PHILADELPHIA, Aug. 10, 2020 /PRNewswire/ -- FS KKR Capital
Corp. (NYSE: FSK), a leading publicly traded business development
company focused on providing customized credit solutions to private
middle market U.S. companies, announced its financial and operating
results for the quarter ended June 30,
2020, and that its board of directors has declared a third
quarter 2020 distribution totaling $0.60 per share. Effective June 15, 2020, FSK completed a 4 to 1 reverse
split of its shares of common stock, or the Reverse Stock
Split.
Financial and Operating Highlights for the Quarter Ended
June 30, 2020(1)
- Net investment income of $0.62
per share, compared to $0.77 per
share for the quarter ended June 30,
2019
- Total net realized and unrealized loss of $1.08 per share, compared to a total net realized
and unrealized gain of $0.00 per
share for the quarter ended June 30,
2019
- Paid cash distributions to stockholders totaling
$0.60 per
share(2)
- Total purchases of $253
million versus $470 million of
sales and repayments, including $126
million of sales to its joint venture Strategic Credit
Opportunities Partners, LLC, or SCJV
- Net asset value of $23.37 per
share, compared to $24.36 per share
as of March 31, 2020
Commenting on the quarter, CEO and Chairman, Michael C. Forman, stated, "During the second
quarter our investment team continued working closely with our
portfolio company management teams and financial sponsors to
provide support during the COVID-19 pandemic. We ended the
quarter optimistic about the continuing transition of our
investment portfolio and during the quarter our net investment
income of $0.62 per share fully
covered our $0.60 per share dividend.
As we look to the second half the year, we see a still subdued
new investment environment as financial sponsors are being cautious
with regard to M&A activity. That said, based on our
deep relationships and strong platform, we believe we are
well positioned to capture more than our fair share of new
investments once sponsors begin to be more active over the
coming quarters."
Declaration of Distribution for Third Quarter 2020
FSK's board of directors has declared a cash distribution for
the third quarter of $0.60 per share,
which will be paid on or about October 1,
2020 to stockholders of record as of the close of business
on September 16, 2020.
Summary Consolidated Results
|
|
Three Months
Ended
|
(dollars in millions,
except per share data)
(all per share amounts are basic and
diluted)(1)
|
June 30,
2020
|
March 31,
2020
|
June 30,
2019
|
Total investment
income
|
$150
|
$179
|
$199
|
Net investment
income
|
77
|
98
|
101
|
Net increase
(decrease) in net assets resulting from operations
|
(55)
|
(703)
|
101
|
|
|
|
|
Net investment income
per share
|
$0.62
|
$0.78
|
$0.77
|
Total net realized
and unrealized gain (loss) per share
|
$(1.08)
|
$(6.37)
|
$0.00
|
Net increase
(decrease) in net assets resulting from operations
(Earnings per Share)
|
$(0.44)
|
$(5.59)
|
$0.77
|
Stockholder
distributions per share(2)
|
$0.60
|
$0.76
|
$0.76
|
Net asset value per
share at period end
|
$23.37
|
$24.36
|
$31.51
|
Weighted average
shares outstanding
|
123,806,337
|
125,855,913
|
130,549,922
|
Shares outstanding,
end of period
|
123,755,965
|
124,346,358
|
130,067,229
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollar amounts in
millions)
|
|
|
|
As
of June 30,
2020
|
As
of December 31,
2019
|
Total fair value of
investments
|
|
$6,624
|
$7,357
|
Total
assets
|
|
6,956
|
8,216
|
Total stockholders'
equity
|
|
2,891
|
3,866
|
Portfolio Highlights as of June 30,
2020
- Total fair value of investments was $6.6
billion of which 67% was invested in senior secured
securities.
- Direct originations(3) represented approximately 90%
of the portfolio by fair value as of June
30, 2020.
- Weighted average annual yield on accruing debt
investments(4) was 8.7%, compared to 9.0% as of
March 31, 2020.
- Weighted average annual yield on all debt
investments(4) was 7.4%, compared to 7.9% as of
March 31, 2020.
- Exposure to the top ten largest portfolio companies by fair
value was 22% as of June 30, 2020,
compared to 22% as of March 31,
2020.
