investments by using the midpoint of the prevailing bid and ask prices from dealers on the date of the relevant period end, which are provided by independent third-party pricing services and screened for validity by such services.
The Company periodically benchmarks the bid and ask prices it receives from the third-party pricing services and/or dealers, as applicable, against the actual prices at which the Company purchases and sells its investments. Based on the results of the benchmark analysis and the experience of the Company’s management in purchasing and selling these investments, the Company believes that these prices are reliable indicators of fair value. However, because of the private nature of this marketplace (meaning actual transactions are not publicly reported), the Company believes that these valuation inputs are classified as Level 3 within the fair value hierarchy. The Company may also use other methods, including the use of an independent valuation firm, to determine fair value for securities for which it cannot obtain prevailing bid and ask prices through third-party pricing services or independent dealers, or where the Company’s board of directors otherwise determines that the use of such other methods is appropriate. The Company periodically benchmarks the valuations provided by the independent valuation firms against the actual prices at which it purchases and sells its investments. The valuation committee of the Company’s board of directors, or the valuation committee, and the board of directors reviewed and approved the valuation determinations made with respect to these investments in a manner consistent with the Company’s valuation policy.
The following is a reconciliation for the nine months ended September 30, 2017 and 2016 of investments for which significant unobservable inputs (Level 3) were used in determining fair value:
​ ​ ​
For the Nine Months Ended September 30, 2017
​
​ ​ ​
Senior Secured
Loans—First
Lien
​ ​
Senior Secured
Loans—Second
Lien
​ ​
Senior
Secured
Bonds
​ ​
Subordinated
Debt
​ ​
Collateralized
Securities
​ ​
Equity/​
Other
​ ​
Total
​
Fair value at beginning of period
​ ​ ​ $ 2,864,089 ​ ​ ​ ​ $ 718,971 ​ ​ ​ ​ $ 148,085 ​ ​ ​ ​ $ 402,397 ​ ​ ​ ​ $ 23,173 ​ ​ ​ ​ $ 331,297 ​ ​ ​ ​ $ 4,488,012 ​ ​
Accretion of discount (amortization of premium)
​ ​ ​ ​ 4,257 ​ ​ ​ ​ ​ 12,330 ​ ​ ​ ​ ​ 418 ​ ​ ​ ​ ​ 2,533 ​ ​ ​ ​ ​ 4 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 19,542 ​ ​
Net realized gain (loss)
​ ​ ​ ​ 4,315 ​ ​ ​ ​ ​ (16,697) ​ ​ ​ ​ ​ (18,593) ​ ​ ​ ​ ​ (14,935) ​ ​ ​ ​ ​ (167) ​ ​ ​ ​ ​ (3,122) ​ ​ ​ ​ ​ (49,199) ​ ​
Net change in unrealized appreciation (depreciation)
​ ​ ​ ​ 11,743 ​ ​ ​ ​ ​ (10,215) ​ ​ ​ ​ ​ 26,019 ​ ​ ​ ​ ​ 45,308 ​ ​ ​ ​ ​ (945) ​ ​ ​ ​ ​ (10,173) ​ ​ ​ ​ ​ 61,737 ​ ​
Purchases
​ ​ ​ ​ 1,165,253 ​ ​ ​ ​ ​ 126,861 ​ ​ ​ ​ ​ 25,468 ​ ​ ​ ​ ​ 134,356 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 35,844 ​ ​ ​ ​ ​ 1,487,782 ​ ​
Paid-in-kind interest
​ ​ ​ ​ 7,537 ​ ​ ​ ​ ​ 9,470 ​ ​ ​ ​ ​ 23 ​ ​ ​ ​ ​ 2,059 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,099 ​ ​ ​ ​ ​ 20,188 ​ ​
Sales and repayments
​ ​ ​ ​ (821,782) ​ ​ ​ ​ ​ (508,516) ​ ​ ​ ​ ​ (1,497) ​ ​ ​ ​ ​ (65,062) ​ ​ ​ ​ ​ (2,805) ​ ​ ​ ​ ​ (9,994) ​ ​ ​ ​ ​ (1,409,656) ​ ​
Net transfers in or out of Level 3
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Fair value at end of period
 ​ ​ ​ $ 3,235,412 ​ ​ ​ ​ $ 332,204 ​ ​ ​ ​ $ 179,923 ​ ​ ​ ​ $ 506,656 ​ ​ ​ ​ $ 19,260 ​ ​ ​ ​ $ 344,951 ​ ​ ​ ​ $ 4,618,406 ​ ​
The amount of total gains or losses for the period included in changes in net assets attributable to the change in unrealized gains or losses relating to investments still held at the reporting date
​ ​ ​ $ (3,650) ​ ​ ​ ​ $ (21,506) ​ ​ ​ ​ $ 5,632 ​ ​ ​ ​ $ 25,937 ​ ​ ​ ​ $ (789) ​ ​ ​ ​ $ 3,068 ​ ​ ​ ​ $ 8,692 ​ ​
​
42
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 7. Fair Value of Financial Instruments (continued)
 
​ ​ ​
For the Nine Months Ended September 30, 2016
​
​ ​ ​
Senior Secured
Loans—First
Lien
​ ​
Senior Secured
Loans—Second
Lien
​ ​
Senior
Secured
Bonds
​ ​
Subordinated
Debt
​ ​
Collateralized
Securities
​ ​
Equity/​
Other
​ ​
Total
​
Fair value at beginning of period
​ ​ ​ $ 2,802,207 ​ ​ ​ ​ $ 902,113 ​ ​ ​ ​ $ 181,200 ​ ​ ​ ​ $ 319,019 ​ ​ ​ ​ $ 113,383 ​ ​ ​ ​ $ 214,930 ​ ​ ​ ​ $ 4,532,852 ​ ​
Accretion of discount (amortization of premium)
 ​ ​ ​ ​ 4,272 ​ ​ ​ ​ ​ 4,113 ​ ​ ​ ​ ​ 2,071 ​ ​ ​ ​ ​ 2,311 ​ ​ ​ ​ ​ 97 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 12,864 ​ ​
Net realized gain (loss)
​ ​ ​ ​ 58 ​ ​ ​ ​ ​ (27,866) ​ ​ ​ ​ ​ (27,399) ​ ​ ​ ​ ​ (33,298) ​ ​ ​ ​ ​ (341) ​ ​ ​ ​ ​ 1,546 ​ ​ ​ ​ ​ (87,300) ​ ​
Net change in unrealized appreciation (depreciation)
​ ​ ​ ​ 47,615 ​ ​ ​ ​ ​ 67,983 ​ ​ ​ ​ ​ 9,329 ​ ​ ​ ​ ​ 81,430 ​ ​ ​ ​ ​ 6,748 ​ ​ ​ ​ ​ 9,269 ​ ​ ​ ​ ​ 222,374 ​ ​
Purchases
​ ​ ​ ​ 502,042 ​ ​ ​ ​ ​ 110,169 ​ ​ ​ ​ ​ 25,594 ​ ​ ​ ​ ​ 69,143 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 93,699 ​ ​ ​ ​ ​ 800,647 ​ ​
Paid-in-kind interest
​ ​ ​ ​ 4,612 ​ ​ ​ ​ ​ 11,482 ​ ​ ​ ​ ​ 155 ​ ​ ​ ​ ​ 1,633 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 17,882 ​ ​
Sales and repayments
​ ​ ​ ​ (614,986) ​ ​ ​ ​ ​ (302,460) ​ ​ ​ ​ ​ (36,724) ​ ​ ​ ​ ​ (45,905) ​ ​ ​ ​ ​ (97,289) ​ ​ ​ ​ ​ (6,793) ​ ​ ​ ​ ​ (1,104,157) ​ ​
Net transfers in or out of Level 3(1)
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (2,791) ​ ​ ​ ​ ​ (2,791) ​ ​
Fair value at end of period
​ ​ ​ $ 2,745,820 ​ ​ ​ ​ $ 765,534 ​ ​ ​ ​ $ 154,226 ​ ​ ​ ​ $ 394,333 ​ ​ ​ ​ $ 22,598 ​ ​ ​ ​ $ 309,860 ​ ​ ​ ​ $ 4,392,371 ​ ​
The amount of total gains or losses for the period included in changes in net assets attributable to the change in unrealized gains or losses relating to investments still held at the reporting date
​ ​ ​ $ 18,177 ​ ​ ​ ​ $ 25,587 ​ ​ ​ ​ $ (13,639) ​ ​ ​ ​ $ 43,453 ​ ​ ​ ​ $ 1,933 ​ ​ ​ ​ $ 9,013 ​ ​ ​ ​ $ 84,524 ​ ​
​
​
(1)
There was one transfer of an investment from Level 3 to Level 1 during the three months ended March 31, 2016. It is the Company’s policy to recognize transfers between levels, if any, at the beginning of the reporting period.
​
The following is a reconciliation for the nine months ended September 30, 2017 and 2016 of a secured borrowing for which significant unobservable inputs (Level 3) were used in determining fair value:
​ ​ ​
Nine Months Ended September 30,
​
​ ​ ​
2017
​ ​
2016
​
Fair value at beginning of period
​ ​ ​ $ (8,273) ​ ​ ​ ​ $ — ​ ​
Amortization of premium (accretion of discount)
​ ​ ​ ​ (13) ​ ​ ​ ​ ​ (3) ​ ​
Net realized gain (loss)
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Net change in unrealized (appreciation) depreciation
​ ​ ​ ​ (26) ​ ​ ​ ​ ​ (94) ​ ​
Proceeds from secured borrowing
​ ​ ​ ​ — ​ ​ ​ ​ ​ (8,132) ​ ​
Paid-in-kind interest
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Repayments on secured borrowing
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Net transfers in or out of Level 3
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Fair value at end of period
​ ​ ​ $ (8,312) ​ ​ ​ ​ $ (8,229) ​ ​
The amount of total gains or losses for the period included in changes in net assets attributable to the change in unrealized gains or losses relating to a secured borrowing still held at the reporting date
​ ​ ​ $ (26) ​ ​ ​ ​ $ (94) ​ ​
​
43
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 7. Fair Value of Financial Instruments (continued)
 
The valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements as of September 30, 2017 and December 31, 2016 were as follows:
Type of Investment
​ ​
Fair Value at
September 30,
2017
(Unaudited)
​ ​
Valuation
Technique(1)
 ​ ​
Unobservable Input
​ ​
Range
​ ​
Weighted
Average
​
Senior Secured Loans—First Lien
 ​ ​ ​ $ 2,826,185 ​ ​ ​ Market Comparables ​ ​ Market Yield (%) ​ ​
4.8% - 18.3%
​ ​
9.0%
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ EBITDA Multiples (x) ​ ​
7.5x - 8.0x
​ ​
7.8x
​
​ ​ ​ ​ ​ 44,952 ​ ​ ​ Other(2) ​ ​ Other ​ ​
N/A
​ ​
N/A
​
​ ​ ​ ​ ​ 364,275 ​ ​ ​ Market Quotes ​ ​ Indicative Dealer Quotes ​ ​
6.0% - 103.0%
​ ​
97.9%
​
Senior Secured Loans—
Second Lien
​ ​ ​ ​ 244,482 ​ ​ ​ Market Comparables ​ ​ Market Yield (%) ​ ​
8.3% - 16.9%
​ ​
13.9%
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ EBITDA Multiples (x) ​ ​
5.8x - 6.8x
​ ​
6.3x
​
​ ​ ​ ​ ​ 87,722 ​ ​ ​ Market Quotes ​ ​ Indicative Dealer Quotes ​ ​
8.2% - 101.5%
​ ​
87.9%
​
Senior Secured Bonds
 ​ ​ ​ ​ 98,507 ​ ​ ​ Market Comparables ​ ​ Market Yield (%) ​ ​
8.3% - 10.0%
​ ​
8.7%
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ EBITDA Multiples (x) ​ ​
4.8x - 9.5x
​ ​
8.6x
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Production Multiples (Mboe/d) ​ ​
$42,250.0 - $44,750.0
​ ​
$43,500.0
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Proved Reserves Multiples (Mmboe)
​ ​
$10.0 - $11.0
​ ​
$10.5
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ PV-10 Multiples (x) ​ ​
0.7x - 0.8x
​ ​
0.8x
​
​ ​ ​ ​ ​ 27,844 ​ ​ ​ Other(2) ​ ​ Other ​ ​
N/A
​ ​
N/A
​
​ ​ ​ ​ ​ 53,572 ​ ​ ​ Market Quotes ​ ​ Indicative Dealer Quotes ​ ​
93.3% - 106.7%
​ ​
104.5%
​
Subordinated Debt
​ ​ ​ ​ 60,335 ​ ​ ​ Market Comparables ​ ​ Market Yield (%) ​ ​
7.8% - 14.8%
​ ​
10.1%
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ EBITDA Multiples (x) ​ ​
10.3x - 11.3x
​ ​
10.8x
​
​ ​ ​ ​ ​ 154,500 ​ ​ ​ Other(2) ​ ​ Other ​ ​
N/A
​ ​
N/A
​
​ ​ ​ ​ ​ 291,821 ​ ​ ​ Market Quotes ​ ​ Indicative Dealer Quotes ​ ​
36.5% - 108.0%
​ ​
99.6%
​
Collateralized Securities
​ ​ ​ ​ 19,260 ​ ​ ​ Market Quotes ​ ​ Indicative Dealer Quotes ​ ​
47.9% - 99.6%
​ ​
69.0%
​
Equity/Other
​ ​ ​ ​ 295,968 ​ ​ ​ Market Comparables ​ ​ Market Yield (%) ​ ​
13.8% - 14.3%
​ ​
14.0%
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Capacity Multiple ($/kW) ​ ​
$2,500.0 - $2,750.0
​ ​
$2,625.0
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ EBITDA Multiples (x) ​ ​
1.9x - 16.0x
​ ​
8.1x
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Production Multiples (Mboe/d) ​ ​
$42,250.0 - $50,000.0
​ ​
$44,949.1
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Production Multiples (MMcfe/d) ​ ​
$5,750.0 - $6,750.0
​ ​
$6,250.0
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Proved Reserves Multiples (Bcfe) ​ ​
$1.7 - $1.9
​ ​
$1.8
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Proved Reserves Multiples (Mmboe)
​ ​
$10.0 - $11.3
​ ​
$10.9
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ PV-10 Multiples (x) ​ ​
0.7x - 3.3x
​ ​
2.6x
​
​ ​ ​ ​ ​ ​ ​ ​ ​
Discounted Cash Flow
​ ​ Discount Rate (%) ​ ​
19.8% - 21.8%
​ ​
20.8%
​
​ ​ ​ ​ ​ ​ ​ ​ ​
Option Valuation Model
​ ​ Volatility (%) ​ ​
30.0% - 37.0%
​ ​
36.4%
​
​ ​ ​ ​ ​ 42,310 ​ ​ ​ Other(2) ​ ​ Other ​ ​
N/A
​ ​
N/A
​
​ ​ ​ ​ ​ 6,673 ​ ​ ​ Market Quotes ​ ​ Indicative Dealer Quotes ​ ​
0.0% - 9.8%
​ ​
7.7%
​
Total
​ ​ ​ $ 4,618,406 ​ ​ ​ ​ ​ ​
Secured Borrowing
​ ​ ​ $ (8,312) ​ ​ ​ Market Comparables ​ ​ Market Yield (%) ​ ​
(6.0%) - (7.1%)
​ ​
(6.6)%
 ​
​
(1)
Investments using a market quotes valuation technique were valued by using the midpoint of the prevailing bid and ask prices from dealers on the date of the relevant period end, which were provided by independent third-party pricing services and screened for validity by such services. For investments utilizing a market comparables valuation technique, a significant increase (decrease) in the market yield, in isolation, would result in a significantly lower (higher) fair value measurement, and a significant increase (decrease) in any of the valuation multiples, in isolation, would result in a significantly higher (lower) fair value measurement. For investments utilizing a discounted cash flow valuation technique, a significant increase (decrease) in the discount rate, in isolation, would result in a significantly lower (higher) fair value measurement. For investments utilizing an option valuation model valuation technique, a significant increase (decrease) in the volatility, in isolation, would result in a significantly higher (lower) fair value measurement.
​
(2)
Fair value based on expected outcome of proposed corporate transactions and/or other factors.
