FS/KKR Advisor LLC, a partnership between Philadelphia’s FS Investments and New York’s KKR Credit Advisors LLC, is merging four non-traded business development companies (BDCs) under its advisement to form the second-largest BDC by assets under management, with over $9 billion in assets.
Combining the four entities — FS Investment Corporation II (FSIC II), FS Investment Corporation III (FSIC III), FS Investment Corporation IV (FSIC IV) and Corporate Capital Trust II (CCT II) — is intended to provide enhanced portfolio diversification across asset classes and industries, with 208 portfolio companies across 20 industries.
The enhanced scale will enable it to drive lower operating costs through the elimination of duplicative administrative, regulatory and professional expenses, the companies said. The structure allows the combined company to select the optimal path to liquidity following the merger, and the single transaction eliminates the uncertainty of timing and the impact of future mergers on shareholder value.
"Today's announcement is an important next step as we continue to deliver on our commitment to create liquidity for our shareholders in these non-traded funds and maximize their value," said FS Investments Chairman and CEO Michael Forman. "We believe the transaction and staged liquidity plan, as it is structured, is in the best interest of shareholders of each fund and positions the combined company for long-term success."
The common equity of the combined company is currently expected to be listed on the New York Stock Exchange in the fourth quarter of 2019.