Total Portfolio Activity
|
Three Months
Ended
|
|
|
(dollar amounts in
millions)
|
June 30,
2020
|
March 31,
2020
|
June 30,
2019
|
|
Purchases
|
$253
|
$1,296
|
$513
|
|
Sales and
redemptions
|
(470)
|
(914)
|
(692)
|
|
Net portfolio
activity
|
$(217)
|
$382
|
$(179)
|
|
Sales to
SCJV
|
126
|
102
|
—
|
|
Adjusted net
portfolio activity
|
$(91)
|
$484
|
$(179)
|
|
|
|
Portfolio
Data
|
As of June
30, 2020
|
As of
December 31, 2019
|
|
Total fair value of
investments
|
$6,624
|
$7,357
|
|
Number of Portfolio
Companies
|
173
|
210
|
|
% of Investments on
Non-Accrual
(based on fair
value)(5)
|
3.8%
|
2.8%
|
|
|
|
|
Asset Class
(based on fair value)
|
|
|
Senior Secured Loans
— First Lien
|
52.3%
|
50.6%
|
|
Senior Secured Loans
— Second Lien
|
12.8%
|
16.3%
|
|
Other Senior Secured
Debt
|
2.0%
|
3.2%
|
|
Subordinated
Debt
|
3.8%
|
5.6%
|
|
Asset Based
Finance
|
13.4%
|
10.0%
|
|
Strategic Credit
Opportunities Partners, LLC
|
9.2%
|
6.5%
|
|
Equity/Other
|
6.5%
|
7.8%
|
|
|
|
|
|
Interest Rate
Type (based on fair value)
|
|
|
|
% Variable Rate Debt
Investments
|
64.2%
|
64.8%
|
|
% Fixed Rate Debt
Investments
|
10.6%
|
14.6%
|
|
% Other Income
Producing Investments
|
15.6%
|
11.2%
|
|
% Non-Income
Producing Investments(6)
|
5.8%
|
6.6%
|
|
% of Investments on
Non-Accrual(5)
|
3.8%
|
2.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct Originations
Direct
Originations Portfolio Data
|
As of June 30,
2020
|
As of December 31,
2019
|
Total Fair Value of
Direct Originations(3)
|
$5,987
|
$6,492
|
|
|
|
|
|
Leverage and Liquidity as of June 30, 2020
- Net debt to equity ratio(7) of 129%, based on
$3.9 billion in total debt
outstanding, $95 million of cash and
foreign currency and $116 million of
net receivable for investments sold and repaid and stockholders'
equity of $2.9 billion. FSK's
weighted average effective interest rate (including the effect of
non-usage fees) was 3.86%.
- Cash and foreign currency of $95
million and availability under its financing arrangements of
$1,154 million, subject to borrowing
base and other limitations.
Conference Call
Information
FSK will host a conference call at 8:00
a.m. (Eastern Time) on Tuesday, August 11, 2020, to discuss
its second quarter 2020 financial and operating results. All
interested parties are welcome to participate. Interested parties
can access the conference call by dialing (833) 818-6808 and using
the conference ID 9676157 approximately 10 minutes prior to the
call. The conference call also will be webcast, which can be
accessed from the Investor Relations section of FSK's website at
www.fskkradvisor.com/fsk under Events + presentations.
A replay of the call will be available shortly after the end of
the call for a period of 30 days following the call by visiting the
Investor Relations section of FSK's website at
www.fskkradvisor.com/fsk under Events +
presentations.
Supplemental Information
An investor presentation containing financial and operating
information will be made available prior to the call in the
Investor Relations section of FSK's website at
www.fskkradvisor.com/fsk under Events + presentations.
About FS KKR Capital Corp.
FS KKR Capital Corp. (NYSE: FSK) is a leading publicly traded
business development company (BDC) focused on providing customized
credit solutions to private middle market U.S. companies. FSK seeks
to invest primarily in the senior secured debt and, to a lesser
extent, the subordinated debt of private middle market companies.
FSK is advised by FS/KKR Advisor, LLC. For more information,
please visit www.fskkradvisor.com/fsk.
About FS/KKR Advisor, LLC
FS/KKR Advisor, LLC (FS/KKR) is a partnership between FS
Investments and KKR Credit that serves as the investment adviser to
BDCs with approximately $15 billion
in assets under management as of June 30,
2020. The BDCs managed by FS/KKR are FSK and FS KKR Capital
Corp. II. (NYSE: FSKR).
FS Investments is a leading asset manager dedicated to helping
individuals, financial professionals and institutions design better
portfolios. The firm provides access to alternative sources of
income and growth, and focuses on setting industry standards for
investor protection, education and transparency. FS Investments is
headquartered in Philadelphia, PA
with offices in New York, NY,
Orlando, FL, Washington, DC
and Leawood KS. Visit
www.fsinvestments.com to learn more.