​
​
44
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 7. Fair Value of Financial Instruments (continued)
 
Type of Investment
​ ​
Fair Value at
December 31,
2016
​ ​
Valuation
Technique(1)
 ​ ​
Unobservable Input
​ ​
Range
​ ​
Weighted
Average
​
Senior Secured Loans—First Lien
​ ​ ​ $ 2,266,541 ​ ​ ​ Market Comparables ​ ​ Market Yield (%) ​ ​
5.5% - 17.3%
​ ​
9.8%
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ EBITDA Multiples (x) ​ ​
6.8x - 7.3x
​ ​
7.0x
​
​ ​ ​ ​ ​ 10,615 ​ ​ ​ Other(2) ​ ​ Other ​ ​
N/A
​ ​
N/A
​
​ ​ ​ ​ ​ 517,874 ​ ​ ​ Market Quotes ​ ​ Indicative Dealer Quotes ​ ​
18.2% - 104.1%
​ ​
98.0%
​
​ ​ ​ ​ ​ 69,059 ​ ​ ​ Cost ​ ​ Cost ​ ​
100.0% - 100.0%
​ ​
100.0%
​
Senior Secured Loans—Second Lien
​ ​ ​ ​ 550,266 ​ ​ ​ Market Comparables ​ ​ Market Yield (%) ​ ​
8.8% - 22.9%
​ ​
11.9%
​
​ ​ ​ ​ ​ 168,705 ​ ​ ​ Market Quotes ​ ​ Indicative Dealer Quotes ​ ​
8.8% - 101.0%
​ ​
90.2%
​
Senior Secured Bonds
​ ​ ​ ​ 70,677 ​ ​ ​ Market Comparables ​ ​ Market Yield (%) ​ ​
7.5% - 9.0%
​ ​
7.9%
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ EBITDA Multiples (x) ​ ​
6.3x - 7.3x
​ ​
6.5x
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Production Multiples (Mboe/d) ​ ​
$45,000.0 - $50,000.0
​ ​
$47,500.0
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Proved Reserves Multiples (Mmboe)
​ ​
$14.5 - $15.0
​ ​
$14.8
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ PV-10 Multiples (x) ​ ​
0.8x - 0.9x
​ ​
0.9x
​
​ ​ ​ ​ ​ 77,408 ​ ​ ​ Market Quotes ​ ​ Indicative Dealer Quotes ​ ​
65.0% - 109.6%
​ ​
98.0%
​
Subordinated Debt
​ ​ ​ ​ 187,936 ​ ​ ​ Market Comparables ​ ​ Market Yield (%) ​ ​
8.0% - 15.3%
​ ​
10.6%
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ EBITDA Multiples (x) ​ ​
9.3x - 10.3x
​ ​
9.8x
​
​ ​ ​ ​ ​ 214,461 ​ ​ ​ Market Quotes ​ ​ Indicative Dealer Quotes ​ ​
54.5% - 125.5%
​ ​
92.4%
​
Collateralized Securities
​ ​ ​ ​ 23,173 ​ ​ ​ Market Quotes ​ ​ Indicative Dealer Quotes ​ ​
38.7% - 94.3%
​ ​
69.4%
​
Equity/Other
​ ​ ​ ​ 305,308 ​ ​ ​ Market Comparables ​ ​ EBITDA Multiples (x) ​ ​
4.5x - 16.3x
​ ​
8.4x
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Production Multiples (Mboe/d) ​ ​
$2,225.0 - $55,000.0
​ ​
$37,276.1
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Proved Reserves Multiples (Mmboe)
​ ​
$0.7 - $15.0
​ ​
$8.1
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Undeveloped Acreage Multiples ($)
​ ​
$8,000.0 - $10,000.0
​ ​
$9,000.0
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Capacity Multiple ($/kW) ​ ​
$2,375.0 - $2,875.0
​ ​
$2,625.0
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ PV-10 Multiples (x) ​ ​
0.8x - 2.1x
​ ​
1.6x
​
​ ​ ​ ​ ​ ​ ​ ​ ​
Discounted Cash Flow
​ ​ Discount Rate (%) ​ ​
11.0% - 24.8%
​ ​
18.7%
​
​ ​ ​ ​ ​ ​ ​ ​ ​
Option Valuation Model
​ ​ Volatility (%) ​ ​
34.5% - 41.0%
​ ​
39.3%
​
​ ​ ​ ​ ​ 12,532 ​ ​ ​ Other(2) ​ ​ Other ​ ​
N/A
​ ​
N/A
​
​ ​ ​ ​ ​ 13,341 ​ ​ ​ Market Quotes ​ ​ Indicative Dealer Quotes ​ ​
0.0% - 32.0%
​ ​
12.7%
​
​ ​ ​ ​ ​ 116 ​ ​ ​ Cost ​ ​ Cost ​ ​
100.0% - 100.0%
​ ​
100.0%
​
Total
​ ​ ​ $ 4,488,012 ​ ​ ​ ​ ​ ​
Secured Borrowing
​ ​ ​ $ (8,273) ​ ​ ​ Market Comparables ​ ​ Market Yield (%) ​ ​
(6.0)% - (7.1)%
​ ​
(6.6)%
 ​
​
(1)
Investments using a market quotes valuation technique were valued by using the midpoint of the prevailing bid and ask prices from dealers on the date of the relevant period end, which were provided by independent third-party pricing services and screened for validity by such services. For investments utilizing a market comparables valuation technique, a significant increase (decrease) in the market yield, in isolation, would result in a significantly lower (higher) fair value measurement, and a significant increase (decrease) in any of the valuation multiples, in isolation, would result in a significantly higher (lower) fair value measurement. For investments utilizing a discounted cash flow valuation technique, a significant increase (decrease) in the discount rate, in isolation, would result in a significantly lower (higher) fair value measurement. For investments utilizing an option valuation model valuation technique, a significant increase (decrease) in the volatility, in isolation, would result in a significantly higher (lower) fair value measurement.
​
(2)
Fair value based on expected outcome of proposed corporate transactions and/or other factors.
​
45
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 8. Financing Arrangements
The following tables present summary information with respect to the Company’s outstanding financing arrangements as of September 30, 2017 and December 31, 2016. For additional information regarding these financing arrangements, see the notes to the Company’s audited consolidated financial statements contained in its annual report on Form 10-K for the year ended December 31, 2016 and the additional disclosure set forth in this Note 8.
​ ​ ​
As of September 30, 2017
(Unaudited)
​
Arrangement
​ ​
Type of Arrangement
​ ​
Rate
​ ​
Amount
Outstanding
​ ​
Amount
Available
​ ​
Maturity
Date
​
Green Creek Credit Facility(1)
 ​ ​
Term Loan Credit Facility
​ ​
L+2.50%
​ ​ ​ $ 500,000 ​ ​ ​ ​ $ — ​ ​ ​
December 15, 2019
​
Cooper River Credit Facility(1)
 ​ ​
Revolving Credit Facility
​ ​
L+2.25%
​ ​ ​ ​ 180,933 ​ ​ ​ ​ ​ 19,067 ​ ​ ​
May 29, 2020
​
Wissahickon Creek Credit
Facility(1)
 ​ ​
Revolving Credit Facility
​ ​
L+1.50%
to L+2.50%
​ ​ ​ ​ 240,146 ​ ​ ​ ​ ​ 9,854 ​ ​ ​
February 18, 2022
​
Darby Creek Credit Facility(1)
 ​ ​
Revolving Credit Facility
​ ​
L+2.50%
​ ​ ​ ​ 250,000 ​ ​ ​ ​ ​ — ​ ​ ​
August 19, 2020
​
Dunning Creek Credit Facility(1) 
 ​ ​
Revolving Credit Facility
​ ​
L+1.80%
​ ​ ​ ​ 149,400 ​ ​ ​ ​ ​ 600 ​ ​ ​
May 14, 2018
​
Juniata River Credit Facility(1)
 ​ ​
Term Loan Credit Facility
​ ​
L+2.68%
​ ​ ​ ​ 850,000 ​ ​ ​ ​ ​ — ​ ​ ​
October 11, 2020
​
FSIC II Revolving Credit Facility(1)
 ​ ​
Revolving Credit Facility
​ ​
See Note(2)
 ​ ​ ​ ​ 10,868(3) ​ ​ ​ ​ ​ 109,132 ​ ​ ​
February 23, 2021
​
Total
​ ​ ​ ​ ​ ​ ​ ​ ​ $ 2,181,347 ​ ​ ​ ​ $ 138,653 ​ ​ ​
Partial Loan Sale
​ ​
Secured Borrowing
​ ​
L+4.50%
(1.0% floor)
​ ​ ​ $ 8,214 ​ ​ ​ ​ $ — ​ ​ ​
July 29, 2022
 ​
​
(1)
The carrying amount outstanding under the facility approximates its fair value.
​
(2)
Interest under the FSIC II revolving credit facility for (i) loans for which the Company elects the base rate option is payable at a rate equal to 0.75% per annum plus the greatest of  (a) the “U.S. Prime Rate” as published in The Wall Street Journal, (b) the federal funds effective rate for such day plus 0.5%, (c) the three-month LIBOR plus 1% per annum and (d) zero; and (ii) loans for which the Company elects the Eurocurrency option is payable at a rate equal to LIBOR plus 1.75% per annum.
​
(3)
Amount includes borrowing in U.S. dollars, Euros, and Canadian Dollars. Euro balance outstanding of  €7,015 has been converted to U.S. dollars at an exchange rate of  €1.00 to $1.18 as of September 30, 2017 to reflect total amount outstanding in U.S. dollars. Canadian dollar balance outstanding of CAD$3,229 has been converted to U.S. dollars at an exchange rate of CAD $1.00 to $0.80 as of September 30, 2017 to reflect total amount outstanding in U.S. dollars.
​
​ ​ ​
December 31, 2016
​
Arrangement
​ ​
Type of Arrangement
​ ​
Rate
​ ​
Amount
Outstanding
​ ​
Amount
Available
​ ​
Maturity
Date
​
Goldman Repurchase Facility
​ ​
Repurchase Agreement
​ ​
L+2.50%
​ ​ ​ $ 400,000 ​ ​ ​ ​ $ — ​ ​ ​
December 15, 2018
​
Cooper River Credit Facility
​ ​
Revolving Credit Facility
​ ​
L+2.25%
​ ​ ​ ​ 166,033 ​ ​ ​ ​ ​ 33,967 ​ ​ ​
May 29, 2020
​
Wissahickon Creek Credit Facility
 ​ ​
Revolving Credit Facility
​ ​
L+1.50%
to L+2.50%
​ ​ ​ ​ 240,146 ​ ​ ​ ​ ​ 9,854 ​ ​ ​
February 19, 2019
 ​
Darby Creek Credit Facility
​ ​
Revolving Credit Facility
​ ​
L+2.50%
​ ​ ​ ​ 225,000 ​ ​ ​ ​ ​ 25,000 ​ ​ ​
August 19, 2020
​
Dunning Creek Credit Facility
​ ​
Revolving Credit Facility
​ ​
L+1.70%
​ ​ ​ ​ 94,200 ​ ​ ​ ​ ​ 55,800 ​ ​ ​
May 14, 2017
​
Juniata River Credit Facility
​ ​
Term Loan Credit Facility
​ ​
L+2.68%
​ ​ ​ ​ 850,000 ​ ​ ​ ​ ​ — ​ ​ ​
October 11, 2020
​
FSIC II Revolving Credit Facility
 ​ ​
Revolving Credit Facility
​ ​
L+1.75%
​ ​ ​ ​ — ​ ​ ​ ​ ​ 120,000 ​ ​ ​
February 23, 2021
​
Total
​ ​ ​ ​ ​ ​ ​ ​ ​ $ 1,975,379 ​ ​ ​ ​ $ 244,621 ​ ​ ​
Partial Loan Sale
​ ​
Secured Borrowing
​ ​
L+4.50%
(1.0% floor)
​ ​ ​ $ 8,214 ​ ​ ​ ​ $ — ​ ​ ​
July 29, 2022
 ​
46
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 8. Financing Arrangements (continued)
 
For the three and nine months ended September 30, 2017 and 2016, the components of total interest expense for the Company’s financing arrangements were as follows:
​ ​ ​
Three Months Ended September 30,
​
​ ​ ​
2017
​ ​
2016
​
Arrangement(1)
 ​ ​
Direct
Interest
Expense(2)
 ​ ​
Amortization
of Deferred
Financing Costs
​ ​
Total
Interest
Expense
​ ​
Direct
Interest
Expense(2)
 ​ ​
Amortization
of Deferred
Financing Costs
​ ​
Total
Interest
Expense
​
JPM Repurchase Facility
​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​ ​ ​ $ 4,569 ​ ​ ​ ​ $ 9 ​ ​ ​ ​ $ 4,578 ​ ​
Goldman Repurchase Facility
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 3,295 ​ ​ ​ ​ ​ 138 ​ ​ ​ ​ ​ 3,433 ​ ​
Green Creek Credit Facility
​ ​ ​ ​ 4,655 ​ ​ ​ ​ ​ 125 ​ ​ ​ ​ ​ 4,780 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Cooper River Credit Facility
​ ​ ​ ​ 1,628 ​ ​ ​ ​ ​ 117 ​ ​ ​ ​ ​ 1,745 ​ ​ ​ ​ ​ 1,352 ​ ​ ​ ​ ​ 118 ​ ​ ​ ​ ​ 1,470 ​ ​
Wissahickon Creek Credit Facility
 ​ ​ ​ ​ 2,289 ​ ​ ​ ​ ​ 266 ​ ​ ​ ​ ​ 2,555 ​ ​ ​ ​ ​ 1,875 ​ ​ ​ ​ ​ 172 ​ ​ ​ ​ ​ 2,047 ​ ​
Darby Creek Credit Facility
​ ​ ​ ​ 2,567 ​ ​ ​ ​ ​ 345 ​ ​ ​ ​ ​ 2,912 ​ ​ ​ ​ ​ 2,091 ​ ​ ​ ​ ​ 274 ​ ​ ​ ​ ​ 2,365 ​ ​
Dunning Creek Credit Facility
​ ​ ​ ​ 1,198 ​ ​ ​ ​ ​ 94 ​ ​ ​ ​ ​ 1,292 ​ ​ ​ ​ ​ 728 ​ ​ ​ ​ ​ 105 ​ ​ ​ ​ ​ 833 ​ ​
Juniata River Credit Facility
​ ​ ​ ​ 8,587 ​ ​ ​ ​ ​ 369 ​ ​ ​ ​ ​ 8,956 ​ ​ ​ ​ ​ 2,432 ​ ​ ​ ​ ​ 18 ​ ​ ​ ​ ​ 2,450 ​ ​
FSIC II Revolving Credit Facility
​ ​ ​ ​ 407 ​ ​ ​ ​ ​ 13 ​ ​ ​ ​ ​ 420 ​ ​ ​ ​ ​ 372 ​ ​ ​ ​ ​ 41 ​ ​ ​ ​ ​ 413 ​ ​
Partial Loan Sale(3)
 ​ ​ ​ ​ 121 ​ ​ ​ ​ ​ 5 ​ ​ ​ ​ ​ 126 ​ ​ ​ ​ ​ 76 ​ ​ ​ ​ ​ 3 ​ ​ ​ ​ ​ 79 ​ ​
Total
​ ​ ​ $ 21,452 ​ ​ ​ ​ $ 1,334 ​ ​ ​ ​ $ 22,786 ​ ​ ​ ​ $ 16,790 ​ ​ ​ ​ $ 878 ​ ​ ​ ​ $ 17,668 ​ ​
​
​ ​ ​
Nine Months Ended September 30,
​
​ ​ ​
2017
​ ​
2016
​
Arrangement(1)
 ​ ​
Direct
Interest
Expense(2)
 ​ ​
Amortization
of Deferred
Financing Costs
​ ​
Total
Interest
Expense
​ ​
Direct
Interest
Expense(2)
 ​ ​
Amortization
of Deferred
Financing Costs
​ ​
Total
Interest
Expense
​
JPM Repurchase Facility
​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​ ​ ​ $ 13,605 ​ ​ ​ ​ $ 29 ​ ​ ​ ​ $ 13,634 ​ ​
Goldman Repurchase Facility
​ ​ ​ ​ 5,249 ​ ​ ​ ​ ​ 202 ​ ​ ​ ​ ​ 5,451 ​ ​ ​ ​ ​ 9,495 ​ ​ ​ ​ ​ 410 ​ ​ ​ ​ ​ 9,905 ​ ​
Green Creek Credit Facility
​ ​ ​ ​ 6,503 ​ ​ ​ ​ ​ 205 ​ ​ ​ ​ ​ 6,708 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Cooper River Credit Facility
​ ​ ​ ​ 4,586 ​ ​ ​ ​ ​ 347 ​ ​ ​ ​ ​ 4,933 ​ ​ ​ ​ ​ 4,202 ​ ​ ​ ​ ​ 386 ​ ​ ​ ​ ​ 4,588 ​ ​
Wissahickon Creek Credit Facility
​ ​ ​ ​ 6,519 ​ ​ ​ ​ ​ 744 ​ ​ ​ ​ ​ 7,263 ​ ​ ​ ​ ​ 5,500 ​ ​ ​ ​ ​ 512 ​ ​ ​ ​ ​ 6,012 ​ ​
Darby Creek Credit Facility
​ ​ ​ ​ 7,306 ​ ​ ​ ​ ​ 1,023 ​ ​ ​ ​ ​ 8,329 ​ ​ ​ ​ ​ 6,340 ​ ​ ​ ​ ​ 691 ​ ​ ​ ​ ​ 7,031 ​ ​
Dunning Creek Credit Facility
​ ​ ​ ​ 3,008 ​ ​ ​ ​ ​ 298 ​ ​ ​ ​ ​ 3,306 ​ ​ ​ ​ ​ 1,990 ​ ​ ​ ​ ​ 391 ​ ​ ​ ​ ​ 2,381 ​ ​
Juniata River Credit Facility
​ ​ ​ ​ 24,381 ​ ​ ​ ​ ​ 1,095 ​ ​ ​ ​ ​ 25,476 ​ ​ ​ ​ ​ 7,136 ​ ​ ​ ​ ​ 52 ​ ​ ​ ​ ​ 7,188 ​ ​
FSIC II Revolving Credit Facility
​ ​ ​ ​ 1,086 ​ ​ ​ ​ ​ 55 ​ ​ ​ ​ ​ 1,141 ​ ​ ​ ​ ​ 918 ​ ​ ​ ​ ​ 91 ​ ​ ​ ​ ​ 1,009 ​ ​
Partial Loan Sale(3)
 ​ ​ ​ ​ 351 ​ ​ ​ ​ ​ 13 ​ ​ ​ ​ ​ 364 ​ ​ ​ ​ ​ 76 ​ ​ ​ ​ ​ 3 ​ ​ ​ ​ ​ 79 ​ ​
Total
​ ​ ​ $ 58,989 ​ ​ ​ ​ $ 3,982 ​ ​ ​ ​ $ 62,971 ​ ​ ​ ​ $ 49,262 ​ ​ ​ ​ $ 2,565 ​ ​ ​ ​ $ 51,827 ​ ​
​
​
(1)
Borrowings of each of the Company’s wholly-owned special-purpose financing subsidiaries are considered borrowings of the Company for purposes of complying with the asset coverage requirements applicable to BDCs under the 1940 Act.
​
(2)
Direct interest expense may include the effect of non-usage fees and/or make-whole fees.
​
(3)
Total interest expense for the secured borrowing includes the effect of amortization of discount.
