UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
FOR THE FISCAL YEAR ENDED DECEMBER 31 , 2023
OR
| 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: 814-00757
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(Exact name of registrant as specified in its charter)
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| (State of Incorporation) | (I.R.S. Employer Identification Number) | |||||||
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Registrant’s telephone number, including area code: (215 ) 495-1150
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Securities registered pursuant to Section 12(b) of the Act:
| (Title of class) | (Trading Symbol(s)) | (Name of exchange on which registered) | ||||||||||||
Securities registered pursuant to Section 12(g) of the Act:
None
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x.
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 x No ¨.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes x No ¨.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting 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.
x | Accelerated filer | ¨ | |||||||||
| Non-accelerated filer | ¨ | 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. x
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements ¨ .
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ¨.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes ¨ No x .
The aggregate market value of common stock held by non-affiliates of the registrant (assuming solely for the purpose of this disclosure, but without conceding, all executive officers and directors of the registrant are “affiliates”), as of June 30, 2023, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $5.4 billion.
There were 280,066,433 shares of the registrant’s common stock outstanding as of January 31, 2024.
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Documents Incorporated by Reference
Portions of the registrant’s definitive Proxy Statement relating to the registrant’s 2023 Annual Meeting of Stockholders, to be filed with the U.S. Securities and Exchange Commission within 120 days following the end of the registrant’s fiscal year ended December 31, 2023, are incorporated by reference in Part III of this annual report on Form 10-K as indicated herein.
TABLE OF CONTENTS
| Page | ||||||||
PART I | ||||||||
| ITEM 1. | ||||||||
| ITEM 1A. | RISK FACTORS | |||||||
| ITEM 1B. | ||||||||
| ITEM 1C. | ||||||||
| ITEM 2. | ||||||||
| ITEM 3. | ||||||||
| ITEM 4. | ||||||||
PART II | ||||||||
| ITEM 5. | ||||||||
| ITEM 6. | ||||||||
| ITEM 7. | ||||||||
| ITEM 7A. | ||||||||
| ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA | |||||||
| ITEM 9. | ||||||||
| ITEM 9A. | ||||||||
| ITEM 9B. | ||||||||
PART III | ||||||||
| ITEM 10. | ||||||||
| ITEM 11. | ||||||||
| ITEM 12. | ||||||||
| ITEM 13. | ||||||||
| ITEM 14. | ||||||||
| PART IV | ||||||||
| ITEM 15. | ||||||||
PART I
Many of the amounts and percentages presented in Part I have been rounded for convenience of presentation.
Item 1. Business.
Summary
FS KKR Capital Corp. (NYSE: FSK), or the Company, which may also be referred to as “we,” “us” or “our,” was incorporated under the general corporation laws of the State of Maryland on December 21, 2007 and formally commenced investment operations on January 2, 2009. We are 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. As such, we are required to comply with certain regulatory requirements. In addition, we have elected to be treated for U.S. federal income tax purposes, and intend to qualify annually, as a regulated investment company, or RIC, under Subchapter M of the Internal Revenue Code of 1986, as amended, or the Code. As of December 31, 2023, we had total assets of approximately $15.5 billion.
We are managed by FS/KKR Advisor, LLC, or the Adviser, a registered investment adviser under the Investment Advisers Act of 1940, as amended, or the Advisers Act, which oversees the management of our operations and is responsible for making investment decisions with respect to our portfolio. Our investment objectives are to generate current income and, to a lesser extent, long-term capital appreciation. We seek to meet our investment objectives by:
•utilizing the experience and expertise of the management team of the Adviser;
•employing a defensive investment approach focused on long-term credit performance and principal protection;
•focusing primarily on debt investments in a broad array of private U.S. companies, including middle-market companies, which we define as companies with annual earnings before interest, taxes, depreciation and amortization, or EBITDA, of $50 million to $150 million at the time of investment;
•investing primarily in established, stable enterprises with positive cash flows; and
•maintaining rigorous portfolio monitoring in an attempt to anticipate and pre-empt negative credit events within our portfolio, such as an event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a portfolio company.