KKR Credit is a subsidiary of KKR & Co. Inc., a leading
global investment firm that manages multiple alternative asset
classes, including private equity, energy, infrastructure, real
estate and credit, with strategic manager partnerships that manage
hedge funds. KKR aims to generate attractive investment returns for
its fund investors by following a patient and disciplined
investment approach, employing world-class people, and driving
growth and value creation with KKR portfolio companies. KKR invests
its own capital alongside the capital it manages for fund investors
and provides financing solutions and investment opportunities
through its capital markets business. References to KKR's
investments may include the activities of its sponsored funds. For
additional information about KKR & Co. Inc. (NYSE: KKR), please
visit KKR's website at www.kkr.com and on Twitter @KKR_Co.
Forward-Looking Statements and Important Disclosure
Notice
This announcement may contain certain forward-looking
statements, including statements with regard to future events or
the future performance or operations of FSK. Words such as
"believes," "expects," "projects," and "future" or similar
expressions are intended to identify forward-looking statements.
These forward-looking statements are subject to the inherent
uncertainties in predicting future results and conditions. Certain
factors could cause actual results to differ materially from those
projected in these forward-looking statements. Factors that could
cause actual results to differ materially include changes in the
economy, risks associated with possible disruption in FSK's
operations or the economy generally due to terrorism, natural
disasters or pandemics such as COVID-19, future changes in laws or
regulations and conditions in FSK's operating area, and the price
at which shares of FSK's common stock trade on the New York Stock
Exchange. Some of these factors are enumerated in the filings FSK
makes with the SEC. FSK undertakes no obligation to update or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
The press release above contains summaries of certain financial
and statistical information about FSK. The information contained in
this press release is summary information that is intended to be
considered in the context of FSK's SEC filings and other public
announcements that FSK may make, by press release or otherwise,
from time to time. FSK undertakes no duty or obligation to update
or revise the information contained in this press release. In
addition, information related to past performance, while helpful as
an evaluative tool, is not necessarily indicative of future
results, the achievement of which cannot be assured. Investors
should not view the past performance of FSK, or information about
the market, as indicative of FSK's future results.
Other Information
The information in this press release is summary information
only and should be read in conjunction with FSK's quarterly report
on Form 10-Q for the quarter ended June 30,
2020, which FSK filed with the U.S. Securities and Exchange
Commission (the SEC) on August 10,
2020, as well as FSK's other reports filed with the SEC. A
copy of FSK's quarterly report on Form 10-Q for the quarter ended
June 30, 2020 and FSK's other reports
filed with the SEC can be found on FSK's website at
www.fskkradvisor.com/fsk and the SEC's website at
www.sec.gov.
Certain Information About Distributions
The determination of the tax attributes of FSK's distributions
is made annually as of the end of its fiscal year based upon its
taxable income and distributions paid, in each case, for the full
year. Therefore, a determination as to the tax attributes of the
distributions made on a quarterly basis may not be representative
of the actual tax attributes for a full year. FSK intends to update
stockholders quarterly with an estimated percentage of its
distributions that resulted from taxable ordinary income. The
actual tax characteristics of distributions to stockholders will be
reported to stockholders annually on Form 1099-DIV.
The timing and amount of any future distributions on FSK's
shares of common stock are subject to applicable legal restrictions
and the sole discretion of its board of directors. There can be no
assurance as to the amount or timing of any such future
distributions.
FSK may fund its cash distributions to stockholders from any
sources of funds legally available to it, including net investment
income from operations, capital gains proceeds from the sale of
assets, non-capital gains proceeds from the sale of assets,
dividends or other distributions paid to it on account of preferred
and common equity investments in portfolio companies, proceeds from
the sale of shares of FSK's common stock, and borrowings. FSK has
not established limits on the amount of funds it may use from
available sources to make distributions. There can be no assurance
that FSK will be able to pay distributions at a specific rate or at
all.