​
​
47
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 8. Financing Arrangements (continued)
 
For the nine months ended September 30, 2017 and 2016, the cash paid for interest expense, average borrowings, effective interest rate and weighted average interest rate for the Company’s financing arrangements were as follows:
​ ​ ​
Nine Months Ended September 30,
​
​ ​ ​
2017
​ ​
2016
​
Arrangement(1)
 ​ ​
Cash Paid
for
Interest
Expense
​ ​
Average
Borrowings
​ ​
Effective
Interest
Rate
​ ​
Weighted
Average
Interest
Rate(2)
 ​ ​
Cash Paid
for
Interest
Expense
​ ​
Average
Borrowings
​ ​
Effective
Interest
Rate
​ ​
Weighted
Average
Interest
Rate(2)
 ​
JPM Repurchase Facility(3)
 ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​ ​ ​ ​ —% ​ ​ ​ ​ ​ —% ​ ​ ​ ​ $ 13,704 ​ ​ ​ ​ $ 550,000 ​ ​ ​ ​ ​ 3.25% ​ ​ ​ ​ ​ 3.25% ​ ​
Goldman Repurchase Facility(3)
 ​ ​ ​ ​ 6,982 ​ ​ ​ ​ ​ 400,000 ​ ​ ​ ​ ​ —% ​ ​ ​ ​ ​ 3.53% ​ ​ ​ ​ ​ 9,205 ​ ​ ​ ​ ​ 400,000 ​ ​ ​ ​ ​ 3.32% ​ ​ ​ ​ ​ 3.12% ​ ​
Green Creek Credit Facility(3)
 ​ ​ ​ ​ 4,095 ​ ​ ​ ​ ​ 456,834 ​ ​ ​ ​ ​ 3.69% ​ ​ ​ ​ ​ 3.69% ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Cooper River Credit Facility(3)
 ​ ​ ​ ​ 4,352 ​ ​ ​ ​ ​ 171,428 ​ ​ ​ ​ ​ 3.49% ​ ​ ​ ​ ​ 3.53% ​ ​ ​ ​ ​ 4,071 ​ ​ ​ ​ ​ 186,310 ​ ​ ​ ​ ​ 3.07% ​ ​ ​ ​ ​ 2.96% ​ ​
Wissahickon Creek Credit Facility(3)
 ​ ​ ​ ​ 6,266 ​ ​ ​ ​ ​ 240,146 ​ ​ ​ ​ ​ 3.73% ​ ​ ​ ​ ​ 3.58% ​ ​ ​ ​ ​ 5,289 ​ ​ ​ ​ ​ 230,511 ​ ​ ​ ​ ​ 3.31% ​ ​ ​ ​ ​ 3.13% ​ ​
Darby Creek Credit Facility(3)
 ​ ​ ​ ​ 6,886 ​ ​ ​ ​ ​ 246,429 ​ ​ ​ ​ ​ 3.91% ​ ​ ​ ​ ​ 3.91% ​ ​ ​ ​ ​ 6,477 ​ ​ ​ ​ ​ 245,182 ​ ​ ​ ​ ​ 3.57% ​ ​ ​ ​ ​ 3.40% ​ ​
Dunning Creek Credit Facility(3)
 ​ ​ ​ ​ 2,753 ​ ​ ​ ​ ​ 129,149 ​ ​ ​ ​ ​ 3.12% ​ ​ ​ ​ ​ 3.07% ​ ​ ​ ​ ​ 1,907 ​ ​ ​ ​ ​ 111,499 ​ ​ ​ ​ ​ 2.81% ​ ​ ​ ​ ​ 2.34% ​ ​
Juniata River Credit Facility(3)
 ​ ​ ​ ​ 23,870 ​ ​ ​ ​ ​ 850,000 ​ ​ ​ ​ ​ 3.84% ​ ​ ​ ​ ​ 3.78% ​ ​ ​ ​ ​ 6,902 ​ ​ ​ ​ ​ 300,000 ​ ​ ​ ​ ​ 3.18% ​ ​ ​ ​ ​ 3.13% ​ ​
FSIC II Revolving Credit Facility(4)
 ​ ​ ​ ​ 1,090 ​ ​ ​ ​ ​ 41,995 ​ ​ ​ ​ ​ 5.82% ​ ​ ​ ​ ​ 3.41% ​ ​ ​ ​ ​ 850 ​ ​ ​ ​ ​ 45,310 ​ ​ ​ ​ ​ 0.38% ​ ​ ​ ​ ​ 2.66% ​ ​
Partial Loan Sale(3)
 ​ ​ ​ ​ 347 ​ ​ ​ ​ ​ 8,214 ​ ​ ​ ​ ​ 5.81% ​ ​ ​ ​ ​ 5.64% ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 8,214 ​ ​ ​ ​ ​ 5.50% ​ ​ ​ ​ ​ 5.50% ​ ​
​ ​ ​ ​ $ 56,641 ​ ​ ​ ​ $ 2,544,195 ​ ​ ​ ​ ​ 3.74% ​ ​ ​ ​ ​ 3.66% ​ ​ ​ ​ $ 48,405 ​ ​ ​ ​ $ 2,077,026 ​ ​ ​ ​ ​ 3.20% ​ ​ ​ ​ ​ 3.13% ​ ​
​
​
(1)
The weighted average interest rate presented for periods of less than one year is annualized.
​
(2)
Effective interest rate and weighted average interest rate may include the effect of non-usage fees and/or administration fees.
​
(3)
Interest is paid quarterly in arrears.
​
(4)
Interest is paid at the end of each interest period, but no less than quarterly, in arrears.
​
JPM Facility
On April 23, 2013, through its two wholly-owned, special-purpose financing subsidiaries, Lehigh River LLC, or Lehigh River, and Cobbs Creek LLC, or Cobbs Creek, the Company entered into an amendment, or the April 2013 amendment, to its debt financing arrangement with JPMorgan Chase Bank, N.A., London Branch, or JPM, which the Company originally entered into on October 26, 2012 (and previously amended on February 6, 2013). The April 2013 amendment, among other things: (i) increased the amount of debt financing available under the arrangement from $300,000 to $550,000; and (ii) extended the final repurchase date under the financing arrangement from February 20, 2017 to May 20, 2017. On October 11, 2016, in connection with the entrance into certain amendments to the Juniata River facility (as defined below), Lehigh River and Cobbs Creek entered into documentation under the JPM facility which, among other things, resulted in the prepayment and termination of the JPM facility and the merger of Lehigh River into Juniata River (as defined below).
Goldman Repurchase Facility
On December 15, 2014, the Company, through its two wholly-owned, special-purpose financing subsidiaries, Green Creek LLC, or Green Creek, and Schuylkill River LLC, or Schuylkill River, entered
48
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 8. Financing Arrangements (continued)
 
into a debt financing arrangement, or the Goldman repurchase facility, with Goldman Sachs Bank USA, or Goldman. On December 15, 2014, the Company, through its two wholly-owned, special-purpose financing subsidiaries, Green Creek LLC, or Green Creek, and Schuylkill River LLC, or Schuylkill River, entered into a debt financing arrangement, or the Goldman repurchase facility, with Goldman Sachs Bank USA, or Goldman. Prior to its termination, the amount borrowed under the Goldman repurchase facility was $400,000. On May 15, 2017, in connection with the closing of the Green Creek facility (described under “—Green Creek Credit Facility”) (i) all of the Floating Rate Notes, or Notes, issued by Green Creek to Schuylkill River were canceled and the indenture under which the Notes were issued was discharged, (ii) the master repurchase agreement between Schuylkill River and Goldman and each transaction thereunder was terminated and (iii) accordingly, the Goldman repurchase facility was prepaid in full and terminated.
As of September 30, 2017 and December 31, 2016, Notes in an aggregate principal amount of  $0 and $689,655, respectively had been purchased by Schuylkill River from Green Creek and subsequently sold to Goldman under the Goldman repurchase facility for aggregate proceeds of  $0 and $400,000, respectively. The carrying amount outstanding under the Goldman repurchase facility approximates its fair value. The Company funded each purchase of Notes by Schuylkill River through a capital contribution to Schuylkill River. As of September 30, 2017 and December 31, 2016, Schuylkill River’s liability under the Goldman repurchase facility was $0 and $400,000, respectively, plus $0 and $1,733, respectively, of accrued interest expense. The Notes issued by Green Creek and purchased by Schuylkill River eliminate in consolidation on the Company’s financial statements.
The Company incurred costs in connection with obtaining the Goldman repurchase facility, which the Company had recorded as deferred financing costs on its consolidated balance sheets and amortized to interest expense over the life of the Goldman repurchase facility. As of September 30, 2017, $863 of such deferred financing costs had yet to be amortized to interest expense. Pursuant to the May 15, 2017 refinancing described under “—Green Creek Credit Facility”, the remaining unamortized deferred financing costs of  $863 will be amortized over the contractual term of the Green Creek Credit Facility.
Green Creek Credit Facility
On May 15, 2017, Green Creek entered into a Credit Agreement with Goldman, as lender, sole lead arranger and administrative agent, Citibank, N.A., as collateral agent, and Virtus Group, LP, as collateral administrator, pursuant to which Goldman advanced $400,000 to Green Creek with a 60-day availability period for Green Creek to borrow an additional $100,000, or the Green Creek facility. On July 14, 2017, Green Creek borrowed the additional $100,000 commitment under the Green Creek facility to increase the amount outstanding to $500,000. Pursuant to the Green Creek facility, the Company may contribute cash, loans or bonds to Green Creek from time to time, subject to certain restrictions, and will retain a residual interest in any assets contributed through its ownership of Green Creek or will receive fair market value for any assets sold to Green Creek. Green Creek may purchase additional assets from various sources. Green Creek has appointed the Company to manage its portfolio of assets pursuant to the terms of an investment management agreement. Green Creek’s obligations to Goldman under the Green Creek facility are secured by a first priority security interest in substantially all of the assets of Green Creek, including its portfolio of assets. The obligations of Green Creek under the Green Creek facility are non-recourse to the Company, and the Company’s exposure under the Green Creek facility is limited to the value of the Company’s investment in Green Creek.
As of May 15, 2017, borrowings under the Green Creek facility accrue interest at a rate equal to three-month LIBOR plus 2.50% per annum. Interest is payable in arrears beginning on August 15, 2017 and each quarter thereafter. The Green Creek facility will mature, and the principal and accrued and unpaid interest thereunder, will be due and payable, on December 15, 2019.
49
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 8. Financing Arrangements (continued)
 
If the Green Creek facility is accelerated prior to its stated maturity date due to an event of default or all or a portion of the borrowings are prepaid, then Green Creek must pay to Goldman a fee equal to the present value of the aggregate amount of the spread over LIBOR (2.50% per annum) that would have been payable to Goldman on the subject borrowings through the facility’s maturity date had the acceleration or prepayment not occurred.
The Company incurred costs in connection with obtaining the Green Creek facility, which the Company has recorded as deferred financing costs, along with $863 of unamortized fees from the Goldman repurchase facility, on its consolidated balance sheets and amortizes to interest expense over the life of the facility. As of September 30, 2017, $1,191 of such deferred financing costs had yet to be amortized to interest expense.
Cooper River Credit Facility
On May 29, 2015, the Company’s wholly-owned, special-purpose financing subsidiary, Cooper River LLC, or Cooper River, entered into a revolving credit facility, or the Cooper River facility, which amends and restates that certain credit facility dated as of March 27, 2013, with Citibank, as administrative agent, and the financial institutions and other lenders from time to time party thereto. The Cooper River facility provides for a five-year credit facility with a three-year reinvestment period, during which Cooper River, subject to compliance with the terms of the facility, including maintenance of the required borrowing base, is permitted to borrow, repay and re-borrow advances up to a maximum commitment of  $200,000, followed by a two-year amortization period.
The Company may contribute cash or debt securities to Cooper River from time to time, subject to certain restrictions set forth in the Cooper River facility, and will retain a residual interest in any assets contributed through its ownership of Cooper River or will receive fair market value for any debt securities sold to Cooper River. Cooper River may purchase additional debt securities from various sources. Cooper River has appointed the Company to manage its portfolio of debt securities pursuant to the terms of an investment management agreement. Cooper River’s obligations to the lenders under the Cooper River facility are secured by a first priority security interest in substantially all of the assets of Cooper River, including its portfolio of debt securities. The obligations of Cooper River under the Cooper River facility are non-recourse to the Company and the Company’s exposure under the Cooper River facility is limited to the value of the Company’s investment in Cooper River.
Borrowings under the Cooper River facility, prior to its amendment and restatement, accrued interest at a rate equal to three-month LIBOR, plus a spread of  (a) 1.75% per annum from closing through March 26, 2015 and (b) 2.00% per annum thereafter. Borrowings under the amended and restated Cooper River facility will accrue interest at a rate per annum equal to three-month LIBOR (subject to a 0% floor) plus a spread of  (i) 2.25% during the reinvestment period, (ii) 2.75% during the first year of the amortization period and (iii) 3.75% thereafter.
Under the terms of the original Cooper River facility, from June 24, 2013 through March 26, 2015, Cooper River was subject to a non-usage fee of 0.50% per annum to the extent the aggregate principal amount available under the Cooper River facility had not been borrowed. Such non-usage fee did not apply from March 27, 2015 through the date the Cooper River facility was amended and restated. Under the amended and restated Cooper River facility, Cooper River pays a commitment fee of 0.75% per annum of the aggregate principal amount available under the Cooper River facility that has not been borrowed. Any amounts borrowed under the Cooper River facility will mature, and all accrued and unpaid interest thereunder will be due and payable, on May 29, 2020.
The Company incurred costs in connection with obtaining the Cooper River facility (including the original facility and the amended and restated facility), which the Company has recorded as deferred
50
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 8. Financing Arrangements (continued)
 
financing costs on its consolidated balance sheets and amortizes to interest expense over the life of the Cooper River facility. As of September 30, 2017, $1,236 of such deferred financing costs had yet to be amortized to interest expense.
Wissahickon Creek Credit Facility
On February 19, 2014, the Company’s wholly-owned, special-purpose financing subsidiary, Wissahickon Creek LLC, or Wissahickon Creek, entered into a revolving credit facility, or the Wissahickon Creek facility, with Wells Fargo Securities, LLC, as administrative agent, each of the conduit lenders and institutional lenders from time to time party thereto and Wells Fargo Bank, National Association, or, collectively with Wells Fargo Securities, LLC, Wells Fargo, as the collateral agent, account bank and collateral custodian under the Wissahickon Creek facility. The Wissahickon Creek facility provides for borrowings in an aggregate principal amount up to $250,000 on a committed basis.
The Company may contribute cash, loans or bonds to Wissahickon Creek from time to time and will retain a residual interest in any assets contributed through its ownership of Wissahickon Creek or will receive fair market value for any assets sold to Wissahickon Creek. Wissahickon Creek may purchase additional assets from various sources. Wissahickon Creek has appointed the Company to manage its portfolio of assets pursuant to the terms of a collateral management agreement. Wissahickon Creek’s obligations to Wells Fargo under the Wissahickon Creek facility are secured by a first priority security interest in substantially all of the assets of Wissahickon Creek, including its portfolio of assets. The obligations of Wissahickon Creek under the Wissahickon Creek facility are non-recourse to the Company, and the Company’s exposure under the facility is limited to the value of its investment in Wissahickon Creek.
Pricing under the Wissahickon Creek facility is based on LIBOR for a three-month interest period, plus a spread ranging between 1.50% and 2.50% per annum, depending on the composition of the portfolio of assets for the relevant period. Interest is payable quarterly in arrears. Wissahickon Creek is subject to a non-usage fee to the extent the aggregate principal amount available under the facility is not borrowed. The non-usage fee equals 0.50% per annum on unborrowed amounts up to and including $25,000 and 2.00% on unborrowed amounts exceeding $25,000. Any amounts borrowed under the Wissahickon Creek facility will mature, and all accrued and unpaid interest thereunder will be due and payable, on February 18, 2022.
The Company incurred costs in connection with obtaining the facility, which the Company has recorded as deferred financing costs on its consolidated balance sheets and amortizes to interest expense over the life of the facility. As of September 30, 2017, $2,610 of such deferred financing costs had yet to be amortized to interest expense.
Darby Creek Credit Facility
On February 20, 2014, the Company’s wholly-owned, special-purpose financing subsidiary, Darby Creek LLC, or Darby Creek, entered into a revolving credit facility, or the Darby Creek facility, with Deutsche Bank AG, New York Branch, or Deutsche Bank, as administrative agent, each of the lenders from time to time party thereto, the other agents party thereto and Wells Fargo Bank, National Association, as the collateral agent and collateral custodian under the Darby Creek facility. The Darby Creek facility provides for borrowings in an aggregate principal amount up to $250,000 on a committed basis.
The Company may sell or contribute assets to Darby Creek from time to time and will retain a residual interest in any assets contributed through its ownership of Darby Creek or will receive fair market value for any assets sold to Darby Creek. Darby Creek may purchase additional assets from various sources. Darby Creek has appointed the Company to manage its portfolio of assets pursuant to the terms of an investment
51
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 8. Financing Arrangements (continued)
 
management agreement. Darby Creek’s obligations to Deutsche Bank under the Darby Creek facility are secured by a first priority security interest in substantially all of the assets of Darby Creek, including its portfolio of assets. The obligations of Darby Creek under the Darby Creek facility are non-recourse to the Company and the Company’s exposure under the facility is limited to the value of its investment in Darby Creek.
Pricing under the Darby Creek facility is based on LIBOR for a three-month interest period (for each committed lender) or the commercial paper rate of each conduit lender, plus, in each case, a spread of 2.50% per annum. Darby Creek is subject to a non-usage fee of 0.50% per annum to the extent the aggregate principal amount available under the Darby Creek facility is not borrowed. In addition, Darby Creek is subject to (i) a make-whole fee on a quarterly basis effectively equal to a portion of the spread that would have been payable if the full amount under the Darby Creek facility had been borrowed, less the non-usage fee accrued during such quarter and (ii) an administration fee. Any amounts borrowed under the Darby Creek facility will mature, and all accrued and unpaid interest thereunder will be due and payable, on August 19, 2020.
The Company incurred costs in connection with obtaining and amending the facility, which the Company has recorded as deferred financing costs on its consolidated balance sheets and amortizes to interest expense over the life of the facility. As of September 30, 2017, $1,877 of such deferred financing costs had yet to be amortized to interest expense.
Dunning Creek Credit Facility
On May 14, 2014, the Company’s wholly-owned, special-purpose financing subsidiary, Dunning Creek LLC, or Dunning Creek, entered into a revolving credit facility, or the Dunning Creek facility, with Deutsche Bank, as administrative agent and lender, and each of the other lenders from time to time party thereto. The Dunning Creek facility was most recently amended on May 12, 2017 to extend the maturity date to May 14, 2018 and increase the interest rate on borrowings to three-month LIBOR plus 1.80% per annum.
The Company may contribute cash, loans or bonds to Dunning Creek from time to time, subject to certain restrictions set forth in the Dunning Creek facility, and will retain a residual interest in any assets contributed through its ownership of Dunning Creek or will receive fair market value for any assets sold to Dunning Creek. Dunning Creek may purchase additional assets from various sources. Dunning Creek has appointed the Company to manage its portfolio of assets pursuant to the terms of an investment management agreement. Dunning Creek’s obligations to the lenders under the Dunning Creek facility are secured by a first priority security interest in substantially all of the assets of Dunning Creek, including its portfolio of assets. The obligations of Dunning Creek under the Dunning Creek facility are non-recourse, to the Company and the Company’s exposure under the facility is limited to the value of its investment in Dunning Creek.
As of September 30, 2017, pricing under the Dunning Creek facility was based on three-month LIBOR, plus a spread of 1.80% per annum. Any amounts borrowed under the Dunning Creek facility will mature, and all accrued and unpaid interest thereunder will be due and payable, on May 14, 2018.
The Company incurred costs in connection with obtaining and amending the facility, which the Company has recorded as deferred financing costs on its consolidated balance sheets and amortizes to interest expense over the life of the facility. As of September 30, 2017, $230 of such deferred financing costs had yet to be amortized to interest expense.
Juniata River Credit Facility
On November 14, 2014, the Company’s wholly-owned, special-purpose financing subsidiary, Juniata River LLC, or Juniata River, entered into a $300,000 senior secured term loan facility, or the Juniata River
52
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 8. Financing Arrangements (continued)
 
facility, with JPM, as administrative agent, and the financial institutions and other lenders from time to time party thereto, Citibank, as collateral agent, and Virtus Group, LP, as collateral administrator. On October 11, 2016 Juniata River entered into amendments to the Juniata River facility which, among other things, (i) provided for an immediate upsize of  $550,000, resulting in a total facility amount of  $850,000, (ii) extended the maturity date of the facility to October 11, 2020 and (iii) increased the margin payable of borrowing to 2.6833% over the three-month LIBOR.
