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Item
1.01.
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Entry
into a Material Definitive Agreement
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Amended
and Restated CLO Indenture and CLO Reset Transaction
On
June 25, 2019, FS KKR MM CLO 1 LLC, or the Issuer, a Delaware limited liability company and a wholly-owned and consolidated special-purpose
financing subsidiary of FS KKR Capital Corp., or the Company, completed a $378,700,000 term debt securitization, or the Original
CLO Transaction. On December 22, 2020, the notes offered by the Issuer in the Original CLO Transaction were refinanced, or the
CLO Reset Transaction, pursuant to an Amended and Restated Indenture, dated December 22, 2020, by and between the Issuer and US
Bank National Association, as trustee.
The
CLO Reset Transaction was executed through a private placement of $383,700,000 of senior secured notes of the Issuer consisting
of: (i) $281,400,000 of Class A-1R Senior Secured Floating Rate Notes, which bear interest at three-month LIBOR plus 1.85% per
annum; (ii) $20,500,000 of Class A-2R Senior Secured Floating Rate Notes, which bear interest at three-month LIBOR plus 2.25%
per annum; (iii) $32,421,000 of Class B-1R Senior Secured Floating Rate Notes, which bear interest at three-month LIBOR plus 2.60%
per annum; (iv) $17,379,000 of Class B-2R Senior Secured Fixed Rate Notes, which bear interest at 3.011% per annum and (v) $32,000,000
of Class C-R Secured Deferrable Floating Rate Notes, or the Class C Notes, which bear interest at three-month LIBOR plus 3.10%
per annum, or collectively, the CLO Reset Notes. The Company holds 100% of the Class C Notes and has held membership interests
in the Issuer, or the Membership Interests, since the Issuer’s formation on January 28, 2019. The Membership Interests do
not bear interest and had a nominal value of approximately $128,800,000 at closing of the CLO Reset Transaction. The CLO Reset
Notes are scheduled to mature on January 15, 2031.
The
CLO Reset Notes are the secured obligations of the Issuer, and the Amended and Restated Indenture governing the CLO Reset Notes
includes customary covenants and events of default. The CLO Reset Notes have not been, and will not be, registered under the Securities
Act of 1933, as amended, or any state securities or “blue sky” laws and may not be offered or sold in the United States
absent registration with the Securities and Exchange Commission or an applicable exemption from registration.
The
Company will continue to serve as portfolio manager to the Issuer pursuant to an Amended and Restated Portfolio Management Agreement
between the Company and the Issuer, or the Portfolio Management Agreement. For so long as the Company serves as portfolio manager,
the Company will elect to irrevocably waive any base management fee or subordinated interest to which it may be entitled under
the Portfolio Management Agreement. The obligations of the Issuer under the CLO Reset Transaction are non-recourse to the Company.
The
description of the Amended and Restated Indenture contained in this Current Report on Form 8-K does not purport to complete and
is qualified in its entirety by reference to the full text of the Amended and Restated Indenture attached hereto as Exhibit 10.1.
Second
Amendment and Restatement of the Senior Secured Revolving Credit Facility
On
December 23, 2020, the Company entered into a second amended and restated senior secured revolving credit facility, or the Second
Amended and Restated Senior Secured Revolving Credit Facility, with FS KKR Capital Corp. II, or FSKR, as borrowers, JPMorgan Chase
Bank, N.A., or JPMorgan, as administrative agent, ING Capital LLC, or ING, as collateral agent, and the lenders party thereto,
which amended and restated the senior secured revolving credit facility originally entered into on August 9, 2018, which was subsequently
amended and restated on November 7, 2019, among the Company and FSKR, as borrowers, JPMorgan, as administrative agent, ING, as
collateral agent, and the lenders party thereto. The Second Amended and Restated Senior Secured Revolving Credit Facility provides
for borrowings in U.S. dollars and certain agreed upon foreign currencies in an initial aggregate amount of up to $4,025,000,000
with an option for the Company to request, at one or more times, that existing and/or new lenders, at their election, provide
up to $2,012,500,000 of additional commitments. The Second Amended and Restated Senior Secured Revolving Credit Facility initially
provides for a sublimit available for the Company to borrow up to $1,615,000,000 of the total facility amount, subject to increase
or reduction from time to time pursuant to the terms of the Second Amended and Restated Senior Secured Revolving Credit Facility
and the oversight and approval of the Company’s board of directors. A sublimit of the total facility amount also is available
to FSKR, as an additional borrower, and the obligations of the borrowers under the Second Amended and Restated Senior Secured
Revolving Credit Facility are several (and not joint) in all respects. The Second Amended and Restated Senior Secured Revolving
Credit Facility provides for the issuance of letters of credit in an initial aggregate face amount of up to $400,000,000, with
a sublimit available for the Company to request the issuance of letters of credit in an aggregate face amount of up to $99,646,529.56,
subject to increase or reduction from time to time pursuant to the terms of the Second Amended and Restated Senior Secured Revolving
Credit Facility.