Contact Information:
Investor Relations Contact
Robert Paun
Robert.Paun@fsinvestments.com
FS Investments Media Team
Melanie Hemmert
media@fsinvestments.com
Income Statement
($ amounts in millions, except per share
data)
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
|
June
30,
|
|
June
30,
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Investment
income
|
|
|
|
|
|
|
|
|
Interest
income
|
|
$
|
109
|
|
|
$
|
145
|
|
|
$
|
234
|
|
|
$
|
298
|
|
Paid-in-kind interest
income
|
|
9
|
|
|
8
|
|
|
20
|
|
|
16
|
|
Fee income
|
|
6
|
|
|
8
|
|
|
18
|
|
|
19
|
|
Dividend and other
income
|
|
1
|
|
|
3
|
|
|
3
|
|
|
4
|
|
From
non-controlled/affiliated investments:
|
|
|
|
|
|
|
|
|
Interest
income
|
|
2
|
|
|
9
|
|
|
5
|
|
|
11
|
|
Paid-in-kind interest
income
|
|
4
|
|
|
4
|
|
|
9
|
|
|
8
|
|
Fee income
|
|
—
|
|
|
—
|
|
|
0
|
|
|
—
|
|
From
controlled/affiliated investments:
|
|
|
|
|
|
|
|
|
Interest
income
|
|
1
|
|
|
2
|
|
|
4
|
|
|
5
|
|
Paid-in-kind interest
income
|
|
2
|
|
|
—
|
|
|
2
|
|
|
4
|
|
Dividend and other
income
|
|
16
|
|
|
20
|
|
|
34
|
|
|
29
|
|
Total investment
income
|
|
150
|
|
|
199
|
|
|
329
|
|
|
394
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
Management
fees
|
|
26
|
|
|
28
|
|
|
56
|
|
|
57
|
|
Subordinated income
incentive fees
|
|
—
|
|
|
25
|
|
|
—
|
|
|
49
|
|
Administrative
services expenses
|
|
3
|
|
|
2
|
|
|
5
|
|
|
3
|
|
Accounting and
administrative fees
|
|
0
|
|
|
1
|
|
|
1
|
|
|
1
|
|
Interest
expense
|
|
42
|
|
|
41
|
|
|
88
|
|
|
84
|
|
Other general and
administrative expenses
|
|
2
|
|
|
1
|
|
|
4
|
|
|
4
|
|
Total operating
expenses
|
|
73
|
|
|
98
|
|
|
154
|
|
|
198
|
|
Net investment
income
|
|
77
|
|
|
101
|
|
|
175
|
|
|
196
|
|
|
|
|
|
|
|
|
|
|
Realized and
unrealized gain/loss
|
|
|
|
|
|
|
|
|
Net realized gain
(loss) on investments:
|
|
|
|
|
|
|
|
|
Non-controlled/unaffiliated investments
|
|
(48)
|
|
|
(51)
|
|
|
(140)
|
|
|
(66)
|
|
Non-controlled/affiliated investments
|
|
(5)
|
|
|
(8)
|
|
|
(39)
|
|
|
(8)
|
|
Controlled/affiliated
investments
|
|
(17)
|
|
|
—
|
|
|
(17)
|
|
|
(3)
|
|
Net realized gain
(loss) on swap contracts
|
|
—
|
|
|
(11)
|
|
|
—
|
|
|
(10)
|
|
Net realized gain
(loss) on foreign currency forward contracts
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
Net realized gain
(loss) on foreign currency
|
|
1
|
|
|
3
|
|
|
(3)
|
|
|
1
|
|
Net change in
unrealized appreciation (depreciation) on investments:
|
|
|
|
|
|
|
|
|
Non-controlled/unaffiliated investments
|
|
(8)
|
|
|
49
|
|
|
(375)
|
|
|
19
|
|
Non-controlled/affiliated investments
|
|
(28)
|
|
|
24
|
|
|
(165)
|
|
|
77
|
|
Controlled/affiliated
investments
|
|
(21)
|
|
|
(12)
|
|
|
(212)
|
|
|
(19)
|
|
Net change in
unrealized appreciation (depreciation) on swap contracts
|
|
—
|
|
|
10
|
|
|
—
|
|
|
14
|
|
Net change in
unrealized appreciation (depreciation) on foreign currency forward
contracts
|
|
—
|
|
|
(2)
|
|
|
2
|
|
|
(1)
|
|
Net change in
unrealized gain (loss) on foreign currency
|
|
(6)
|
|
|
(2)
|
|
|
16
|
|
|
(2)
|
|
Total net realized and
unrealized gain (loss)
|
|
$
|
(132)
|
|
|
$
|
—
|
|
|
$
|
(933)
|
|
|
$
|
6
|
|
Net increase
(decrease) in net assets resulting from operations
|
|
$
|
(55)
|
|
|
$
|
101
|
|
|
$
|
(758)
|
|
|
$
|
202
|
|
|
|
|
|
|
|
|
|
|
Per share
information—basic and diluted
|
|
|
|
|
|
|
|
|
Net increase
(decrease) in net assets resulting from operations (Earnings per
Share)(1)
|
|
$
|
(0.44)
|
|
|
$
|
0.77
|
|
|
$
|
(6.07)
|
|
|
$
|
1.54
|
|
Weighted average
shares outstanding(1)
|
|
123,806,337
|
|
|
130,549,922
|
|
|
124,831,125
|
|
|
131,209,687
|
|
Balance Sheet
($ amounts in millions, except per share
data)
|
|
June 30,
2020
|
|
|
|
|
(Unaudited)
|
|
December 31,
2019
|
Assets
|
|
|
|
|
Investments, at fair
value
|
|
|
|
|
Non-controlled/unaffiliated investments (amortized