The Company may contribute cash, loans or bonds to Juniata River from time to time, subject to certain restrictions set forth in the Juniata River facility, and will retain a residual interest in any assets contributed through its ownership of Juniata River or will receive fair market value for any assets sold to Juniata River. Juniata River may purchase additional assets from various sources. Juniata River has appointed the Company to manage its portfolio of assets pursuant to the terms of an investment management agreement. Juniata River’s obligations to the lenders under the Juniata River facility are secured by a first priority security interest in substantially all of the assets of Juniata River, including its portfolio of debt securities. The obligations of Juniata River under the Juniata River facility are non-recourse to the Company, and the Company’s exposure under the Juniata River facility is limited to the value of the Company’s investment in Juniata River.
Pricing under the Juniata River facility is based on LIBOR for a three-month interest period plus a spread of 2.6833% per annum. Interest is payable quarterly in arrears. Any amounts borrowed under the Juniata River facility will mature, and all accrued and unpaid interest thereunder will be due and payable, on October 11, 2020.
The Company incurred costs in connection with obtaining and amending the Juniata River facility, which the Company has recorded as deferred financing costs on its consolidated balance sheets and amortizes to interest expense over the life of the Juniata River facility. As of September 30, 2017, $4,439 of such deferred financing costs had yet to be amortized to interest expense.
FSIC II Revolving Credit Facility
On February 23, 2016, the Company entered into the FSIC II revolving credit facility with ING Capital LLC, or ING, as administrative agent, and the lenders party thereto. The FSIC II revolving credit facility provides for borrowings in U.S. dollars and certain agreed upon foreign currencies in an initial aggregate amount of up to $95,000, with an option for the Company to request, at one or more times after closing, that existing or new lenders, at their election, provide up to $80,000 of additional commitments. On April 26, 2016, the Company entered into an incremental commitment and assumption agreement pursuant to which an additional lender provided an additional commitment of  $25,000. The FSIC II revolving credit facility provides for the issuance of letters of credit in an aggregate face amount not to exceed $25,000 if one of the lenders or another party assumes the role of letter of credit issuer. The Company’s obligations under the FSIC II revolving credit facility are guaranteed by all of the Company’s subsidiaries, other than its special-purpose financing subsidiaries, tax blocker subsidiaries and foreign subsidiaries. The Company’s obligations under the FSIC II revolving credit facility are secured by a first priority security interest in substantially all of the assets of the Company and the subsidiary guarantors thereunder.
As of September 30, 2017, $10,868 was outstanding under the FSIC II revolving credit facility, which includes borrowings in Euro in an aggregate amount of  €7,015 and borrowings in Canadian dollars in an aggregate amount of CAD $3,229. The Company incurred costs in connection with obtaining the FSIC II revolving credit facility, which the Company has recorded as deferred financing costs on its consolidated balance sheets and amortizes to interest expense over the life of the FSIC II revolving credit facility. As of September 30, 2017, $166 of such deferred financing costs had yet to be amortized to interest expense.
53
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 8. Financing Arrangements (continued)
 
Partial Loan Sale
Certain partial loan sales do not qualify for sale accounting under ASC Topic 860 because these sales do not meet the definition of a participating interest, as defined in the guidance, in order for sale treatment to be allowed. Participations or other partial loan sales which do not meet the definition of a participating interest remain as an investment on the consolidated balance sheets and the portion sold is recorded as a secured borrowing in the liabilities section of the consolidated balance sheets. For these partial loan sales, the interest earned on the entire loan balance is recorded within interest income and the interest earned by the buyer in the partial loan sale is recorded within interest expense in the consolidated statements of operations.
As of September 30, 2017 and December 31, 2016, the Company recognized a secured borrowing at fair value of  $8,312 and $8,273, respectively, and the fair value of the loan that is associated with the secured borrowing was $43,355 and $43,099, respectively. The secured borrowing was the result of the Company’s completion of a partial sale of a senior secured loan associated with one portfolio company that did not meet the definition of a participating interest. As a result, sale treatment was not allowed and the partial loan sale was treated as a secured borrowing.
During the nine months ended September 30, 2017, there were no new partial loan sales and no fundings on revolving and delayed draw secured borrowings or repayments on secured borrowings.
Note 9. Commitments and Contingencies
The Company enters into contracts that contain a variety of indemnification provisions. The Company’s maximum exposure under these arrangements is unknown; however, the Company has not had prior claims or losses pursuant to these contracts. Management of FSIC II Advisor has reviewed the Company’s existing contracts and expects the risk of loss to the Company to be remote.
The Company is not currently subject to any material legal proceedings and, to the Company’s knowledge, no material legal proceedings are threatened against the Company. From time to time, the Company may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of the Company’s rights under contracts with its portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, the Company does not expect that any such proceedings will have a material effect upon its financial condition or results of operations.
See Note 6 for a discussion of the Company’s unfunded commitments.
54
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 10. Financial Highlights
The following is a schedule of financial highlights of the Company for the nine months ended September 30, 2017 and the year ended December 31, 2016
​ ​ ​
Nine Months Ended
September 30, 2017
(Unaudited)
​ ​
Year Ended
December 31, 2016
​
Per Share Data:(1) ​ ​ ​
Net asset value, beginning of period
​ ​ ​ $ 8.90 ​ ​ ​ ​ $ 8.37 ​ ​
Results of operations(2) ​ ​ ​
Net investment income
​ ​ ​ ​ 0.60 ​ ​ ​ ​ ​ 0.79 ​ ​
Net realized and unrealized appreciation (depreciation) on investments, gain/loss on foreign currency and secured borrowing
 ​ ​ ​ ​ 0.03 ​ ​ ​ ​ ​ 0.49 ​ ​
Net increase (decrease) in net assets resulting from operations
​ ​ ​ ​ 0.63 ​ ​ ​ ​ ​ 1.28 ​ ​
Stockholder distributions(3) ​ ​ ​
Distributions from net investment income
​ ​ ​ ​ (0.57) ​ ​ ​ ​ ​ (0.73) ​ ​
Distributions from net realized gain on investments
​ ​ ​ ​ — ​ ​ ​ ​ ​ (0.02) ​ ​
Net decrease in net assets resulting from stockholder distributions
​ ​ ​ ​ (0.57) ​ ​ ​ ​ ​ (0.75) ​ ​
Capital share transactions ​ ​ ​
Issuance of common stock(4)
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Repurchases of common stock(5)
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Net increase (decrease) in net assets resulting from capital share transactions
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Net asset value, end of period
​ ​ ​ $ 8.96 ​ ​ ​ ​ $ 8.90 ​ ​
Shares outstanding, end of period
​ ​ ​ ​ 326,954,161 ​ ​ ​ ​ ​ 326,909,727 ​ ​
Total return(6)
 ​ ​ ​ ​ 7.13% ​ ​ ​ ​ ​ 16.07% ​ ​
Total return (without assuming reinvestment of distributions)(6)
 ​ ​ ​ ​ 7.08% ​ ​ ​ ​ ​ 15.29% ​ ​
Ratio/Supplemental Data: ​ ​ ​
Net assets, end of period
​ ​ ​ $ 2,928,395 ​ ​ ​ ​ $ 2,909,860 ​ ​
Ratio of net investment income to average net assets(7)
 ​ ​ ​ ​ 8.92% ​ ​ ​ ​ ​ 9.28% ​ ​
Ratio of operating expenses and excise taxes to average net assets(7)
 ​ ​ ​ ​ 8.77% ​ ​ ​ ​ ​ 8.96% ​ ​
Ratio of net operating expenses and excise taxes to average net assets(7)
 ​ ​ ​ ​ 8.33% ​ ​ ​ ​ ​ 8.51% ​ ​
Portfolio turnover(8)
 ​ ​ ​ ​ 30.54% ​ ​ ​ ​ ​ 31.77% ​ ​
Total amount of senior securities outstanding, exclusive of treasury securities
​ ​ ​ $ 2,189,561 ​ ​ ​ ​ $ 1,983,593 ​ ​
Asset coverage per unit(9)
 ​ ​ ​ ​ 2.34 ​ ​ ​ ​ ​ 2.47 ​ ​
​
(1)
Per share data may be rounded in order to recompute the ending net asset value per share.
​
(2)
The per share data was derived by using the weighted average shares outstanding during the applicable period.
​
(3)
The per share data for distributions reflects the actual amount of distributions paid per share during the applicable period.
​
​
55
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 10. Financial Highlights (continued)
 
(4)
The issuance of common stock on a per share basis reflects the incremental net asset value changes as a result of the issuance of shares of common stock pursuant to the Company’s distribution reinvestment plan. The issuance of common stock at a price that is greater than the net asset value per share results in an increase in net asset value per share.
​
(5)
The per share impact of the Company’s repurchases of common stock is a reduction to net asset value of less than $0.01 per share during the period.
​
(6)
The total return for each period presented was calculated based on the change in net asset value during the applicable period, including the impact of distributions reinvested in accordance with the Company’s distribution reinvestment plan. The total return (without assuming reinvestment of distributions) for each period presented was calculated by taking the net asset value per share as of the end of the applicable period, adding the cash distributions per share which were declared during the applicable period and dividing the total by the net asset value per share at the beginning of the applicable period. The total returns (with and without assuming reinvestment of distributions) do not consider the effect of any selling commissions or charges that may be incurred in connection with the sale of shares of the Company’s common stock. The total returns (with and without assuming reinvestment of distributions) include the effect of the issuance of shares at a net offering price that is greater than net asset value per share, which causes an increase in net asset value per share. The historical calculations of total returns (with and without assuming reinvestment of distributions) in the table should not be considered representations of the Company’s future total returns (with and without assuming reinvestment of distributions), which may be greater or less than the returns shown in the table due to a number of factors, including the Company’s ability or inability to make investments in companies that meet its investment criteria, the interest rates payable on the debt securities the Company acquires, the level of the Company’s expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which the Company encounters competition in its markets and general economic conditions. As a result of these factors, results for any previous period should not be relied upon as being indicative of performance in future periods. The total return calculations set forth above represent the total returns on the Company’s investment portfolio during the applicable period and do not represent actual returns to stockholders.
​
(7)
Weighted average net assets during the applicable period are used for this calculation. Ratios for the nine months ended September 30, 2017 are annualized. Annualized ratios for the nine months ended September 30, 2017 are not necessarily indicative of the ratios that may be expected for the year ending December 31, 2017. The following is a schedule of supplemental ratios for the nine months ended September 30, 2017 and the year ended December 31, 2016:
​
​ ​ ​ ​ ​ ​ ​
Nine Months Ended
September 30, 2017
(Unaudited)
​ ​
Year Ended
December 31, 2016
​
​ ​ ​ ​
Ratio of subordinated income incentive fees to average net assets
​ ​ ​ ​ 1.94% ​ ​ ​ ​ ​ 2.27% ​ ​
​ ​ ​ ​
Ratio of interest expense to average net assets
​ ​ ​ ​ 2.88% ​ ​ ​ ​ ​ 2.57% ​ ​
​ ​ ​ ​
Ratio of excise taxes to average net assets
​ ​ ​ ​ —% ​ ​ ​ ​ ​ 0.07% ​ ​
(8)
Portfolio turnover for the nine months ended September 30, 2017 is not annualized.
​
(9)
Asset coverage per unit is the ratio of the carrying value of the Company’s total consolidated assets, less liabilities and indebtedness not represented by senior securities, to the aggregate amount of senior securities representing indebtedness.
​
56
​
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(in thousands, except share and per share amounts)
​
The information contained in this section should be read in conjunction with our unaudited consolidated financial statements and related notes thereto appearing elsewhere in this quarterly report on Form 10-Q. In this report, “we,” “us,” “our” and the “Company” refer to FS Investment Corporation II.
Forward-Looking Statements
Some of the statements in this quarterly report on Form 10-Q constitute forward-looking statements because they relate to future events or our future performance or financial condition. The forward-looking statements contained in this quarterly report on Form 10-Q may include statements as to:
•
our future operating results;
​
•
our business prospects and the prospects of the companies in which we may invest;
​
•
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;
​
•
changes in the general interest rate environment;
​
•
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 the Fund Complex or any affiliate thereof;
​
•
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 FSIC II Advisor to locate suitable investments for us and to monitor and administer our investments;
​
•
the ability of FSIC II Advisor or its affiliates to attract and retain highly talented professionals;
​
•
our ability to maintain our qualification as a RIC and as a BDC;
​
•
the impact on our business of the Dodd-Frank Wall Street Reform and Consumer Protection Act, as amended, and the rules and regulations issued thereunder;
​
•
the effect of changes to tax legislation on us and the portfolio companies in which we may invest and our and their tax position; and
​
•
the tax status of the enterprises in which we may invest.
​
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 quarterly report on Form 10-Q 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.
​
​
57
We have based the forward-looking statements included in this quarterly report on Form 10-Q on information available to us on the date of this quarterly report on Form 10-Q. 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. Stockholders are advised to consult any additional disclosures that we may make directly to stockholders or through reports that we may file in the future with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. The forward-looking statements and projections contained in this quarterly report on Form 10-Q are excluded from the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act.
Overview
We were incorporated under the general corporation laws of the State of Maryland on July 13, 2011 and formally commenced investment operations on June 18, 2012. We are an externally managed, non-diversified, closed-end management investment company that has elected to be regulated as a BDC under the 1940 Act and has elected to be treated for U.S. federal income tax purposes, and intends to qualify annually, as a RIC under Subchapter M of the Code. In March 2014, we closed our continuous public offering of shares of common stock to new investors.
Our investment activities are managed by FSIC II Advisor and supervised by our board of directors, a majority of whom are independent. Under the investment advisory and administrative services agreement, we have agreed to pay FSIC II Advisor an annual base management fee based on the average value of our gross assets and an incentive fee based on our performance. FSIC II Advisor has engaged GDFM to act as our investment sub-adviser. GDFM assists FSIC II Advisor in identifying investment opportunities and makes investment recommendations for approval by FSIC II Advisor according to guidelines set by FSIC II Advisor.
Our investment objectives are to generate current income and, to a lesser extent, long-term capital appreciation. We have identified and intend to focus on the following investment categories, which we believe will allow us to generate an attractive total return with an acceptable level of risk.
Direct Originations: We intend to leverage our relationships and our relationship with GDFM and its global sourcing and origination platform, including its industry relationships, to directly source investment opportunities. Such investments are originated or structured for us or made by us and are not generally available to the broader market. These investments may include both debt and equity components, although we do not generally make equity investments independent of having an existing credit relationship. We believe directly originated investments may offer higher returns and more favorable protections than broadly syndicated transactions.
Opportunistic: We intend to seek to capitalize on market price inefficiencies by investing in loans, bonds and other securities where the market price of such investment reflects a lower value than deemed warranted by our fundamental analysis. We believe that market price inefficiencies may occur due to, among other things, general dislocations in the markets, a misunderstanding by the market of a particular company or an industry being out of favor with the broader investment community. We seek to allocate capital to these securities that have been misunderstood or mispriced by the market and where we believe there is an opportunity to earn an attractive return on our investment. Such opportunities may include event driven investments, anchor orders (i.e., opportunities that are originated and then syndicated by a commercial or investment bank but where we provide a capital commitment significantly above the average syndicate participant) and CLOs.
In the case of event driven investments, we intend to take advantage of dislocations that arise in the markets due to an impending event and where the market’s apparent expectation of value differs substantially from our fundamental analysis. Such events may include a looming debt maturity or default, a merger, spin-off or other corporate reorganization, an adverse regulatory or legal ruling, or a material contract expiration, any of which may significantly improve or impair a company’s financial position. Compared to other investment strategies, event driven investing depends more heavily on our ability to
58
successfully predict the outcome of an individual event rather than on underlying macroeconomic fundamentals. As a result, successful event driven strategies may offer both substantial diversification benefits and the ability to generate performance in uncertain market environments.
We may also invest in anchor orders. In these types of investments, we may receive fees, preferential pricing or other benefits not available to other lenders in return for our significant capital commitment. Our decision to provide an anchor order to a syndicated transaction is predicated on a rigorous credit analysis, our familiarity with a particular company, industry or financial sponsor, and the broader investment experiences of FSIC II Advisor and GDFM.
In addition, we opportunistically invest in CLOs. CLOs are a form of securitization where the cash flow from a pooled basket of syndicated loans is used to support distribution payments made to different tranches of securities. While collectively CLOs represent nearly fifty percent of the broadly syndicated loan universe, investing in individual CLO tranches requires a high degree of investor sophistication due to their structural complexity and the illiquid nature of their securities.
Broadly Syndicated/Other: Although our primary focus is to invest in directly originated transactions and opportunistic investments, in certain circumstances we will also invest in the broadly syndicated loan and high yield markets. Broadly syndicated loans and bonds are generally more liquid than our directly originated investments and provide a complement to our less liquid strategies. In addition, and because we typically receive more attractive financing terms on these positions than we do on our less liquid assets, we are able to leverage the broadly syndicated portion of our portfolio in such a way that maximizes the levered return potential of our portfolio.
Our portfolio is comprised primarily of investments in senior secured loans and second lien secured loans of private middle market U.S. companies and, to a lesser extent, subordinated loans of private U.S.companies. Although we do not expect a significant portion of our portfolio to be comprised of subordinated loans, there is no limit on the amount of such loans in which we may invest. We may purchase interests in loans or make other debt investments, including investments in senior secured bonds, through secondary market transactions in the “over-the-counter” market or directly from our target companies as primary market or directly originated investments. In connection with our debt investments, we may on occasion receive equity interests such as warrants or options as additional consideration. We may also purchase or otherwise acquire interests in the form of common or preferred equity or equity-related securities, such as rights and warrants that may be converted into or exchanged for common stock or other equity or the cash value of common stock or other equity, in our target companies, generally in conjunction with one of our debt investments, including through the restructuring of such investments, or through a co-investment with a financial sponsor, such as an institutional investor or private equity firm. In addition, a portion of our portfolio may be comprised of corporate bonds, CLOs, other debt securities and derivatives, including total return swaps and credit default swaps. FSIC II Advisor will seek to tailor our investment focus as market conditions evolve. Depending on market conditions, we may increase or decrease our exposure to less senior portions of the capital structure or otherwise make opportunistic investments.
The senior secured loans, second lien secured loans, and senior secured bonds, in which we invest generally have stated terms of three to seven years and subordinated debt investments that we make generally have stated terms of up to ten years, but the expected average life of such securities is generally between three and seven years. However, there is no limit on the maturity or duration of any security in our portfolio. Our debt investments may be rated by a nationally recognized statistical rating organization and, in such case, generally will carry a rating below investment grade (rated lower than “Baa3” by Moody’s Investors Services, Inc. or lower than “BBB-” by Standard & Poor’s Ratings Services). We also invest in non-rated debt securities.
Revenues
The principal measure of our financial performance is net increase in net assets resulting from operations, which includes net investment income, net realized gain or loss on investments, net realized gain or loss on foreign currency, net unrealized appreciation or depreciation on investments and net unrealized gain or loss on foreign currency.