Availability
under the Second Amended and Restated Senior Secured Revolving Credit Facility will terminate on December 23, 2024, or the Revolver
Termination Date, and the outstanding loans under the Second Amended and Restated Senior Secured Revolving Credit Facility will
mature on December 23, 2025. The Second Amended and Restated Senior Secured Revolving Credit Facility also requires mandatory
prepayment of interest and principal upon certain events during the term-out period commencing on the Revolver Termination Date
and at certain other times when the Company’s adjusted asset coverage ratio is less than 185%.
Borrowings
under the Second Amended and Restated Senior Secured Revolving Credit Facility are subject to compliance with a borrowing base
test. Interest under the Second Amended and Restated Senior Secured Revolving Credit Facility for (i) loans for which the
Company elects the base rate option, (A) if the value of the borrowing base is equal to or greater than 1.85 times the aggregate
amount of certain outstanding indebtedness of the Company, or the Combined Debt Amount, is payable at an “alternate base
rate” (which is the greatest of (a) the prime rate as publicly announced by JPMorgan, (b) the sum of (x) the
greater of (I) the federal funds effective rate and (II) the overnight bank funding rate plus (y) 0.5%, and (c) the
one month LIBOR plus 1% per annum) plus 0.75% and, (B) if the value of the borrowing base is less than 1.85 times the
Combined Debt Amount, the alternate base rate plus 1.00%; and (ii) loans for which the Company elects the Eurocurrency option
(A) if the value of the borrowing base is equal to or greater than 1.85 times the Combined Debt Amount, is payable at a rate
equal to LIBOR plus 1.75% and (B) if the value of the borrowing base is less than 1.85 times the Combined Debt Amount, is
payable at a rate equal to LIBOR plus 2.00%. The Company will pay a commitment fee of at least 0.375% and up to 0.50% per
annum (based on the immediately preceding quarter’s average usage) on the unused portion of its sublimit under the Second
Amended and Restated Senior Secured Revolving Credit Facility during the revolving period. The Company also will be required to
pay letter of credit participation fees and a fronting fee on the average daily amount of any lender’s exposure with respect
to any letters of credit issued at the request of the Company under the Second Amended and Restated Senior Secured Revolving Credit
Facility.
In
connection with the Second Amended and Restated Senior Secured Revolving Credit Facility, the Company has made certain representations
and warranties and must comply with various covenants and reporting requirements customary for facilities of this type. In addition,
the Company must comply with the following financial covenants: (a) the Company must maintain a minimum shareholders’ equity,
measured as of each fiscal quarter end; and (b) the Company must maintain at all times a 150% asset coverage ratio (or, if greater,
the statutory requirement then applicable to the Company).
The
Second Amended and Restated Senior Secured Revolving Credit Facility contains events of default customary for facilities of this
type. Upon the occurrence of an event of default, JPMorgan, at the instruction of the lenders, may terminate the commitments and
declare the outstanding advances and all other obligations under the Second Amended and Restated Senior Secured Revolving Credit
Facility immediately due and payable.
The
Company’s obligations under the Second Amended and Restated Senior Secured Revolving Credit Facility are guaranteed by certain
of the Company’s subsidiaries. The Company’s obligations under the Second Amended and Restated Senior Secured Revolving
Credit Facility are secured by a first priority security interest in substantially all of the assets of the Company and certain
of the Company’s subsidiaries thereunder.
The
foregoing description of the Second Amended and Restated Senior Secured Revolving Credit Facility does not purport to be complete
and is qualified in its entirety by reference to the full text of the Second Amended and Restated Senior Secured Revolving Credit
Facility attached hereto as Exhibit 10.2.