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 and certain asset-based financing 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,” or OTC, 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, including through a co-investment with a financial sponsor or possibly the restructuring of an investment. In addition, a portion of our portfolio may be comprised of corporate bonds, structured products, other debt securities and derivatives, including total return swaps and credit default swaps. The Adviser 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 structures of our portfolio companies or otherwise make opportunistic investments, such as where the market price of loans, bonds or other securities reflects a lower value than deemed warranted by the Adviser’s fundamental analysis. Such investment opportunities may occur due to 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 and may include event driven investments, anchor orders and structured products.
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 three to four years. However, we may invest in loans and securities with any maturity or duration. Our debt investments may be rated by a nationally recognized statistical rating organization, or NRSRO, and, in such case, generally will carry a rating below investment grade (rated lower than “Baa3” by Moody’s Investors Service, Inc., or Moody’s, or lower than “BBB-” by Standard & Poor’s Ratings Services, or S&P). We may invest without limit in debt or other securities of any rating, as well as debt or other securities that have not been rated by a NRSRO.
To seek to enhance our returns, we employ leverage as market conditions permit and at the discretion of the Adviser, but in no event will leverage employed exceed the maximum amount permitted by the 1940 Act. Prior to June 14, 2019, in accordance with the
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1940 Act, we were allowed to borrow amounts such that our asset coverage, calculated pursuant to the 1940 Act, was at least 200% after such borrowing. Effective June 15, 2019, following approval by our stockholders, our asset coverage requirement was reduced from 200% to 150%.
As a BDC, we are subject to certain regulatory restrictions in making our 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 U.S. Securities and Exchange Commission, or 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 January 5, 2021, the SEC granted exemptive relief permitting us, subject to the satisfaction of certain conditions, to co-invest in certain privately negotiated investment transactions, including investments originated and directly negotiated by the Adviser or KKR Credit Advisors (US) LLC, or KKR Credit, with our co-investment affiliates. We believe this relief enhances our ability to further our investment objectives and strategy. We believe this relief may also increase favorable investment opportunities for us in part by allowing us to participate in larger investments, together with our co-investment affiliates, than would be available to us if such relief had not been obtained.
About the Adviser
The Adviser is a Delaware limited liability company, located at 201 Rouse Boulevard, Philadelphia, PA 19112, registered as an investment adviser with the SEC under the Advisers Act. The Adviser is a partnership between an affiliate of Franklin Square Holdings, L.P. (which does business as FS Investments), or FS Investments, and KKR Credit. Our chairman and chief executive officer, Michael C. Forman, serves as the Adviser’s chairman and chief executive officer.
The Adviser has significant experience in private lending and private equity investing, and has developed an expertise in using all levels of a firm’s capital structure to produce income-generating investments, while focusing on risk management. The Adviser also has extensive knowledge of the managerial, operational and regulatory requirements of publicly registered alternative asset entities, such as BDCs. We believe that the active and ongoing participation by the Adviser, FS Investments, KKR Credit and their respective affiliates in the credit markets, and the depth of experience and disciplined investment approach of the Adviser, will allow the Adviser to successfully execute our investment strategies.
Our board of directors, which is comprised of a majority of independent directors, oversees and monitors our investment performance, and beginning with the second anniversary of the effective date of the investment advisory agreement, will review the investment advisory agreement to determine, among other things, whether the fees payable under such agreement are reasonable in light of the services provided.
About FS Investments
FS Investments is a global alternative asset manager dedicated to delivering superior performance and innovative investment and capital solutions. The firm manages over $79 billion in assets for a wide range of clients, including institutional investors, financial professionals and individual investors. FS Investments provides access to a broad suite of alternative asset classes and strategies through its best-in-class investment teams and partners. With its diversified platform and flexible capital solutions, the firm is a valued partner to general partners, asset owners and portfolio companies. FS Investments is grounded in its high-performance culture and guided by its commitment to building value for its clients, investing in its colleagues and giving back to its communities. The firm has more than 500 employees across offices in the U.S., Europe and Asia and is headquartered in Philadelphia.