59
Net investment income is the difference between our income from interest, dividends, fees and other investment income and our operating and other expenses. Net realized gain or loss on investments is the difference between the proceeds received from dispositions of portfolio investments and their amortized cost, including the respective realized gain or loss on foreign currency for those foreign denominated investment transactions. Net realized gain or loss on foreign currency is the portion of realized gain or loss attributable to foreign currency fluctuations. Net unrealized appreciation or depreciation on investments is the net change in the fair value of our investment portfolio, including the respective unrealized gain or loss on foreign currency for those foreign denominated investments. Net unrealized gain or loss on foreign currency is the net change in the value of receivables or accruals due to the impact of foreign currency fluctuations.
We principally generate revenues in the form of interest income on the debt investments we hold. In addition, we may generate revenues in the form of non-recurring commitment, closing, origination, structuring or diligence fees, monitoring fees, fees for providing managerial assistance, consulting fees, prepayment fees and performance-based fees. Any such fees generated in connection with our investments will be recognized as earned. We may also generate revenues in the form of dividends and other distributions on the equity or other securities we hold.
Expenses
Our primary operating expenses include the payment of management and incentive fees and other expenses under the investment advisory and administrative services agreement, interest expense from financing arrangements and other indebtedness, and other expenses necessary for our operations. The management and incentive fees compensate FSIC II Advisor for its work in identifying, evaluating, negotiating, executing, monitoring and servicing our investments. FSIC II Advisor is responsible for compensating our investment sub-adviser.
We reimburse FSIC II Advisor for expenses necessary to perform services related to our administration and operations, including FSIC II Advisor’s allocable portion of the compensation and related expenses of certain personnel of FS Investments providing administrative services to us on behalf of FSIC II Advisor. Such services include the provision of general ledger accounting, fund accounting, legal services, investor relations and other administrative services. FSIC II Advisor also performs, or oversees the performance of, our corporate operations and required administrative services, which includes being responsible for the financial records that we are required to maintain and preparing reports for our stockholders and reports filed with the SEC. In addition, FSIC II Advisor assists us in calculating our net asset value, overseeing the preparation and filing of tax returns and the printing and dissemination of reports to our stockholders, and generally overseeing the payment of our expenses and the performance of administrative and professional services rendered to us by others. See Note 4 to our unaudited consolidated financial statements included herein for additional information regarding the reimbursements payable to FSIC II Advisor for administrative services and the methodology for determining the amount of any such reimbursements. We bear all other expenses of our operations and transactions, including all other expenses incurred by FSIC II Advisor, GDFM or us in connection with administering our business, including expenses incurred by FSIC II Advisor or GDFM in performing administrative services for us and administrative personnel paid by FSIC II Advisor or GDFM, to the extent they are not controlling persons of FSIC II Advisor, GDFM or any of their respective affiliates, subject to the limitations included in the investment advisory and administrative services agreement. For additional information regarding these expenses, see our annual report on Form 10-K for the year ended December 31, 2016.
In addition, we have contracted with State Street Bank and Trust Company to provide various accounting and administrative services, including, but not limited to, preparing preliminary financial information for review by FSIC II Advisor, preparing and monitoring expense budgets, maintaining accounting and corporate books and records, processing trade information provided by us and performing testing with respect to RIC compliance.
60
Portfolio Investment Activity for the Three and Nine Months Ended September 30, 2017 and for the Year Ended December 31, 2016.
Total Portfolio Activity
The following tables present certain selected information regarding our portfolio investment activity for the three and nine months ended September 30, 2017:
Net Investment Activity
​ ​
For the Three Months Ended
September 30, 2017
​ ​
For the Nine Months Ended
September 30, 2017
​
Purchases
​ ​ ​ $ 267,272 ​ ​ ​ ​ $ 1,490,626 ​ ​
Sales and Redemptions
​ ​ ​ ​ (392,093) ​ ​ ​ ​ ​ (1,409,656) ​ ​
Net Portfolio Activity
​ ​ ​ $ (124,821) ​ ​ ​ ​ $ 80,970 ​ ​
​
​ ​ ​
For the Three Months Ended
September 30, 2017
​ ​
For the Nine Months Ended
September 30, 2017
​
New Investment Activity by Asset Class
​ ​
Purchases
​ ​
Percentage
​ ​
Purchases
​ ​
Percentage
​
Senior Secured Loans—First Lien
​ ​ ​ $ 252,112 ​ ​ ​ ​ ​ 94% ​ ​ ​ ​ $ 1,165,253 ​ ​ ​ ​ ​ 78% ​ ​
Senior Secured Loans—Second Lien
​ ​ ​ ​ 11,432 ​ ​ ​ ​ ​ 4% ​ ​ ​ ​ ​ 126,861 ​ ​ ​ ​ ​ 8% ​ ​
Senior Secured Bonds
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 25,468 ​ ​ ​ ​ ​ 2% ​ ​
Subordinated Debt
 ​ ​ ​ ​ 3,728 ​ ​ ​ ​ ​ 2% ​ ​ ​ ​ ​ 134,356 ​ ​ ​ ​ ​ 9% ​ ​
Collateralized Securities
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Equity/Other
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 38,688 ​ ​ ​ ​ ​ 3% ​ ​
Total ​ ​ ​ $ 267,272 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ $ 1,490,626 ​ ​ ​ ​ ​ 100% ​ ​
​
The following table summarizes the composition of our investment portfolio at cost and fair value as of September 30, 2017 and December 31, 2016:
​ ​ ​
September 30, 2017
(Unaudited)
​ ​
December 31, 2016
​
​ ​ ​
Amortized
Cost(1)
 ​ ​
Fair Value
​ ​
Percentage
of Portfolio
​ ​
Amortized
Cost(1)
 ​ ​
Fair Value
​ ​
Percentage
of Portfolio
​
Senior Secured Loans—First Lien
 ​ ​ ​ $ 3,246,013 ​ ​ ​ ​ $ 3,235,412 ​ ​ ​ ​ ​ 70% ​ ​ ​ ​ $ 2,886,433 ​ ​ ​ ​ $ 2,864,089 ​ ​ ​ ​ ​ 64% ​ ​
Senior Secured Loans—Second Lien
​ ​ ​ ​ 372,697 ​ ​ ​ ​ ​ 332,204 ​ ​ ​ ​ ​ 7% ​ ​ ​ ​ ​ 749,249 ​ ​ ​ ​ ​ 718,971 ​ ​ ​ ​ ​ 16% ​ ​
Senior Secured Bonds
​ ​ ​ ​ 174,356 ​ ​ ​ ​ ​ 179,923 ​ ​ ​ ​ ​ 4% ​ ​ ​ ​ ​ 168,537 ​ ​ ​ ​ ​ 148,085 ​ ​ ​ ​ ​ 3% ​ ​
Subordinated Debt
​ ​ ​ ​ 473,271 ​ ​ ​ ​ ​ 506,656 ​ ​ ​ ​ ​ 11% ​ ​ ​ ​ ​ 414,320 ​ ​ ​ ​ ​ 402,397 ​ ​ ​ ​ ​ 9% ​ ​
Collateralized Securities
 ​ ​ ​ ​ 17,300 ​ ​ ​ ​ ​ 19,260 ​ ​ ​ ​ ​ 0% ​ ​ ​ ​ ​ 20,268 ​ ​ ​ ​ ​ 23,173 ​ ​ ​ ​ ​ 1% ​ ​
Equity/Other
​ ​ ​ ​ 325,131 ​ ​ ​ ​ ​ 352,171 ​ ​ ​ ​ ​ 8% ​ ​ ​ ​ ​ 298,460 ​ ​ ​ ​ ​ 340,680 ​ ​ ​ ​ ​ 7% ​ ​
Total
​ ​ ​ $ 4,608,768 ​ ​ ​ ​ $ 4,625,626 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ $ 4,537,267 ​ ​ ​ ​ $ 4,497,395 ​ ​ ​ ​ ​ 100% ​ ​
​
​
(1)
Amortized cost represents the original cost adjusted for the amortization of premiums and/or accretion of discounts, as applicable, on investments.
​
​
61
The following table presents certain selected information regarding the composition of our investment portfolio as of September 30, 2017 and December 31, 2016:
​ ​ ​
September 30,
2017
​ ​
December 31,
2016
​
Number of Portfolio Companies
​ ​
135
​ ​
138
​
% Variable Rate (based on fair value)
​ ​
77.8%
​ ​
79.0%
​
% Fixed Rate (based on fair value)
​ ​
14.2%
​ ​
13.4%
​
% Income Producing Equity or Other Investments (based on fair value)
​ ​
1.1%
​ ​
1.0%
​
% Non-Income Producing Equity or Other Investments (based on fair value)
​ ​
6.9%
​ ​
6.6%
​
Average Annual EBITDA of Portfolio Companies
​ ​
$106,300
​ ​
$125,000
​
Weighted Average Purchase Price of Debt Investments (as a % of par)
​ ​
97.5%
​ ​
97.5%
​
% of Investments on Non-Accrual (based on fair value)
​ ​
0.7%
​ ​
0.0%
​
Gross Portfolio Yield Prior to Leverage (based on amortized cost)
​ ​
9.1%
​ ​
9.4%
​
Gross Portfolio Yield Prior to Leverage (based on amortized cost)—Excluding Non-Income Producing Assets
​ ​
9.9%
​ ​
10.1%
 ​
Based on our regular monthly cash distribution amount of  $0.06283 per share as of September 30, 2017 and December 31, 2016 and our final public offering price of  $10.60, the annualized distribution rate to stockholders as of September 30, 2017 and December 31, 2016 was 7.11%. Based on our regular monthly cash distribution amount of  $0.06283 per share as of September 30, 2017 and December 31, 2016 and our distribution reinvestment price of  $9.05 as of September 30, 2017 and $8.95 as of December 31, 2016, the annualized distribution rate to stockholders as of September 30, 2017 and December 31, 2016 was 8.33% and 8.42% respectively. The annualized distribution rate to stockholders is expressed as a percentage equal to the projected annualized distribution amount per share divided by our institutional offering price per share. Our annualized distribution rate to stockholders may include income, realized capital gains and a return of investors’ capital. During the nine months ended September 30, 2017, our total return was 7.13% and our total return without assuming reinvestment of distributions was 7.08%. During the year ended December 31, 2016, our total return was 16.07% and our total return without assuming reinvestment of distributions was 15.29%.
Our estimated gross portfolio yield may be higher than an investor’s yield on an investment in shares of our common stock. Our estimated gross portfolio yield does not reflect operating expenses that may be incurred by us. In addition, our estimated gross portfolio yield and total return figures disclosed above do not consider the effect of any sales commissions or charges that may have been incurred in connection with the sale of shares of our common stock. Our estimated gross portfolio yield, total return and annualized distribution rate to stockholders do not represent actual investment returns to stockholders, are subject to change and in the future may be greater or less than the rates set forth above. See “Item 1A. Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2016 and our other periodic reports filed with the SEC for a discussion of the uncertainties, risks and assumptions associated with these statements. See footnote 6 to the table included in Note 10 to our unaudited consolidated financial statements included herein for information regarding the calculations of our total return.
Direct Originations
The following tables present certain selected information regarding our direct originations for the three and nine months ended September 30, 2017:
New Direct Originations
​ ​
For the Three Months Ended
September 30, 2017
​ ​
For the Nine Months Ended
September 30, 2017
​
Total Commitments (including unfunded commitments)
​ ​ ​ $ 224,126 ​ ​ ​ ​ $ 1,132,686 ​ ​
Exited Investments (including partial paydowns)
​ ​ ​ ​ (189,936) ​ ​ ​ ​ ​ (853,945) ​ ​
Net Direct Originations
​ ​ ​ $ 34,190 ​ ​ ​ ​ $ 278,741 ​ ​
​
62
​ ​ ​
For the Three Months Ended
September 30, 2017
​ ​
For the Nine Months Ended
September 30, 2017
​
New Direct Originations by Asset Class (including unfunded
commitments)
​ ​
Commitment
Amount
​ ​
Percentage
​ ​
Commitment
Amount
​ ​
Percentage
​
Senior Secured Loans—First Lien
​ ​ ​ $ 198,571 ​ ​ ​ ​ ​ 89% ​ ​ ​ ​ $ 1,077,871 ​ ​ ​ ​ ​ 95% ​ ​
Senior Secured Loans—Second Lien
​ ​ ​ ​ 5,555 ​ ​ ​ ​ ​ 2% ​ ​ ​ ​ ​ 9,094 ​ ​ ​ ​ ​ 1% ​ ​
Senior Secured Bonds
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 3,396 ​ ​ ​ ​ ​ — ​ ​
Subordinated Debt
 ​ ​ ​ ​ 20,000 ​ ​ ​ ​ ​ 9% ​ ​ ​ ​ ​ 20,000 ​ ​ ​ ​ ​ 2% ​ ​
Collateralized Securities
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Equity/Other
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 22,325 ​ ​ ​ ​ ​ 2% ​ ​
Total ​ ​ ​ $ 224,126 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ $ 1,132,686 ​ ​ ​ ​ ​ 100% ​ ​
​
​ ​ ​
For the Three Months Ended
September 30, 2017
​ ​
For the Nine Months Ended
September 30, 2017
​
Average New Direct Origination Commitment Amount
 ​ ​
$37,354
​ ​
$33,314
​
Weighted Average Maturity for New Direct Originations
​ ​
3/19/22
​ ​
8/6/22
​
Gross Portfolio Yield Prior to Leverage (based on amortized cost) of New Direct Originations Funded during Period
​ ​
9.4%
​ ​
8.8%
​
Gross Portfolio Yield Prior to Leverage (based on amortized cost) of New Direct Originations Funded during Period—Excluding Non-Income Producing Assets
​ ​
9.7%
​ ​
9.1%
​
Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Direct Originations Exited during Period
​ ​
11.5%
​ ​
10.2%
 ​
The following table presents certain selected information regarding our direct originations as of September 30, 2017 and December 31, 2016:
Characteristics of All Direct Originations Held in Portfolio
​ ​
September 30, 2017
​ ​
December 31, 2016
​
Number of Portfolio Companies
​ ​
77
​ ​
68
​
Average Annual EBITDA of Portfolio Companies
​ ​
$73,600
​ ​
$66,700
​
Average Leverage Through Tranche of Portfolio Companies—Excluding Equity/Other and Collateralized Securities
 ​ ​
4.8x
​ ​
4.8x
​
% of Investments on Non-Accrual (based on fair value)
​ ​
0.3%
​ ​
—
 ​
Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Funded Direct Originations
​ ​
9.1%
​ ​
9.5%
​
Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Funded Direct Originations—Excluding Non-Income Producing Assets
​ ​
9.9%
​ ​
10.2%
 ​
Portfolio Composition by Strategy
The table below summarizes the composition of our investment portfolio by strategy and enumerates the percentage, by fair value, of the total portfolio assets in such strategies as of September 30, 2017 and December 31, 2016:
​ ​ ​
September 30, 2017
​ ​
December 31, 2016
​
Portfolio Composition by Strategy
​ ​
Fair
Value
​ ​
Percentage of
Portfolio
​ ​
Fair
Value
​ ​
Percentage of
Portfolio
​
Direct Originations
​ ​ ​ $ 3,820,845 ​ ​ ​ ​ ​ 83% ​ ​ ​ ​ $ 3,635,978 ​ ​ ​ ​ ​ 81% ​ ​
Opportunistic
​ ​ ​ ​ 618,281 ​ ​ ​ ​ ​ 13% ​ ​ ​ ​ ​ 568,120 ​ ​ ​ ​ ​ 13% ​ ​
Broadly Syndicated/Other
​ ​ ​ ​ 186,500 ​ ​ ​ ​ ​ 4% ​ ​ ​ ​ ​ 293,297 ​ ​ ​ ​ ​ 6% ​ ​
Total
​ ​ ​ $ 4,625,626 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ $ 4,497,395 ​ ​ ​ ​ ​ 100% ​ ​
​
63
See Note 6 to our unaudited consolidated financial statements included herein for additional information regarding the composition of our investment portfolio by industry classification.
Portfolio Asset Quality
In addition to various risk management and monitoring tools, FSIC II Advisor uses an investment rating system to characterize and monitor the expected level of returns on each investment in our portfolio. FSIC II Advisor uses an investment rating scale of 1 to 5. The following is a description of the conditions associated with each investment rating:
Investment
Rating 		​ ​
Summary Description
​
1
​ ​ Investment exceeding expectations and/or capital gain expected. ​
2
​ ​ Performing investment generally executing in accordance with the portfolio company’s business plan—full return of principal and interest expected. ​
3
​ ​ Performing investment requiring closer monitoring. ​
4
​ ​ Underperforming investment—some loss of interest or dividend possible, but still expecting a positive return on investment. ​
5
​ ​ Underperforming investment with expected loss of interest and some principal. ​
The following table shows the distribution of our investments on the 1 to 5 investment rating scale at fair value as of September 30, 2017 and December 31, 2016:
​ ​ ​
September 30, 2017
​ ​
December 31, 2016
​
Investment Rating
​ ​
Fair
Value
​ ​
Percentage of
Portfolio
​ ​
Fair
Value
​ ​
Percentage of
Portfolio
​
1
​ ​ ​ $ 432,118 ​ ​ ​ ​ ​ 9% ​ ​ ​ ​ $ 301,900 ​ ​ ​ ​ ​ 7% ​ ​
2
​ ​ ​ ​ 3,864,835 ​ ​ ​ ​ ​ 84% ​ ​ ​ ​ ​ 3,628,492 ​ ​ ​ ​ ​ 81% ​ ​
3
​ ​ ​ ​ 215,403 ​ ​ ​ ​ ​ 5% ​ ​ ​ ​ ​ 449,511 ​ ​ ​ ​ ​ 10% ​ ​
4
​ ​ ​ ​ 21,710 ​ ​ ​ ​ ​ 0% ​ ​ ​ ​ ​ 87,088 ​ ​ ​ ​ ​ 2% ​ ​
5
​ ​ ​ ​ 91,560 ​ ​ ​ ​ ​ 2% ​ ​ ​ ​ ​ 30,404 ​ ​ ​ ​ ​ 0% ​ ​
Total
​ ​ ​ $ 4,625,626 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ $ 4,497,395 ​ ​ ​ ​ ​ 100% ​ ​
​
The amount of the portfolio in each grading category may vary substantially from period to period resulting primarily from changes in the composition of the portfolio as a result of new investment, repayment and exit activities. In addition, changes in the grade of investments may be made to reflect our expectation of performance and changes in investment values.