cost—$5,785 and $6,006, respectively)
|
|
$
|
5,065
|
|
|
$
|
5,661
|
|
Non-controlled/affiliated investments (amortized
cost—$618 and $686, respectively)
|
|
484
|
|
|
717
|
|
Controlled/affiliated
investments (amortized cost—$1,425 and $1,117,
respectively)
|
|
1,075
|
|
|
979
|
|
Total investments, at
fair value (amortized cost—$7,828 and $7,809,
respectively)
|
|
6,624
|
|
|
7,357
|
|
Cash
|
|
87
|
|
|
93
|
|
Foreign currency, at
fair value (cost—$8 and $13, respectively)
|
|
8
|
|
|
13
|
|
Receivable for
investments sold and repaid
|
|
137
|
|
|
657
|
|
Income
receivable
|
|
78
|
|
|
82
|
|
Unrealized
appreciation on foreign currency forward contracts
|
|
3
|
|
|
1
|
|
Deferred financing
costs
|
|
13
|
|
|
10
|
|
Prepaid expenses and
other assets
|
|
6
|
|
|
3
|
|
Total
assets
|
|
$
|
6,956
|
|
|
$
|
8,216
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Payable for
investments purchased
|
|
$
|
21
|
|
|
$
|
15
|
|
Debt (net of deferred
financing costs of $14 and $9, respectively)
|
|
3,903
|
|
|
4,173
|
|
Unrealized
depreciation on foreign currency forward contracts
|
|
—
|
|
|
0
|
|
Stockholder
distributions payable
|
|
75
|
|
|
96
|
|
Management fees
payable
|
|
26
|
|
|
30
|
|
Subordinated income
incentive fees payable
|
|
—
|
|
|
—
|
|
Administrative
services expense payable
|
|
3
|
|
|
3
|
|
Interest
payable
|
|
34
|
|
|
23
|
|
Other accrued
expenses and liabilities
|
|
3
|
|
|
10
|
|
Total
liabilities
|
|
4,065
|
|
|
4,350
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
|
|
Preferred stock,
$0.001 par value, 50,000,000 shares authorized, none issued and
outstanding
|
|
—
|
|
|
—
|
|
Common stock, $0.001
par value, 750,000,000 shares authorized, 123,755,965 and
126,581,766 shares issued and outstanding, respectively
|
|
—
|
|
|
1
|
|
Capital in excess of
par value
|
|
3,995
|
|
|
4,041
|
|
Retained earnings
(accumulated deficit)
|
|
(1,104)
|
|
|
(176)
|
|
Total
stockholders' equity
|
|
2,891
|
|
|
3,866
|
|
Total
liabilities and stockholders' equity
|
|
$
|
6,956
|
|
|
$
|
8,216
|
|
Net asset value per
share of common stock at period end(1)
|
|
$
|
23.37
|
|
|
$
|
30.54
|
|
1)
|
Per share data was
derived by using the weighted average shares of FSK's common stock
outstanding during the applicable period. Per share numbers may not
sum due to rounding. Share and per share amounts have been adjusted
to reflect the Reverse Stock Split on a retroactive
basis.
|
2)
|
The per share data
for distributions reflects the amount of distributions paid per
share of our common stock to stockholders of record during each
applicable period. The amount of each per share distribution has
been retroactively adjusted to reflect the Reverse Stock
Split.
|
3)
|
See FSK's quarterly
report on Form 10-Q for the three months ended June 30, 2020 for a
description of FSK's investment strategies, including its
definition of "direct originations."
|
4)
|
See FSK's quarterly
report on Form 10-Q for the three months ended June 30, 2020 for
important information, including information related to the
calculation and definition of weighted average annual yield on
accruing debt investments, weighted average annual yield on all
debt investments, variable rate debt investments, fixed rate debt
investments, other income producing investments and non-income
producing investments.
|
5)
|
Interest income is
recorded on an accrual basis. See FSK's quarterly report on Form
10-Q for the three months ended June 30, 2020 for a description of
FSK's revenue recognition policy.
|
6)
|
Does not include
investments on non-accrual status.
|
7)
|
Net debt to equity
ratio is debt outstanding, net of cash and foreign currency and net
payable/receivable for investments purchased/sold and repaid,
divided by net assets.
|
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SOURCE FS KKR Capital Corp.