About KKR Credit
KKR Credit is a Delaware limited liability company, located at 555 California Street, 50th Floor, San Francisco, CA 94104, registered as an investment adviser with the SEC under the Advisers Act. It had approximately $219 billion of assets under management as of December 31, 2023 across investment funds, structured finance vehicles, specialty finance companies and separately managed accounts that invest capital in both liquid and illiquid credit strategies on behalf of some of the largest public and private pension plans, global financial institutions, university endowments and other institutional and public market investors. Its investment professionals utilize an industry and thematic approach to investing and benefit from access, where appropriate, to the broader resources and intellectual capital of KKR & Co. Inc., or KKR & Co.
KKR Credit is a subsidiary of KKR & Co., a leading global investment firm with approximately $553 billion in assets under management as of December 31, 2023, that manages investments across multiple asset classes, including private equity, energy, infrastructure, real estate and credit, with strategic manager partnerships that manage hedge funds. KKR & Co. 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 & Co. portfolio companies. KKR & Co. invests its own capital alongside the capital it manages for fund investors and provides financing solutions and investment opportunities through its capital markets business.
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Potential Market Opportunity
We believe significant investment opportunities will continue to present themselves in the senior secured and second lien secured loan asset class, as well as investments in debt securities of middle market companies.
Attractive Opportunities in Senior Secured and Second Lien Secured Loans
The variable rate structure of most senior secured and second lien secured loans present significant opportunities across the asset class, particularly within a rising interest rate environment. Additionally, the strong defensive characteristics inherent to many securities across the asset class make them compelling to many investors, especially as financial conditions tighten. Because senior secured debt has priority in payment among an issuer’s security holders (i.e., holders are due to receive payment before junior creditors and equity holders), they carry the least potential risk within the issuer’s capital structure. Further, senior secured debt investments are secured by the issuer’s assets, which may be seized in the event of a default. Senior secured loans generally also carry restrictive covenants aimed at ensuring repayment before junior creditors, including unsecured bondholders and other security holders, preserving collateral to protect against credit deterioration.
Opportunity in Middle Market Private Companies
In addition to investing in senior secured and second lien secured loans, we believe that the market for lending to private companies, particularly middle market private companies within the United States, presents a compelling investment opportunity. The following characteristics support our belief:
•Large Target Market. Middle market U.S. companies have historically represented a significant portion of the growth segment of the U.S. economy. These companies also often require substantial capital investment to grow their businesses. Historically, significant private equity capital has been available for investment in middle market companies and we expect that private equity firms will continue to leverage their investments in middle market companies with senior secured and second lien secured loans.
•Limited Investment Competition. Despite the size of the market, regulatory changes and other factors have diminished the role of traditional financial institutions in providing financing to middle market companies in favor of lending to large corporate clients and leading syndication efforts for capital markets transactions. Further, we believe a limited number of lenders are willing to hold large amounts of middle market loans. As a result, we believe our ability to eliminate syndication risk by holding middle market loans is a competitive advantage.
Lending and originating new loans to middle market companies, which are often private, generally requires a greater dedication of a lender’s time and resources compared to lending to larger companies as it is often more difficult to make investments in, and acquire information, about smaller companies. Many investment firms lack the breadth and scale necessary to identify investment opportunities, particularly directly originated investments in middle market companies, which may result in their overlooking many attractive investment opportunities. Middle market companies also may require more active monitoring and participation on the lender’s part. We believe that many large financial organizations, which often have relatively high-cost structures, are not suited to deal with these factors and instead emphasize services and transactions to larger corporate clients, resulting in a reduction in the availability of financing to middle market companies.
•Attractive Market Segment. The underserved nature of such a large segment of the market can at times create significant investment opportunities. In many environments, lending to middle market companies may offer more attractive economics than lending to larger corporations in terms of transaction pricing, up-front and ongoing fees, prepayment penalties, stricter covenants and quality collateral. In addition, middle market companies often have simpler capital structures and carry less leverage than larger companies, thus aiding the structuring and negotiation process and allowing us greater flexibility in structuring favorable transactions.
