Filed pursuant to Rule 497
File No. 333-149374

 

 

 

FS INVESTMENT CORPORATION

 

 

 

 

Supplement dated February 18, 2010

to

Prospectus dated August 28, 2009

 

 

 

 

This supplement contains information which amends, supplements or modifies certain information contained in the Prospectus of FS Investment Corporation (“FSIC”) dated August 28, 2009, as supplemented by the supplements dated October 13, 2009, November 20, 2009 and January 19, 2010.

 

You should carefully consider the “Risk Factors” beginning on page 29 of the Prospectus before you decide to invest.

 

Status of Our Initial Public Offering

 

In our monthly closing on February 1, 2010, we accepted subscriptions for 1,591,012 shares of our common stock at an average price per share of $10.34 for corresponding gross proceeds of $16,446,406. Since commencing our public offering on December 15, 2008, we have received and accepted subscriptions totaling $123,694,244. Including $1,000,008 contributed by principals of our investment adviser in February 2008, we have accepted subscriptions for gross proceeds of $124,694,252 to date.

 

Portfolio Update

 

From January 1, 2010 to February 12, 2010, we invested in seven new portfolio companies and increased our positions in five others through secondary market transactions. During this period, we sold interests in American Safety Razor and Reader’s Digest Association, Inc. Also, our entire position in Sorenson Communications, Inc. was paid down in full. All of these transactions, excluding American Safety Razor, resulted in realized gains.

 

As of February 12, 2010, our investment portfolio consists of 56 positions in senior secured loans, second lien secured loans, senior secured bonds and mezzanine debt of U.S. and European companies with an average annual EBITDA of $267.3 million. The investments in our portfolio were purchased at an average price of 87.3% of par value. The weighted average credit rating of our portfolio is B3 based upon the Moody’s scale and our estimated gross annual portfolio yield is 11.3%⁽¹⁾. We intend to continue to grow our portfolio. The following is our investment portfolio as of February 12, 2010.

 

 

 

 

 

The tables below show portfolio investments that were sold or experienced a repayment in excess of 1% of a position’s value between January 1, 2010 and February 12, 2010.

 

 

 

 

 

We have elected to change our industry classification methodology to the Global Industry Classification Standard (“GICS”). Below is a revised schedule of our investments as of December 31, 2009 that reflects this change.

 

 

“Prospectus Summary”

 

This supplement revises the prospectus cover page and the section entitled, “Summary — Plan of Distribution” as follows:

 

We are offering our shares on a continuous basis at a price of $10.00; however, to the extent that our net asset value increases, we will sell at a price necessary to ensure that shares are not sold at a price, after deduction of selling commissions and dealer manager fees, that is below net asset value per share. In the event of a material decline in our net asset value per share, which we consider to be a 5% decrease from the net offering price at our prior month’s closing, and subject to certain conditions, we will reduce our offering price accordingly.

 

“Plan of Distribution” and “Determination of Net Asset Value”

 

This supplement revises the sections entitled, “Plan of Distribution” and “Determination of Net Asset Value” as follows:

 

We are offering our shares on a continuous basis at a price of $10.00; however, to the extent that our net asset value increases, we will sell at a price necessary to ensure that shares are not sold at a price, after deduction of selling commissions and dealer manager fees, that is below net asset value per share.

 

In addition, a decline in our net asset value per share to an amount more than 5% below our current offering price, net of selling commissions and dealer manager fees, shall create a rebuttable presumption that there has been a material change in the value of our assets such that a reduction in the offering price per share is warranted. This presumption may only be rebutted if our board, in consultation with our management, reasonably and in good faith determines that the decline in net asset value per share is the result of a temporary movement in the credit markets, rather than a more fundamental shift in the valuation of our portfolio. In the event that (i) net asset value per share decreases to more than 5% below our current net offering price and (ii) our board believes that such decrease in the net asset value per share is the result of a non-temporary movement in the credit markets, our board will undertake to establish a new net offering price that is not more than 5% above our net asset value per share.

 

Promptly following any such adjustment to the net offering price per share, we will file a prospectus supplement with the SEC disclosing the adjusted net offering price, and we will also post the updated information on our website at www.fsinvestmentcorp.com. If our board determines that the decline in net asset value per share is the result of a temporary movement in the credit markets rather than a fundamental shift in the valuation of our portfolio and, as a result, does not adjust our net offering price per share, we will notify investors by issuing a press release and filing it with the SEC as part of a Form 8-K.