Results of Operations
Comparison of the Three Months Ended September 30, 2017 and 2016
Revenues
Our investment income for the three months ended September 30, 2017 and 2016 was as follows:
​ ​ ​
Three Months Ended September 30,
​
​ ​ ​
2017
​ ​
2016
​
​ ​ ​
Amount
​ ​
Percentage of
Total Income
​ ​
Amount
​ ​
Percentage of
Total Income
​
Interest Income
​ ​ ​ $ 104,423 ​ ​ ​ ​ ​ 87% ​ ​ ​ ​ $ 100,641 ​ ​ ​ ​ ​ 85% ​ ​
Paid-in-kind interest income
​ ​ ​ ​ 9,256 ​ ​ ​ ​ ​ 7% ​ ​ ​ ​ ​ 9,900 ​ ​ ​ ​ ​ 8% ​ ​
Fee income
​ ​ ​ ​ 7,223 ​ ​ ​ ​ ​ 6% ​ ​ ​ ​ ​ 8,525 ​ ​ ​ ​ ​ 7% ​ ​
Total investment income(1)
 ​ ​ ​ $ 120,902 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ $ 119,066 ​ ​ ​ ​ ​ 100% ​ ​
​
64
​
(1)
Such revenues represent $110,418 and $108,231 of cash income earned as well as $10,484 and $10,835 in non-cash portions relating to accretion of discount and PIK interest for the three months ended September 30, 2017 and 2016, respectively. Cash flows related to such non-cash revenues may not occur for a number of reporting periods or years after such revenues are recognized.
​
The increase in interest income was due primarily to the acceleration of original issue discount with respect to the repayment of certain portfolio investments. The level of interest income we receive is generally related to the balance of income-producing investments multiplied by the weighted average yield of our investments.
Fee income is transaction based, and typically consists of prepayment fees, structuring fees, amendment and consent fees and other non-recurring fees. As such, future fee income is generally dependent on new direct origination investments and the occurrence of prepayments and other events at existing portfolio companies resulting in such fees.
Expenses
Our operating expenses for the three months ended September 30, 2017 and 2016 were as follows:
​ ​ ​
Three Months Ended
September 30,
​
​ ​ ​
2017
​ ​
2016
​
Management fees
​ ​ ​ $ 25,769 ​ ​ ​ ​ $ 24,635 ​ ​
Subordinated income incentive fees(1)
 ​ ​ ​ ​ 10,137 ​ ​ ​ ​ ​ 14,252 ​ ​
Administrative services expenses
​ ​ ​ ​ 799 ​ ​ ​ ​ ​ 1,039 ​ ​
Stock transfer agent fees
​ ​ ​ ​ 506 ​ ​ ​ ​ ​ 506 ​ ​
Accounting and administrative fees
​ ​ ​ ​ 434 ​ ​ ​ ​ ​ 368 ​ ​
Interest expense
​ ​ ​ ​ 22,786 ​ ​ ​ ​ ​ 17,668 ​ ​
Directors’ fees
​ ​ ​ ​ 278 ​ ​ ​ ​ ​ 290 ​ ​
Expenses associated with our independent audit and related fees
​ ​ ​ ​ 129 ​ ​ ​ ​ ​ 89 ​ ​
Legal fees
​ ​ ​ ​ 207 ​ ​ ​ ​ ​ 157 ​ ​
Printing fees
​ ​ ​ ​ 187 ​ ​ ​ ​ ​ 387 ​ ​
Other
​ ​ ​ ​ 579 ​ ​ ​ ​ ​ 533 ​ ​
Total operating expenses
​ ​ ​ $ 61,811 ​ ​ ​ ​ $ 59,924 ​ ​
Management fee waiver
​ ​ ​ ​ (3,222) ​ ​ ​ ​ ​ (3,080) ​ ​
Net operating expenses
​ ​ ​ $ 58,589 ​ ​ ​ ​ $ 56,844 ​ ​
​
​
(1)
See Note 2 to our unaudited consolidated financial statements included herein for additional information regarding the calculation of incentive fees.
​
During the three months ended September 30, 2017 and 2016, the ratio of our net expenses to our average net assets was 2.02% and 2.04%, respectively. During the three months ended September 30, 2017 and 2016, the ratio of our net expenses to average net assets included $22,786 and $17,668, respectively, related to interest expense and $10,137 and $14,252, respectively, related to accruals of incentive fees. Without such expenses, our ratio of net expenses to average net assets would have been 0.89% and 0.89% for the three months ended September 30, 2017 and 2016, respectively. Incentive fees and interest expense, among other things, may increase or decrease our expense ratios relative to comparative periods depending on portfolio performance, and changes in benchmark interest rates such as LIBOR among other factors.
Net Investment Income
Our net investment income totaled $62,313 ($0.19 per share) and $62,222 ($0.19 per share) for the three months ended September 30, 2017 and 2016, respectively.
65
Net Realized Gains or Losses
We sold investments and received principal repayments of  $131,102 and $260,991, respectively, during the three months ended September 30, 2017, from which we realized a net loss of  $5,942. We sold investments and received principal repayments of  $343,884 and $250,192, respectively, during the three months ended September 30, 2016, from which we realized a net loss of  $40,479. We also realized a net gain of  $122 and a net loss of  $5, respectively, from settlements on foreign currency during the three months ended September 30, 2017 and 2016.
Net Change in Unrealized Appreciation (Depreciation) on Investments and Secured Borrowing and Unrealized Gain (Loss) on Foreign Currency
For the three months ended September 30, 2017, the net change in unrealized appreciation (depreciation) on investments totaled $5,001, the net change in unrealized appreciation (depreciation) on the secured borrowing was $10 and the net change in unrealized gain (loss) on foreign currency was $(186). For the three months ended September 30, 2016, the net change in unrealized appreciation (depreciation) on investments totaled $136,227 and the net change in unrealized appreciation (depreciation) on the secured borrowing was $(94). The net change in unrealized appreciation (depreciation) on our investments during the three months ended September 30, 2017 was driven by the conversion of unrealized depreciation to realized losses, offset by the reduced valuations in certain investments.
Net Increase (Decrease) in Net Assets Resulting from Operations
For the three months ended September 30, 2017, the net increase (decrease) in net assets resulting from operations was $61,318 ($0.19 per share) and $157,871 ($0.49 per share), respectively.
Comparison of the Nine Months Ended September 30, 2017 and 2016
Revenues
Our investment income for the nine months ended September 30, 2017 and 2016 was as follows:
​ ​ ​
Nine Months Ended September 30,
​
​ ​ ​
2017
​ ​
2016
​
​ ​ ​
Amount
​ ​
Percentage of
Total Income
​ ​
Amount
​ ​
Percentage of
Total Income
​
Interest Income
​ ​ ​ $ 310,184 ​ ​ ​ ​ ​ 82% ​ ​ ​ ​ $ 322,297 ​ ​ ​ ​ ​ 89% ​ ​
Paid-in-kind interest income
​ ​ ​ ​ 20,188 ​ ​ ​ ​ ​ 6% ​ ​ ​ ​ ​ 17,882 ​ ​ ​ ​ ​ 5% ​ ​
Fee income
​ ​ ​ ​ 46,323 ​ ​ ​ ​ ​ 12% ​ ​ ​ ​ ​ 20,088 ​ ​ ​ ​ ​ 6% ​ ​
Dividend Income
​ ​ ​ ​ 11 ​ ​ ​ ​ ​ 0% ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Total investment income(1)
 ​ ​ ​ $ 376,706 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ $ 360,267 ​ ​ ​ ​ ​ 100% ​ ​
​
​
(1)
Such revenues represent $348,791 and $333,501 of cash income earned as well as $27,915 and $26,766 in non-cash portions relating to accretion of discount and PIK interest for the nine months ended September 30, 2017 and 2016, respectively. Cash flows related to such non-cash revenues may not occur for a number of reporting periods or years after such revenues are recognized.
​
The decrease in interest income was due primarily to the prepayment of several large investments during the nine months ended September 30, 2017 and the refinancing of certain investments during the twelve months ended September 30, 2017, partially offset by the acceleration of original issue discount with respect to the repayment of certain portfolio investments. The level of interest income we receive is generally related to the balance of income-producing investments multiplied by the weighted average yield of our investments.
Fee income is transaction based, and typically consists of prepayment fees, structuring fees, amendment and consent fees and other non-recurring fees. As such, future fee income is generally dependent on new direct origination investments and the occurrence of prepayments and other events at existing portfolio companies resulting in such fees.
66
Expenses
Our operating expenses for the nine months ended September 30, 2017 and 2016 were as follows:
​ ​ ​
Nine Months Ended
September 30,
​
​ ​ ​
2017
​ ​
2016
​
Management fees
​ ​ ​ $ 77,005 ​ ​ ​ ​ $ 72,989 ​ ​
Subordinated income incentive fees(1)
 ​ ​ ​ ​ 42,352 ​ ​ ​ ​ ​ 45,836 ​ ​
Administrative services expenses
​ ​ ​ ​ 2,530 ​ ​ ​ ​ ​ 3,096 ​ ​
Stock transfer agent fees
​ ​ ​ ​ 1,502 ​ ​ ​ ​ ​ 1,549 ​ ​
Accounting and administrative fees
​ ​ ​ ​ 1,303 ​ ​ ​ ​ ​ 1,069 ​ ​
Interest expense
​ ​ ​ ​ 62,971 ​ ​ ​ ​ ​ 51,827 ​ ​
Directors’ fees
​ ​ ​ ​ 849 ​ ​ ​ ​ ​ 835 ​ ​
Expenses associated with our independent audit and related fees
​ ​ ​ ​ 382 ​ ​ ​ ​ ​ 309 ​ ​
Legal fees
​ ​ ​ ​ 612 ​ ​ ​ ​ ​ 432 ​ ​
Printing fees
​ ​ ​ ​ 847 ​ ​ ​ ​ ​ 1,281 ​ ​
Other
​ ​ ​ ​ 1,137 ​ ​ ​ ​ ​ 1,612 ​ ​
Total operating expenses
​ ​ ​ $ 191,490 ​ ​ ​ ​ $ 180,835 ​ ​
Management fee waiver
​ ​ ​ ​ (9,626) ​ ​ ​ ​ ​ (9,124) ​ ​
Net operating expenses
​ ​ ​ $ 181,864 ​ ​ ​ ​ $ 171,711 ​ ​
​
​
(1)
See Note 2 to our unaudited consolidated financial statements included herein for additional information regarding the calculation of incentive fees.
​
During the nine months ended September 30, 2017 and 2016, the ratio of our net expenses to our average net assets was 6.23% and 6.34%, respectively. During the nine months ended September 30, 2017 and 2016, the ratio of our net expenses to average net assets included $62,971 and $51,827, respectively, related to interest expense and $42,352 and $45,836, respectively, related to accruals of incentive fees. Without such expenses, our ratio of net expenses to average net assets would have been 2.62% and 2.73% for the nine months ended September 30, 2017 and 2016, respectively. Incentive fees and interest expense, among other things, may increase or decrease our expense ratios relative to comparative periods depending on portfolio performance, and changes in benchmark interest rates such as LIBOR among other factors.
Net Investment Income
Our net investment income totaled $194,842 ($0.60 per share) and $188,556 ($0.58 per share) for the nine months ended September 30, 2017 and 2016, respectively. The increase in net investment income can be attributed to an increase in fee income during the nine months ended September 30, 2017.
Net Realized Gains or Losses
We sold investments and received principal repayments of  $437,734 and $971,922, respectively, during the nine months ended September 30, 2017, from which we realized a net loss of  $49,199. We sold investments and received principal repayments of  $511,389 and $592,768, respectively, during the nine months ended September 30, 2016, from which we realized a net loss of  $87,300. We also realized a net gain of  $439 and a net loss of  $2, respectively, from settlements on foreign currency during the nine months ended September 30, 2017 and 2016.
Net Change in Unrealized Appreciation (Depreciation) on Investments and Secured Borrowing and Unrealized Gain (Loss) on Foreign Currency
For the nine months ended September 30, 2017, the net change in unrealized appreciation (depreciation) on investments totaled $56,730, the net change in unrealized appreciation (depreciation) on the secured borrowing was $(26) and the net change in unrealized gain (loss) on foreign currency was
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$(370). For the nine months ended September 30, 2016, the net change in unrealized appreciation (depreciation) on investments totaled $222,436 and the net change in unrealized gain (loss) on the secured borrowing was $(94). The net change in unrealized appreciation (depreciation) on our investments during the nine months ended September 30, 2017 was primarily driven by the conversion of unrealized depreciation to realized losses, offset by the reduced valuations in certain investments.
Net Increase (Decrease) in Net Assets Resulting from Operations
For the nine months ended September 30, 2017 and 2016, the net increase (decrease) in net assets resulting from operations was $202,416 ($0.62 per share) and $323,596 ($1.00 per share), respectively.
Financial Condition, Liquidity and Capital Resources
Overview
As of September 30, 2017, we had $529,817 in cash and foreign currency, which we and our wholly-owned financing subsidiaries held in custodial accounts, and $138,653 in borrowings available under our financing arrangements, subject to borrowing base and other limitations. As of September 30, 2017, we also had broadly syndicated investments and opportunistic investments that could be sold to create additional liquidity. As of September 30, 2017, we had twenty-three senior secured loan investments with aggregate unfunded commitments of  $255,899, one subordinated debt investment with an unfunded commitment of  $20,000, one unfunded commitment to purchase up to $295 in shares of preferred stock and one unfunded commitment to purchase up to $16 in shares of common stock. We maintain sufficient cash on hand, available borrowings and liquid securities to fund such unfunded commitments should the need arise.
We currently generate cash primarily from cash flows from fees, interest and dividends earned from our investments as well as from the issuance of shares under our distribution reinvestment plan, and principal repayments and proceeds from sales of our investments. To seek to enhance our returns, we also employ leverage as market conditions permit and at the discretion of FSIC II Advisor, but in no event will leverage employed exceed 50% of the value of our assets, as required by the 1940 Act. See “—Financing Arrangements.”
Prior to investing in securities of portfolio companies, we invest the cash received from fees, interest and dividends earned from our investments and from the issuance of shares under our distribution reinvestment plan, as well as principal repayments and proceeds from sales of our investments primarily in cash, cash equivalents, including money market funds, U.S. government securities, repurchase agreements and high-quality debt instruments maturing in one year or less from the time of investment, consistent with our BDC election and our election to be taxed as a RIC.
Financing Arrangements
The following table presents summary information with respect to our outstanding financing arrangements as of September 30, 2017:
Arrangement
​ ​
Type of Arrangement
​ ​
Rate
​ ​
Amount
Outstanding
​ ​
Amount
Available
​ ​
Maturity
Date
​
Green Creek Credit Facility(1)
 ​ ​
Term Loan Credit Facility
​ ​
L+2.50%
​ ​ ​ $ 500,000 ​ ​ ​ ​ $ — ​ ​ ​
December 15, 2019
​
Cooper River Credit Facility(1)
 ​ ​
Revolving Credit Facility
​ ​
L+2.25%
​ ​ ​ ​ 180,933 ​ ​ ​ ​ ​ 19,067 ​ ​ ​
May 29, 2020
​
Wissahickon Creek Credit Facility(1)
 ​ ​
Revolving Credit Facility
​ ​
L+1.50% to L+2.50%
​ ​ ​ ​ 240,146 ​ ​ ​ ​ ​ 9,854 ​ ​ ​
February 18, 2022
​
Darby Creek Credit Facility(1)
 ​ ​
Revolving Credit Facility
​ ​
L+2.50%
​ ​ ​ ​ 250,000 ​ ​ ​ ​ ​ — ​ ​ ​
August 19, 2020
​
Dunning Creek Credit Facility(1)
 ​ ​
Revolving Credit Facility
​ ​
L+1.80%
​ ​ ​ ​ 149,400 ​ ​ ​ ​ ​ 600 ​ ​ ​
May 14, 2018
​
Juniata River Credit Facility(1)
 ​ ​
Term Loan Credit Facility
​ ​
L+2.68%
​ ​ ​ ​ 850,000 ​ ​ ​ ​ ​ — ​ ​ ​
October 11, 2020
​
FSIC II Revolving Credit Facility(1)
 ​ ​
Revolving Credit Facility
​ ​
See Note(2)
 ​ ​ ​ ​ 10,868(3) ​ ​ ​ ​ ​ 109,132 ​ ​ ​
February 23, 2021
​
Total
​ ​ ​ ​ ​ ​ ​ ​ ​ $ 2,181,347 ​ ​ ​ ​ $ 138,653 ​ ​ ​
Partial Loan Sale
​ ​
Secured Borrowing
​ ​
L+4.50% (1.0% floor)
​ ​ ​ $ 8,214 ​ ​ ​ ​ $ — ​ ​ ​
July 29, 2022
 ​
​
(1)
The carrying amount outstanding under the facility approximates its fair value.
​
​
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​
(2)
Interest under the FSIC II revolving credit facility for (i) loans for which we elect the base rate option is payable at a rate equal to 0.75% per annum plus the greatest of  (a) the “U.S. Prime Rate” as published in The Wall Street Journal, (b) the federal funds effective rate for such day plus 0.5%, (c) the three-month LIBOR plus 1% per annum and (d) zero; and (ii) loans for which we elect the Eurocurrency option is payable at a rate equal to LIBOR plus 1.75% per annum.
​
(3)
Amount includes borrowing in U.S. dollars, Euros, and Canadian Dollars. Euro balance outstanding of  €7,015 has been converted to U.S. dollars at an exchange rate of  €1.00 to $1.18 as of September 30, 2017 to reflect total amount outstanding in U.S. dollars. Canadian dollar balance outstanding of CAD$3,229 has been converted to U.S. dollars at an exchange rate of CAD $1.00 to $0.80 as of September 30, 2017 to reflect total amount outstanding in U.S. dollars.
​
For additional information regarding our financing arrangements, see Note 8 to our unaudited consolidated financial statements included herein.
RIC Status and Distributions
We have elected to be subject to tax as a RIC under Subchapter M of the Code. In order to qualify for RIC tax treatment, we must, among other things, make distributions of an amount at least equal to 90% of our “investment company taxable income,” determined without regard to any deduction for distributions paid, each tax year. As long as the distributions are declared by the later of the fifteenth day of the ninth month following the close of a tax year or the due date of the tax return for such tax year, including extensions, distributions paid up to twelve months after the current tax year can be carried back to the prior tax year for determining the distributions paid in such tax year. We intend to make sufficient distributions to our stockholders to qualify for and maintain our RIC tax status each tax year. We are also subject to a 4% nondeductible federal excise taxes on certain undistributed income unless we make distributions in a timely manner to our stockholders generally of an amount at least equal to the sum of  (1) 98% of our net ordinary income (taking into account certain deferrals and elections) for the calendar year, (2) 98.2% of our capital gain net income, which is the excess of capital gains in excess of capital losses, or “capital gain net income” (adjusted for certain ordinary losses), for the one-year period ending October 31 of that calendar year and (3) any net ordinary income and capital gain net income for the preceding years that were not distributed during such years and on which we paid no U.S. federal income tax. Any distribution declared by us during October, November or December of any calendar year, payable to stockholders of record on a specified date in such a month and actually paid during January of the following calendar year, will be treated as if it had been paid by us, as well as received by our U.S. stockholders, on December 31 of the calendar year in which the distribution was declared. We can offer no assurance that we will achieve results that will permit us to pay any cash distributions. If we issue senior securities, we will be prohibited from making distributions if doing so causes us to fail to maintain the asset coverage ratios stipulated by the 1940 Act or if distributions are limited by the terms of any of our borrowings.