Potential Competitive Strengths
We believe that we offer investors the following potential competitive strengths:
Large, scalable, global platform with seasoned investment professionals
We believe that the breadth and depth of the experience of the Adviser and its affiliates, which are dedicated to sourcing, structuring, executing, monitoring and harvesting a broad range of private investments, provide us with a significant competitive advantage in sourcing and analyzing attractive investment opportunities. Our investment platform is supported by approximately 160 dedicated investment professionals at KKR Credit located in nine global cities. We also benefit from the expertise, network and resources of KKR & Co., which has approximately 700 investment professionals located in 26 global cities. The individual members of these teams have diverse investment backgrounds, with prior experience at investment banks, commercial banks, other asset
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managers and operating companies. We believe this diverse experience provides an in-depth understanding of the strategic, financial and operational challenges and opportunities of middle-market companies.
Utilization of long-standing relationships and international capital market capabilities to source investments
The Adviser and its affiliates have worked diligently over many years to build strategic relationships with private equity firms, banks and trading desks globally. Our and our affiliates’ long history of serving as a reliable financing partner to middle-market sponsors, even during periods of significant market dislocation, has enhanced our reputation. We believe that our network of relationships will continue to produce attractive investment opportunities.
The Adviser also leverages the intellectual capital, industry experience and global network of KKR & Co.’s Capital Markets franchise to support the origination of new private credit investment opportunities. Through KKR & Co.’s Capital Markets franchise, the Adviser benefits from expanded sources of deal flow, real-time market intelligence on pricing trends and continuous dialogue with issuers and sponsors to provide holistic financing solutions to current and prospective portfolio companies. In addition, KKR & Co.’s Capital Markets franchise gives us the ability to access and originate larger transactions and enhances the Adviser’s ability to manage risk.
Focus on larger middle market companies and customized one-stop credit solutions
We are focused on providing customized credit solutions to private upper middle market companies, which we generally define as companies with annual EBITDA of at least $50 million at the time of our investment. Based on its size and scale, the KKR Credit platform is able to originate, commit to and hold positions in excess of $1 billion in a given transaction. This size allows us to serve in the lead financing role for certain larger middle market companies with more than $100 million in EBITDA. We believe our ability to underwrite an entire transaction provides financial sponsors and companies with a greater degree of financing certainty and further enhances our competitive position. The KKR Credit platform also offers a variety of financing structures and has the flexibility to structure investments to meet the needs of companies. Finally, we believe that the upper end of the middle market is less competitive as fewer lenders have the requisite size and scale to provide holistic solutions for these companies.
Long-term investment horizon
Our long-term investment horizon gives us great flexibility, which we believe allows us to maximize returns on our investments. Unlike most private equity and venture capital funds, as well as many private debt funds, we are not required to return capital to our stockholders once we exit a portfolio investment. We believe that freedom from such capital return requirements, which allows us to invest using a longer-term focus, provides us with the opportunity to increase total returns on invested capital, compared to other private company investment vehicles.
Disciplined, income-oriented investment philosophy
The Adviser employs a defensive investment approach focused on long-term credit performance and principal protection. This investment approach involves a multi-stage selection process for each investment opportunity, as well as ongoing monitoring of each investment made, with particular emphasis on early detection of deteriorating credit conditions at portfolio companies which would result in adverse portfolio developments. This strategy is designed to maximize current income and minimize the risk of capital loss while maintaining the potential for long-term capital appreciation.
Investment expertise across all levels of the corporate capital structure
The Adviser believes that its broad expertise and experience investing at all levels of a company’s capital structure enable us to manage risk while affording us the opportunity for significant returns on our investments. We attempt to capitalize on this expertise in an effort to produce and maintain an investment portfolio that will perform in a broad range of economic conditions.
Ability to create bespoke financing solutions through asset-based opportunities
The Adviser believes that there is an expansive and growing opportunity to create customized solutions in underserved asset classes, including across the aircraft, consumer finance and auto and equipment finance sectors. The Adviser will seek to identify investments with strong collateral protection, a low correlation to the broader markets and equity-like upside potential.
Maintenance of portfolio diversification
In addition to focusing our investments in middle-market companies, we seek to invest across various industries. The Adviser monitors our investment portfolio to ensure we have acceptable industry balance, using industry and market metrics as key indicators. By monitoring our investment portfolio for industry balance, we seek to reduce the effects of economic downturns associated with any particular industry or market sector. Notwithstanding our intent to invest across a variety of industries, we may from time to time hold securities of a single portfolio company that comprise more than 5.0% of our total assets and/or more than 10.0% of the outstanding
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voting securities of the portfolio company. For that reason, we are classified as a non-diversified management investment company under the 1940 Act.