Subject to applicable legal restrictions and the sole discretion of our board of directors, we intend to declare regular cash distributions on a quarterly basis and pay such distributions on a monthly basis. We will calculate each stockholder’s specific distribution amount for the period using record and declaration dates and each stockholder’s distributions will begin to accrue on the date that shares of our common stock are issued to such stockholder. From time to time, we may also pay special interim distributions in the form of cash or shares of our common stock at the discretion of our board of directors. The timing and amount of any future distributions to stockholders are subject to applicable legal restrictions and the sole discretion of our board of directors.
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The following table reflects the cash distributions per share that we have declared and paid on our common stock during the nine months ended September 30, 2017 and 2016:
​ ​ ​
Distribution
​
For the Three Months Ended
​ ​
Per Share
​ ​
Amount
​
Fiscal 2016 ​ ​ ​
March 31, 2016
 ​ ​ ​ $ 0.1885 ​ ​ ​ ​ $ 60,744 ​ ​
June 30, 2016
 ​ ​ ​ ​ 0.1885 ​ ​ ​ ​ ​ 60,976 ​ ​
September 30, 2016
 ​ ​ ​ ​ 0.1885 ​ ​ ​ ​ ​ 61,155 ​ ​
Total
 ​ ​ ​ $ 0.5655 ​ ​ ​ ​ $ 182,875 ​ ​
Fiscal 2017 ​ ​ ​
March 31, 2017
 ​ ​ ​ $ 0.1885 ​ ​ ​ ​ $ 61,436 ​ ​
June 30, 2017
 ​ ​ ​ ​ 0.1885 ​ ​ ​ ​ ​ 61,505 ​ ​
September 30, 2017
 ​ ​ ​ ​ 0.1885 ​ ​ ​ ​ ​ 61,277 ​ ​
Total
 ​ ​ ​ $ 0.5655 ​ ​ ​ ​ $ 184,218 ​ ​
​
See Note 5 to our unaudited consolidated financial statements included herein for additional information regarding our distributions, including a reconciliation of our GAAP-basis net investment income to our tax-basis net investment income for the nine months ended September 30, 2017 and 2016.
Critical Accounting Policies
Our financial statements are prepared in conformity with GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Critical accounting policies are those that require the application of management’s most difficult, subjective or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that may change in subsequent periods. In preparing the financial statements, management has made estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. In preparing the financial statements, management has utilized available information, including our past history, industry standards and the current economic environment, among other factors, in forming its estimates and judgments, giving due consideration to materiality. Actual results may differ from these estimates. In addition, other companies may utilize different estimates, which may impact the comparability of our results of operations to those of companies in similar businesses. As we execute our operating plans, we will describe additional critical accounting policies in the notes to our future financial statements in addition to those discussed below.
Valuation of Portfolio Investments
We determine the net asset value of our investment portfolio each quarter. Securities are valued at fair value as determined in good faith by our board of directors. In connection with that determination, FSIC II Advisor provides our board of directors with portfolio company valuations which are based on relevant inputs, including, but not limited to, indicative dealer quotes, values of like securities, recent portfolio company financial statements and forecasts, and valuations prepared by independent third-party valuation services.
Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosure, or ASC Topic 820, issued by FASB, clarifies the definition of fair value and requires companies to expand their disclosure about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. ASC Topic 820 defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 also establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted
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prices in active markets; Level 2, which includes inputs such as quoted prices for similar securities in active markets and quoted prices for identical securities where there is little or no activity in the market; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.
With respect to investments for which market quotations are not readily available, we undertake a multi-step valuation process each quarter, as described below:
•
our quarterly fair valuation process begins with FSIC II Advisor’s management team reviewing and documenting valuations of each portfolio company or investment, which valuations may be obtained from an independent third-party valuation service, if applicable;
​
•
FSIC II Advisor’s management team then provides the valuation committee with the preliminary valuations for each portfolio company or investment;
​
•
preliminary valuations are then discussed with the valuation committee;
​
•
the valuation committee reviews the preliminary valuations and FSIC II Advisor’s management team, together with our independent third-party valuation services, if applicable, supplement the preliminary valuations to reflect any comments provided by the valuation committee;
​
•
following its review, the valuation committee will recommend that our board of directors approve our fair valuations; and
​
•
our board of directors discusses the valuations and determines the fair value of each such investment in our portfolio in good faith based on various statistical and other factors, including the input and recommendation of FSIC II Advisor, the valuation committee and any independent third-party valuation services, if applicable.
​
Determination of fair value involves subjective judgments and estimates. Accordingly, the notes to our consolidated financial statements refer to the uncertainty with respect to the possible effect of such valuations and any change in such valuations on our consolidated financial statements. In making its determination of fair value, our board of directors may use any approved independent third-party pricing or valuation services. However, our board of directors is not required to determine fair value in accordance with the valuation provided by any single source, and may use any relevant data, including information obtained from FSIC II Advisor or any approved independent third-party valuation or pricing service that our board of directors deems to be reliable in determining fair value under the circumstances. Below is a description of factors that FSIC II Advisor’s management team, any approved independent third party valuation services and our board of directors may consider when determining the fair value of our investments.
Valuation of fixed income investments, such as loans and debt securities, depends upon a number of factors, including prevailing interest rates for like securities, expected volatility in future interest rates, call features, put features and other relevant terms of the debt. For investments without readily available market prices, we may incorporate these factors into discounted cash flow models to arrive at fair value. Other factors that may be considered include the borrower’s ability to adequately service its debt, the fair market value of the borrower in relation to the face amount of its outstanding debt and the quality of collateral securing our debt investments.
For convertible debt securities, fair value generally approximates the fair value of the debt plus the fair value of an option to purchase the underlying security (i.e., the security into which the debt may convert) at the conversion price. To value such an option, a standard option pricing model may be used.
Our equity interests in portfolio companies for which there is no liquid public market are valued at fair value. Our board of directors, in its determination of fair value, may consider various factors, such as multiples of EBITDA, cash flows, net income, revenues or, in limited instances, book value or liquidation value. All of these factors may be subject to adjustments based upon the particular circumstances of a portfolio company or our actual investment position. For example, adjustments to EBITDA may take into account compensation to previous owners or acquisition, recapitalization, restructuring or other related items.
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FSIC II Advisor’s management team, any approved independent third-party valuation services and our board of directors may also consider private merger and acquisition statistics, public trading multiples discounted for illiquidity and other factors, valuations implied by third-party investments in the portfolio companies or industry practices in determining fair value. FSIC II Advisor’s management team, any approved independent third-party valuation services and our board of directors may also consider the size and scope of a portfolio company and its specific strengths and weaknesses, and may apply discounts or premiums, where and as appropriate, due to the higher (or lower) financial risk and/or the smaller size of portfolio companies relative to comparable firms, as well as such other factors as our board of directors, in consultation with FSIC II Advisor’s management team and any approved independent third party valuation services, if applicable, may consider relevant in assessing fair value. Generally, the value of our equity interests in public companies for which market quotations are readily available is based upon the most recent closing public market price. Portfolio securities that carry certain restrictions on sale are typically valued at a discount from the public market value of the security.
When we receive warrants or other equity securities at nominal or no additional cost in connection with an investment in a debt security, the cost basis in the investment will be allocated between the debt securities and any such warrants or other equity securities received at the time of origination. Our board of directors subsequently values these warrants or other equity securities received at their fair value.
The fair values of our investments are determined in good faith by our board of directors. Our board of directors is solely responsible for the valuation of our portfolio investments at fair value as determined in good faith pursuant to our valuation policy and consistently applied valuation process. Our board of directors has delegated day-to-day responsibility for implementing our valuation policy to FSIC II Advisor’s management team, and has authorized FSIC II Advisor’s management team to utilize independent third-party valuation and pricing services that have been approved by our board of directors. The valuation committee is responsible for overseeing FSIC II Advisor’s implementation of the valuation process.
See Note 7 to our unaudited consolidated financial statements included herein for additional information regarding the fair value of financial instruments.
Revenue Recognition
Security transactions are accounted for on the trade date. We record interest income on an accrual basis to the extent that we expect to collect such amounts. We record dividend income on the ex-dividend date. We do not accrue as a receivable interest or dividends on loans and securities if we have reason to doubt our ability to collect such income. Our policy is to place investments on non-accrual status when there is reasonable doubt that interest income will be collected. We consider many factors relevant to an investment when placing it on or removing it from non-accrual status including, but not limited to, the delinquency status of the investment, economic and business conditions, the overall financial condition of the underlying investment, the value of the underlying collateral, bankruptcy status, if any, and any other facts or circumstances relevant to the investment. If there is reasonable doubt that we will receive any previously accrued interest, then the interest income will be written-off. Payments received on non-accrual investments may be recognized as income or applied to principal depending upon the collectability of the remaining principal and interest. Non-accrual investments may be restored to accrual status when principal and interest become current and are likely to remain current based on our judgment.
Loan origination fees, original issue discount and market discount are capitalized and we amortize such amounts as interest income over the respective term of the loan or security. Upon the prepayment of a loan or security, any unamortized loan origination fees and original issue discount are recorded as interest income. Structuring and other non-recurring upfront fees are recorded as fee income when earned. We record prepayment premiums on loans and securities as fee income when we earn such amounts.
Net Realized Gains or Losses, Net Change in Unrealized Appreciation or Depreciation and Net Change in Unrealized Gains or Losses on Foreign Currency
Gains or losses on the sale of investments are calculated by using the specific identification method. We measure realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation
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previously recognized, but considering unamortized fees. Net change in unrealized appreciation or depreciation reflects the change in portfolio investment values during the reporting period, including any reversal of previously recorded unrealized gains or losses when gains or losses are realized. Net change in unrealized gains or losses on foreign currency reflects the change in the value of receivables or accruals during the reporting period due to the impact of foreign currency fluctuations.
We follow the guidance in ASC Topic 860 when accounting for loan participations and other partial loan sales. This guidance requires a participation or other partial loan sale to meet the definition of a participating interest, as defined in the guidance, in order for sale treatment to be allowed. Participations or other partial loan sales which do not meet the definition of a participating interest remain on our consolidated balance sheets and the proceeds are recorded as a secured borrowing until the participation or other partial loan sale meets the definition. Secured borrowings are carried at fair value to correspond with the related investments, which are carried at fair value.
Uncertainty in Income Taxes
We evaluate our tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax benefits or liabilities in our consolidated financial statements. Recognition of a tax benefit or liability with respect to an uncertain tax position is required only when the position is “more likely than not” to be sustained assuming examination by taxing authorities. We recognize interest and penalties, if any, related to unrecognized tax liabilities as income tax expense in our consolidated statements of operations. During the nine months ended September 30, 2017 and 2016, we did not incur any interest or penalties.
See Note 2 to our unaudited consolidated financial statements included herein for additional information regarding our significant accounting policies.
Contractual Obligations
We have entered into an agreement with FSIC II Advisor to provide us with investment advisory and administrative services. Payments for investment advisory services under the investment advisory and administrative services agreement are equal to (a) an annual base management fee of 2.0% of the average value of our gross assets and (b) an incentive fee based on our performance. FSIC II Advisor and, to the extent it is required to provide such services, GDFM, are reimbursed for administrative expenses incurred on our behalf. FSIC II Advisor agreed, effective March 5, 2015, to permanently waive 0.25% of the base management fee to which it is entitled under the investment advisory and administrative services agreement so that the fee received equals 1.75% of the average value of our gross assets. See Note 4 to our unaudited consolidated financial statements included herein and “—Related Party Transactions—Compensation of the Investment Adviser” for a discussion of this agreement.
A summary of our significant contractual payment obligations related to the repayment of our outstanding indebtedness at September 30, 2017 is as follows:
​ ​ ​
Payments Due By Period
​
​ ​ ​
Total
​ ​
Less than 1 year
​ ​
1–3 years
​ ​
3–5 years
​ ​
More than 5 years
​
Green Creek Credit Facility(1)
 ​ ​ ​ $ 500,000 ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 500,000 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Cooper River Credit Facility(2)
 ​ ​ ​ $ 180,933 ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 180,933 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Wissahickon Creek Credit Facility(3)
 ​ ​ ​ $ 240,146 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 240,146 ​ ​ ​ ​ ​ — ​ ​
Darby Creek Credit Facility(4)
 ​ ​ ​ $ 250,000 ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 250,000 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Dunning Creek Credit Facility(5)
 ​ ​ ​ $ 149,400 ​ ​ ​ ​ $ 149,400 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Juniata River Credit Facility(6)
 ​ ​ ​ $ 850,000 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 850,000 ​ ​ ​ ​ ​ — ​ ​
FSIC II Revolving Credit Facility(7)
 ​ ​ ​ $ 10,868 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 10,868 ​ ​ ​ ​ ​ — ​ ​
Partial Loan Sale(8)
 ​ ​ ​ $ 8,214 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 8,214 ​ ​ ​ ​ ​ — ​ ​
​
(1)
At September 30, 2017, no amounts remained unused under the Green Creek facility. Amounts outstanding under the Green Creek facility will mature, and all accrued and unpaid interest thereunder will be due and payable, on December 15, 2019.
​
​
73
​
(2)
At September 30, 2017, $19,067 remained unused under the Cooper River facility. Amounts outstanding under the Cooper River facility will mature, and all accrued and unpaid interest thereunder will be due and payable, on May 29, 2020.
​
(3)
At September 30, 2017, $9,854 remained unused under the Wissahickon Creek facility. Amounts outstanding under the Wissahickon Creek facility will mature, and all accrued and unpaid interest thereunder will be due and payable, on February 18, 2022.
​
(4)
At September 30, 2017, no amounts remained unused under the Darby Creek facility. Amounts outstanding under the Darby Creek facility will mature, and all accrued and unpaid interest thereunder will be due and payable, on August 19, 2020.
​
(5)
At September 30, 2017, $600 remained unused under the Dunning Creek facility. Amounts outstanding under the Dunning Creek facility will mature, and all accrued and unpaid interest thereunder will be due and payable, on May 14, 2018.
​
(6)
At September 30, 2017, no amounts remained unused under the Juniata River facility. Amounts outstanding under the Juniata River facility will mature, and all accrued and unpaid interest thereunder will be due and payable, on October 11, 2020.
​
(7)
At September 30, 2017, $109,132 amounts remained unused under the ING facility. Amounts outstanding under the ING facility will mature, and all accrued and unpaid interest thereunder will be due and payable, on February 23, 2021.
​
(8)
All amounts will mature, and all accrued and unpaid interest thereunder will be due and payable, on July 29, 2022.
​
Off-Balance Sheet Arrangements
We currently have no off-balance sheet arrangements, including any risk management of commodity pricing or other hedging practices.
Related Party Transactions
Compensation of the Investment Adviser
Pursuant to the investment advisory and administrative services agreement, FSIC II Advisor is entitled to an annual base management fee of 2.0% of the average value of our gross assets and an incentive fee based on our performance. The investment sub-advisory agreement provides that GDFM will receive 50% of all management and incentive fees payable to FSIC II Advisor under the investment advisory and administrative services agreement with respect to each year. Effective March 5, 2015, FSIC II Advisor agreed to permanently waive 0.25% of its base management fee to which it is entitled under the investment advisory and administrative services agreement, so that the fee received equals 1.75% of the average value of our gross assets. We also reimburse FSIC II Advisor and GDFM for expenses necessary to perform services related to our administration and operations, including FSIC II Advisor’s allocable portion of the compensation and related expenses of certain personnel of FS Investments providing administrative services to us on behalf of FSIC II Advisor.
See Note 4 to our unaudited consolidated financial statements included herein for additional information regarding our agreements with FSIC II Advisor, as well as our other related party transactions and relationships, including our potential conflicts of interest, our exemptive relief order from the SEC and our expense reimbursement agreement with FS Investments.
Item 3.
Quantitative and Qualitative Disclosures About Market Risk.
(in thousands)
​
We are subject to financial market risks, including changes in interest rates. As of September 30, 2017, 77.8% of our portfolio investments (based on fair value) paid variable interest rates, 14.2% paid fixed interest rates, 6.9% were non-income producing senior secured loans or equity/other investments and the remaining 1.1% were income producing equity/other investments. A rise in the general level of interest rates can be expected to lead to higher interest rates applicable to any variable rate investments we hold and to declines in the value of any fixed rate investments we hold. However, many of our variable rate investments provide for an interest rate floor, which may prevent our interest income from increasing until benchmark
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interest rates increase beyond a threshold amount. To the extent that a substantial portion of our investments may be in variable rate investments, an increase in interest rates beyond this threshold would make it easier for us to meet or exceed the hurdle rate applicable to the subordinated incentive fee on income under the investment advisory and administrative services agreement we have entered into with FSIC II Advisor, and may result in a substantial increase in our net investment income and to the amount of incentive fees payable to FSIC II Advisor with respect to our increased pre-incentive fee net investment income.
Pursuant to the terms of the Cooper River facility, Wissahickon Creek facility, Darby Creek facility, Dunning Creek facility, Juniata River facility, Green Creek facility, FSIC II Revolving credit facility and secured borrowing arrangement, borrowings are at a floating rate based on LIBOR. To the extent that any present or future credit facilities, total return swap agreements or other financing arrangements that we or any of our subsidiaries enter into are based on a floating interest rate, we will be subject to risks relating to changes in market interest rates. In periods of rising interest rates when we or our subsidiaries have such debt outstanding or financing arrangements in effect, our interest expense would increase, which could reduce our net investment income, especially to the extent we hold fixed rate investments.
The following table shows the effect over a twelve month period of changes in interest rates on our interest income, interest expense and net interest income, assuming no changes in the composition of our investment portfolio, including the accrual status of our investments, and our financing arrangements in effect as of September 30, 2017:
Basis Point Change in Interest Rates
​ ​
Increase
(Decrease)
in Interest
Income(1)
 ​ ​
Increase
(Decrease)
in Interest
Expense
​ ​
Increase
(Decrease) in
Net Interest
Income
​ ​
Percentage
Change in Net
Interest Income
​
Down 100 basis points
​ ​ ​ $ (11,858) ​ ​ ​ ​ $ (17,709) ​ ​ ​ ​ $ 5,851 ​ ​ ​ ​ ​ 1.7% ​ ​
No change
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Up 100 basis points
​ ​ ​ $ 34,200 ​ ​ ​ ​ $ 17,709 ​ ​ ​ ​ $ 16,491 ​ ​ ​ ​ ​ 4.7% ​ ​
Up 300 basis points
​ ​ ​ $ 104,788 ​ ​ ​ ​ $ 53,127 ​ ​ ​ ​ $ 51,662 ​ ​ ​ ​ ​ 14.8% ​ ​
Up 500 basis points
​ ​ ​ $ 176,939 ​ ​ ​ ​ $ 88,545 ​ ​ ​ ​ $ 88,395 ​ ​ ​ ​ ​ 25.4% ​ ​
​
(1)
Assumes no defaults or prepayments by portfolio companies over the next twelve months.