Investment Strategy
Our principal focus is to invest in senior secured and second lien secured loans of private middle market U.S. companies, and to a lesser extent, subordinated loans and certain asset-based financing 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 OTC 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, including through a co-investment with a financial sponsor or possibly the restructuring of an investment. In addition, a portion of our portfolio may be comprised of bonds, structured products, other debt securities and derivatives. The Adviser 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 structures of our portfolio companies or otherwise make opportunistic investments, such as where the market price of loans, bonds or other securities reflects a lower value than deemed warranted by the Adviser’s fundamental analysis. Such investment opportunities may occur due to 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 and may include event driven investments, anchor orders and structured products.
When identifying prospective portfolio companies, we focus primarily on the attributes set forth below, which we believe will help us generate higher total returns with an acceptable level of risk. While these criteria provide general guidelines for our investment decisions, if we believe the benefits of investing are sufficiently strong, not all of these criteria necessarily will be met by each portfolio company in which we choose to invest. These attributes are:
•Leading, defensible market positions. We seek to invest in companies that have developed strong competitive positions within their respective markets and exhibit the potential to maintain sufficient cash flows and profitability to service our debt in a range of economic environments. We seek companies that can protect their competitive advantages through scale, scope, customer loyalty, product pricing or product quality versus their competitors, thereby minimizing business risk and protecting profitability.
•Investing in stable companies with positive cash flow. We seek to invest in established, stable companies with strong profitability and cash flows. Such companies, we believe, are well-positioned to maintain consistent cash flow to service and repay our loans and maintain growth in their businesses or market share. We do not intend to invest to any significant degree in start-up companies, turnaround situations or companies with speculative business plans.
•Proven management teams. We focus on companies that have experienced management teams with an established track record of success. We typically prefer our portfolio companies to have proper incentives in place, which may include non-cash and performance-based compensation, to align management’s goals with ours.
•Private equity sponsorship. Often we seek to participate in transactions sponsored by what we believe to be sophisticated and seasoned private equity firms. The Adviser believes that a private equity sponsor’s willingness to invest significant sums of equity capital into a company is an endorsement of the quality of the investment opportunity. Further, by co-investing with such experienced private equity firms which commit significant sums of equity capital ranking junior in priority of payment to our debt investments, we may benefit from the due diligence review performed by the private equity firm, in addition to our own due diligence review. Further, strong private equity sponsors with significant investments at risk may have both the ability and incentive to contribute additional capital in difficult economic times should operational or financial issues arise, which could provide additional protections for our investments.
•Allocation among various issuers and industries. We seek to allocate our portfolio broadly among issuers and industries, thereby attempting to reduce the risk of a downturn in any one company or industry having a disproportionate adverse impact on the value of our portfolio.
•Viable exit strategy. While we attempt to invest in securities that may be sold in a privately negotiated OTC market, providing us a means by which we may exit our positions, we expect that a large portion of our portfolio may not be sold on this secondary market. For any investments that are not able to be sold within this market, we focus primarily on investing in companies whose business models and growth prospects offer attractive exit possibilities, including repayment of our investments, an initial public offering of equity securities, a merger, a sale or a recapitalization, in each case with the potential for capital gains.
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Joint Venture
We also co-invest with South Carolina Retirement Systems Group Trust, or SCRS, through Credit Opportunities Partners JV, LLC (formerly known as Strategic Credit Opportunities Partners, LLC), or COPJV, a joint venture with SCRS. COPJV invests its capital in a range of investments, including senior secured loans (both first lien and second lien) to middle market companies, broadly syndicated loans, equity, warrants and other investments. We and SCRS each have 50% voting control of COPJV and together are required to agree on all investment decisions as well as certain other significant actions for COPJV. As of December 31, 2023, COPJV had total capital commitments of $2.4 billion, $2.1 billion of which was from us and the remaining $0.3 billion of which was from SCRS. As of December 31, 2023, we had funded approximately $1.6 billion of our commitment. Additionally, as of December 31, 2023, COPJV had $0.4 billion of borrowing capacity. As of December 31, 2023, our investment in COPJV was approximately $1.4 billion at fair value. We do not consolidate COPJV in our consolidated financial statements.
Investment Types
We primarily focus on the following investment types:
Senior Secured Loans
Senior secured loans are situated at the top of a company's capital structure. Because these loans generally have priority in payment, they carry the least risk among all investments in a firm. Generally, our senior secured loans are expected to have maturities of three to seven years, offer some form of amortization, and have first priority security interests in the assets of the borrower. Generally, we expect that the interest rate on our senior secured loans typically will have variable rates over a standard benchmark, such as the prime rate, the London Interbank Offered Rate, or LIBOR, or the Secured Overnight Financing Rate, or SOFR.
Second Lien Secured Loans
Second lien secured loans are immediately junior to senior secured loans and have substantially the same maturities, collateral and covenant structures as senior secured loans. Second lien secured loans, however, are granted a second priority security interest in the assets of the borrower, which means that any realization of collateral will generally be applied to pay senior secured loans in full before second lien secured loans are paid and the value of the collateral may not be sufficient to repay in full both senior secured loans and second lien secured loans. In return for this junior ranking, second lien secured loans generally offer higher returns compared to senior secured debt. These higher returns come in the form of higher interest and in some cases the potential for equity participation through warrants, though to a lesser extent than with subordinated loans. Generally, we expect these loans to carry a fixed rate, or a floating current yield over a standard benchmark. In addition, we may receive additional returns from any warrants we may receive in connection with these investments.
Senior Secured Bonds
Senior secured bonds are generally secured by collateral on a senior, pari passu or junior basis with other debt instruments in an issuer’s capital structure and have similar maturities and covenant structures as senior secured loans. Generally, we expect these investments to carry a fixed rate.
Subordinated Debt
In addition to senior secured loans, second lien secured loans and senior secured bonds, we may invest a portion of our assets in subordinated debt. Subordinated debt investments usually rank junior in priority of payment to senior debt and are often unsecured, but are situated above preferred equity and common equity in the capital structure. In return for their junior status compared to senior debt, subordinated debt investments typically offer higher returns through both higher interest rates and possible equity ownership in the form of warrants, enabling the lender to participate in the capital appreciation of the borrower. These warrants typically require only a nominal cost to exercise. We generally target subordinated debt with interest-only payments throughout the life of the security, with the principal due at maturity. Typically, subordinated debt investments have maturities of five to ten years. Generally, we expect these securities to carry a fixed rate, or a floating current yield over a standard benchmark. In addition, we may receive additional returns from any warrants we may receive in connection with these investments. In some cases, a portion of the total interest may accrue or be paid-in-kind, or PIK.
Equity and Equity-Related Securities
While we intend to maintain our focus on investments in debt securities, from time to time, when we see the potential for extraordinary gain, or in connection with securing particularly favorable terms in a debt investment, we may enter into investments in preferred or common equity, typically in conjunction with a private equity sponsor we believe to be sophisticated and seasoned. In addition, we may receive the right to make equity investments in a portfolio company whose debt securities we hold in connection with the next equity financing round for that company. This right may provide us with the opportunity to further enhance our returns over time through equity investments in our portfolio companies. In addition, we may hold 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
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equity, generally obtained in conjunction with one of our debt investments or through a co-investment with a financial sponsor, such as an institutional investor or private equity firm. In the future, we may achieve liquidity through a merger or acquisition of a portfolio company, a public offering of a portfolio company’s stock or by exercising our right, if any, to require a portfolio company to repurchase the equity-related securities we hold.
Convertible Securities
We may invest in convertible securities, such as bonds, debentures, notes, preferred stocks or other securities that may be converted into, or exchanged for, a specified amount of common stock of the same or different issuer within a particular period of time at a specified price or formula.
Non-U.S. Securities
We may invest in non-U.S. securities, which may include securities denominated in U.S. dollars or in non-U.S. currencies and securities of companies in emerging markets, to the extent permitted by the 1940 Act.