​
We expect that our long-term investments will be financed primarily with equity and debt. If deemed prudent, we may use interest rate risk management techniques in an effort to minimize our exposure to interest rate fluctuations. These techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act. Adverse developments resulting from changes in interest rates or hedging transactions could have a material adverse effect on our business, financial condition and results of operations. During the nine months ended September 30, 2017 and 2016, we did not engage in interest rate hedging activities.
In addition, we may have risk regarding portfolio valuation. See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Valuation of Portfolio Investments.”
Item 4.
Controls and Procedures.
​
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2017.
Based on the foregoing, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that we would meet our disclosure obligations.
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Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) promulgated under the Exchange Act) that occurred during the three-month period ended September 30, 2017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II—OTHER INFORMATION
Item 1.   Legal Proceedings.
We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us. From time to time, we may be party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. While the outcome of any legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material adverse effect upon our financial condition or results of operations.
Item 1A.   Risk Factors.
There have been no material changes from the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2016.
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds.
The table below provides information concerning our repurchases of shares of our common stock during the three months ended September 30, 2017, pursuant to our share repurchase program.
Period
​ ​
Total Number
of Shares
Purchased
​ ​
Average
Price Paid
per Share
​ ​
Total Number of
Shares
Purchased as
Part of Publicly
Announced Plans
or Programs
​ ​
Maximum Number of
Shares that May Yet
Be Purchased
Under the
Plans or Programs
​
July 1 to July 31, 2017
​ ​ ​ ​ 4,513,119 ​ ​ ​ ​ $ 9.10 ​ ​ ​ ​ ​ 4,513,119 ​ ​ ​ ​ ​ (1) ​ ​
August 1 to August 31, 2017
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
September 1 to September 30, 2017
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Total
​ ​ ​ ​ 4,513,119 ​ ​ ​ ​ $ 9.10 ​ ​ ​ ​ ​ 4,513,119 ​ ​ ​ ​ ​ (1) ​ ​
​
(1)
The maximum number of shares available for repurchase on July 3, 2017 was 4,928,558. A description of the calculation of the maximum number of shares of our common stock that may be repurchased under our share repurchase program is set forth in Note 3 to our unaudited consolidated financial statements included herein.
​
See Note 3 to our unaudited consolidated financial statements included herein for a more detailed discussion of the terms of our share repurchase program.
Item 3.   Defaults upon Senior Securities.
Not applicable.
Item 4.   Mine Safety Disclosures.
Not applicable.
Item 5.   Other Information.
Not applicable.
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Item 6.   Exhibits.
​ ​ 3.1 ​ ​ ​ Articles of Amendment and Restatement of the Company. (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on June 14, 2012.) ​
​ ​ 3.2 ​ ​ ​ Articles Supplementary of the Company. (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on June 1, 2017.) ​
​ ​ 3.3 ​ ​ ​ Articles Supplementary of the Company. (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on June 13, 2017.) ​
​ ​ 3.4 ​ ​ ​ Third Amended and Restated Bylaws of the Company. (Incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on June 13, 2017.) ​
​ ​ 4.1 ​ ​ ​ Amended and Restated Distribution Reinvestment Plan of the Company, effective as of March 26, 2014. (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on February 24, 2014.) ​
​ ​ 10.1 ​ ​ ​ Investment Advisory and Administrative Services Agreement, dated as of February 8, 2012, by and between the Company and FSIC II Advisor, LLC. (Incorporated by reference to Exhibit (g)(1) filed with Pre-Effective Amendment No. 3 to the Company’s registration statement on Form N-2 (File No. 333-175654) filed on February 10, 2012.) ​
​ ​ 10.2 ​ ​ ​ Investment Sub-Advisory Agreement, dated as of February 8, 2012, by and between FSIC II Advisor, LLC and GSO / Blackstone Debt Funds Management LLC. (Incorporated by reference to Exhibit (g)(2) filed with Pre-Effective Amendment No. 3 to the Company’s registration statement on Form N-2 (File No. 333-175654) filed on February 10, 2012.) ​
​ ​ 10.3 ​ ​ ​ Custodian Agreement, dated as of February 8, 2012, by and between the Company and State Street Bank and Trust Company. (Incorporated by reference to Exhibit (j) filed with Pre-Effective Amendment No. 3 to the Company’s registration statement on Form N-2 (File No. 333-175654) filed on February 10, 2012.) ​
​ ​ 10.4 ​ ​ ​ Amended and Restated Indenture, dated as of February 6, 2013, by and between Lehigh River LLC and Citibank, N.A., as trustee. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 7, 2013.) ​
​ ​ 10.5 ​ ​ ​ Lehigh River LLC Class A Floating Rate Secured Note, due 2023. (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on October 30, 2012.) ​
​ ​ 10.6 ​ ​ ​ Supplemental Indenture No. 1, dated as of April 23, 2013, by and between Lehigh River LLC and Citibank, N.A., as trustee. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 26, 2013.) ​
​ ​ 10.7 ​ ​ ​ Lehigh River LLC Class A Floating Rate Secured Note, due 2024. (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on February 7, 2013.) ​
​ ​ 10.8 ​ ​ ​ Lehigh River LLC Class A Floating Rate Secured Note, due 2024. (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on April 26, 2013.) ​
​ ​ 10.9 ​ ​ ​ TBMA/ISMA 2000 Amended and Restated Global Master Repurchase Agreement, by and between JPMorgan Chase Bank, N.A., London Branch, and Cobbs Creek LLC, together with the related Annex and Amended and Restated Confirmation thereto, each dated as of April 23, 2013. (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on April 26, 2013.) ​
​ ​ 10.10 ​ ​ ​ Amended and Restated Credit Agreement, dated as of May 29, 2015, by and among Cooper River LLC, as borrower, Citibank, N.A., as administrative agent, Citibank, N.A. acting through its Agency and Trust division, as collateral custodian and collateral agent, each of the lenders from time to time party thereto and Virtus Group, LP, as collateral administrator. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 4, 2015.) ​
​ ​ 10.11 ​ ​ ​ Amended and Restated Account Control Agreement, dated as of May 29, 2015, by and among Cooper River LLC, as pledgor, Citibank, N.A., as secured party, and Citibank, N.A., as securities intermediary. (Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on June 4, 2015.) ​
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​ ​ 10.12 ​ ​ ​ Security Agreement, dated as of March 27, 2013, by and between Cooper River LLC and Citibank, N.A. (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on March 28, 2013.) ​
​ ​ 10.13 ​ ​ ​ Agreement and Plan of Merger, dated as of March 27, 2013, by and among Cooper River LLC, Cooper River CBNA Loan Funding LLC and Citibank, N.A. (Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on March 28, 2013.) ​
​ ​ 10.14 ​ ​ ​ Amended and Restated Investment Management Agreement, dated as of May 29, 2015, by and between the Company, as investment manager, and Cooper River LLC. (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on June 4, 2015.) ​
​ ​ 10.15 ​ ​ ​ Loan and Servicing Agreement, dated as of February 19, 2014, by and among Wissahickon Creek LLC, as borrower, Wells Fargo Securities, LLC, as administrative agent, Wells Fargo Bank, National Association, as collateral agent, account bank and collateral custodian, and the other lenders and lender agents from time to time party thereto. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 25, 2014.) ​
​ ​ 10.16 ​ ​ ​ Purchase and Sale Agreement, dated as of February 19, 2014, by and between Wissahickon Creek LLC, as purchaser, and the Company, as seller. (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on February 25, 2014.) ​
​ ​ 10.17 ​ ​ ​ Collateral Management Agreement, dated as of February 19, 2014, by and between Wissahickon Creek LLC and the Company, as collateral manager. (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on February 25, 2014.) ​
​ ​ 10.18 ​ ​ ​ Securities Account Control Agreement, dated as of February 19, 2014, by and among Wissahickon Creek LLC, as pledgor, Wells Fargo Bank, National Association, as collateral agent, and Wells Fargo Bank, National Association, as securities intermediary. (Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on February 25, 2014.) ​
​ ​ 10.19 ​ ​ ​ Loan Financing and Servicing Agreement, dated as of February 20, 2014, by and among Darby Creek LLC, as borrower, Deutsche Bank AG, New York Branch, as administrative agent, Wells Fargo Bank, National Association, as collateral agent and collateral custodian, and the other lenders and lender agents from time to time party thereto. (Incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on February 25, 2014.) ​
​ ​ 10.20 ​ ​ ​ Amendment No. 1 to Loan Financing and Servicing Agreement, dated as of January 12, 2015, by and among Darby Creek LLC, as borrower, Deutsche Bank AG, New York Branch, as administrative agent, Wells Fargo Bank, National Association, as collateral agent and collateral custodian, and the other lenders and lender agents from time to time party thereto. (Incorporated by reference to Exhibit 10.27 to the Company’s Annual Report on Form 10-K filed on March 25, 2016.) ​
​ ​ 10.21 ​ ​ ​ Amendment No. 2 to Loan Financing and Servicing Agreement, dated as of February 3, 2015, by and among Darby Creek LLC, as borrower, Deutsche Bank AG, New York Branch, as administrative agent, Wells Fargo Bank, National Association, as collateral agent and collateral custodian, and the other lenders and lender agents from time to time party thereto. (Incorporated by reference to Exhibit 10.28 to the Company’s Annual Report on Form 10-K filed on March 25, 2016.) ​
​ ​ 10.22 ​ ​ ​ Amendment No. 3 to Loan Financing and Servicing Agreement, dated as of May 7, 2015, by and among Darby Creek LLC, as borrower, Deutsche Bank AG, New York Branch, as administrative agent, Wells Fargo Bank, National Association, as collateral agent and collateral custodian, and the other lenders and lender agents from time to time party thereto. (Incorporated by reference to Exhibit 10.29 to the Company’s Annual Report on Form 10-K filed on March 25, 2016.) ​
​ ​ 10.23 ​ ​ ​ Amendment No. 4 to Loan Financing and Servicing Agreement, dated as of October 8, 2015, by and among Darby Creek LLC, as borrower, Deutsche Bank AG, New York Branch, as administrative agent, Wells Fargo Bank, National Association, as collateral agent and collateral custodian, and the other lenders and lender agents from time to time party thereto. (Incorporated by reference to Exhibit 10.30 to the Company’s Annual Report on Form 10-K filed on March 25, 2016.) ​
79
​ ​ 10.24 ​ ​ ​ Amendment No. 6 to Loan Financing and Servicing Agreement, dated as of August 19, 2016, by and among Darby Creek LLC, as borrower, Deutsche Bank AG, New York Branch, as administrative agent, Wells Fargo Bank, National Association, as collateral agent and collateral custodian, and the other lenders and lender agents from time to time party thereto. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 22, 2016.) ​
​ ​ 10.25 ​ ​ ​ Sale and Contribution Agreement, dated as of February 20, 2014, by and between Darby Creek LLC, as purchaser, and the Company, as seller. (Incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on February 25, 2014.) ​
​ ​ 10.26 ​ ​ ​ Investment Management Agreement, dated as of February 20, 2014, by and between Darby Creek LLC and the Company, as investment manager. (Incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed on February 25, 2014.) ​
​ ​ 10.27 ​ ​ ​ Securities Account Control Agreement, dated as of February 20, 2014, by and among Darby Creek LLC, as pledgor, Wells Fargo Bank, National Association, as secured party, and Wells Fargo Bank, National Association, as securities intermediary. (Incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K filed on February 25, 2014.) ​
​ ​ 10.28 ​ ​ ​ Credit Agreement, dated as of May 14, 2014, by and among Dunning Creek LLC, as borrower, Deutsche Bank AG, New York Branch, as administrative agent and lender, and the other lenders from time to time party thereto. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 19, 2014.) ​
​ ​ 10.29 ​ ​ ​ First Amendment to Credit Agreement, dated as of June 4, 2014, by and between Dunning Creek LLC and Deutsche Bank AG, New York Branch, as administrative agent and lender. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 6, 2014.) ​
​ ​ 10.30 ​ ​ ​ Second Amendment to Credit Agreement, dated as of May 14, 2015, by and among Dunning Creek LLC, as borrower, Deutsche Bank AG, New York Branch, as administrative agent and lender, and the other lenders from time to time party thereto. (Incorporated by reference to Exhibit 10.36 to the Company’s Annual Report on Form 10-K filed on March 25, 2016.) ​
​ ​ 10.31 ​ ​ ​ Third Amendment to Credit Agreement, dated as of May 13, 2016, by and among Dunning Creek LLC, as borrower, Deutsche Bank AG, New York Branch, as administrative agent and lender, and the other lenders from time to time party thereto. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 18, 2016.) ​
​ ​ 10.32 ​ ​ ​ Fourth Amendment to Credit Agreement, dated as of May 12, 2017, by and between Dunning Creek LLC and Deutsche Bank AG, New York Branch, as administrative agent and lender. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 16, 2017.) ​
​ ​ 10.33 ​ ​ ​ Amended and Restated Sale and Contribution Agreement, dated as of May 29, 2015, by and between the Company, as seller, and Cooper River LLC, as purchaser. (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on June 4, 2015.) ​
​ ​ 10.34 ​ ​ ​ Custodial Agreement, dated as of May 14, 2014, by and among Dunning Creek LLC, as borrower, the Company, as manager, Deutsche Bank AG, New York Branch, as administrative agent, and Deutsche Bank Trust Company Americas, as custodian. (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on May 19, 2014.) ​
​ ​ 10.35 ​ ​ ​ Security Agreement, dated as of May 14, 2014, by and between Dunning Creek LLC, as borrower, and Deutsche Bank AG, New York Branch, as administrative agent. (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on May 19, 2014.) ​
​ ​ 10.36 ​ ​ ​ Sale and Contribution Agreement, dated as of May 14, 2014, by and between the Company, as seller, and Dunning Creek LLC, as purchaser. (Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on May 19, 2014.) ​
​ ​ 10.37 ​ ​ ​ Investment Management Agreement, dated as of May 14, 2014, by and between Dunning Creek LLC and the Company, as Investment Manager. (Incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on May 19, 2014.) ​
80
​ ​ 10.38 ​ ​ ​ Loan Agreement, dated as of November 14, 2014, by and among Juniata River LLC, as borrower, JPMorgan Chase Bank, National Association, as administrative agent and lender, Citibank, N.A., as collateral agent and Virtus Group, LP as collateral administrator. (Incorporated by reference to Exhibit 10.51 to the Company’s Annual Report on Form 10-K filed on March 18, 2015.) ​
​ ​ 10.39 ​ ​ ​ Amendment No. 1 to Loan Agreement, dated as of October 11, 2016, by and among Juniata River LLC, as borrower, JPMorgan Chase Bank, National Association, as administrative agent and lender, Citibank, N.A., as collateral agent and Virtus Group, LP as collateral administrator. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 13, 2016.) ​
​ ​ 10.40 ​ ​ ​ Sale and Contribution Agreement, dated as of November 14, 2014, between Juniata River LLC, as purchaser, and the Company, as seller. (Incorporated by reference to Exhibit 10.52 to the Company’s Annual Report on Form 10-K filed on March 18, 2015.) ​
​ ​ 10.41 ​ ​ ​ Investment Management Agreement, dated as of November 14, 2014, between Juniata River LLC and FS Investment Corporation, as investment manager. (Incorporated by reference to Exhibit 10.53 to the Company’s Annual Report on Form 10-K filed on March 18, 2015.) ​
​ ​ 10.42 ​ ​ ​ Collateral Administration Agreement, dated as of November 14, 2014, by and among Juniata River LLC, JPMorgan Chase Bank, National Association, as administrative agent, the Company, as investment manager and Virtus Group, LP, as collateral administrator. (Incorporated by reference to Exhibit 10.54 to the Company’s Annual Report on Form 10-K filed on March 18, 2015.) ​
​ ​ 10.43 ​ ​ ​ Indenture, dated as of December 15, 2014, by and between Green Creek LLC and Citibank, N.A., as trustee. (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on December 19, 2014.) ​
​ ​ 10.44 ​ ​ ​ Green Creek LLC Floating Rate Notes due 2026. (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on December 19, 2014.) ​
​ ​ 10.45 ​ ​ ​ September 1996 Version Master Repurchase Agreement between Goldman Sachs Bank USA and Schuylkill River LLC, together with the related Annex and Master Confirmation thereto, each dated as of December 15, 2014. (Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on December 19, 2014.) ​
​ ​ 10.46 ​ ​ ​ Senior Secured Revolving Credit Agreement, dated as of February 23, 2016, by and among the Company, ING Capital LLC, as administrative agent, and the lenders party thereto. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 26, 2016.) ​
​ ​ 10.47 ​ ​ ​ Amendment No. 1 to Senior Secured Revolving Credit Agreement, dated April 25, 2016, by and among the Company, ING Capital LLC, as administrative agent, and the lenders party thereto. (Incorporated by reference to Exhibit 10.53 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2016 filed on May 13, 2016.) ​
​ ​ 10.48 ​ ​ ​ Incremental Commitment and Assumption Agreement, dated April 26, 2016, by and among the Company, ING Capital LLC, as administrative agent, the lenders party thereto and the assuming lenders party thereto. (Incorporated by reference to Exhibit 10.54 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2016 filed on May 13, 2016.) ​
​ ​ 10.49 ​ ​ ​ Guarantee, Pledge and Security Agreement, dated as of February 23, 2016, by and among the Company, ING Capital LLC, as revolving administrative agent and collateral agent, the subsidiary guarantors party thereto and each financing agent and designated indebtedness holder party thereto. (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on February 26, 2016.) ​
​ ​ 10.50 ​ ​ ​ Control Agreement, dated as of February 23, 2016, by and among the Company, ING Capital LLC, as collateral agent, and State Street Bank and Trust Company. (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on February 26, 2016.) ​
​ ​ 10.51 ​ ​ ​ Credit Agreement, dated as of May 15, 2017, among Green Creek LLC, Goldman Sachs Bank USA, as lender, sole lead arranger and administrative agent, Citibank, N.A., as collateral agent, and Virtus Group, LP, as collateral administrator. (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on May 16, 2017.) ​
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this quarterly report to be signed on its behalf by the undersigned, thereunto duly authorized on November 13, 2017.
​ ​ ​ ​ FS INVESTMENT CORPORATION II ​
​ ​ ​ ​
By:
​ ​
/s/ Michael C. Forman
​
Michael C. Forman
Chief Executive Officer
(Principal Executive Officer)
 ​
​ ​ ​ ​
By:
​ ​
/s/ William Goebel
​
William Goebel
Chief Financial Officer
(Principal Financial and Accounting Officer)
 ​
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FS KKR Capital Corp. II Reports