Investments in Asset-Based Opportunities
We may invest in asset-based opportunities through joint ventures, investment platforms, private investment funds or other business entities that provide one or more of the following services: origination or sourcing of potential investment opportunities, due diligence and negotiation of potential investment opportunities and/or servicing, development and management (including turnaround) and disposition of investments. Such investments may be in or alongside existing or newly formed operators, consultants and/or managers that pursue such opportunities and may or may not include capital and/or assets contributed by third party investors. Such investments may include opportunities to direct-finance physical assets, such as airplanes and ships, and/or operating assets, such as financial service entities, as opposed to investment securities, or to invest in origination and/or servicing platforms directly. These asset-based opportunities are expected to offer mezzanine-like structural downside protection as well as asset collateral, and equity-like upside that can be achieved through appreciation at the asset-level or, in the case of platforms, through growth of the enterprise value. Key areas of focus include, without limitation, aircraft, real estate and consumer finance.
Structured Products
We may invest in structured products, which may include collateralized debt obligations, collateralized bond obligations, collateralized loan obligations, structured notes and credit-linked notes. The issuers of such investment products may be structured as trusts or other types of pooled investment vehicles. Such products may also involve the deposit with or purchase by an entity of the underlying investments and the issuance by that entity of one or more classes of securities backed by, or representing interests in, the underlying investments or referencing an indicator related to such investments.
Derivatives
We may also invest from time to time in derivatives, including total return swaps, interest rate swaps, credit default swaps and foreign currency forward contracts. We anticipate that any use of derivatives would primarily be as a substitute for investing in conventional securities or to hedge potential risk that is identified by the Adviser.
Investments with Third-Parties
We may co-invest with third parties through partnerships, joint ventures or other entities, thereby acquiring jointly-controlled or non-controlling interests in certain investments in conjunction with participation by one or more third parties in such investment. Such joint venture partners or third party managers may include former personnel of the Adviser or its affiliates or associated persons.
Cash and Cash Equivalents
We may maintain a certain level of cash or equivalent instruments, including money market funds, to make follow-on investments, if necessary, in existing portfolio companies or to take advantage of new opportunities.
Comparison of Targeted Debt Investments to Corporate Bonds
Loans to private companies are debt instruments that can be compared to corporate bonds to aid an investor’s understanding. As with corporate bonds, loans to private companies can range in credit quality depending on security-specific factors, including total leverage, amount of leverage senior to the security in question, variability in the issuer’s cash flows, the quality of assets securing debt and the degree to which such assets cover the subject company’s debt obligations. As is the case in the corporate bond market, we will require greater returns for securities that we perceive to carry increased risk. The companies in which we invest may be leveraged, often as a result of leveraged buyouts or other recapitalization transactions, and, in many cases, will not be rated by national rating agencies. When our targeted debt investments do carry ratings from a NRSRO, we believe that such ratings generally will be below investment grade (rated lower than “Baa3” by Moody’s or lower than “BBB-” by S&P). To the extent we make unrated investments,
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we believe that such investments would likely receive similar ratings if they were to be examined by a NRSRO. Compared to below-investment grade corporate bonds that are typically available to the public, our targeted senior secured and second lien secured loan investments are higher in the capital structure, have priority in receiving payment, are secured by the issuer’s assets, allow the lender to seize collateral if necessary, and generally exhibit higher rates of recovery in the event of default. Corporate bonds, on the other hand, are often unsecured obligations of the issuer.
The market for loans to private companies possesses several key differences compared to the corporate bond market. For instance, due to a possible lack of debt ratings for certain middle market firms, and also due to the reduced availability of information for private companies, investors must conduct extensive due diligence investigations before committing to an investment. This intensive due diligence process gives the investor significant access to management, which is often not possible in the case of corporate bondholders, who rely on underwriters, debt rating agencies and publicly available information for due diligence reviews and monitoring of corporate issuers. While holding these investments, private debt investors often receive monthly or quarterly updates on the portfolio company’s financial performance, along with possible representation on the company’s board of directors, which allows the investor to take remedial action quickly if conditions happen to deteriorate. Due to reduced liquidity, the relative scarcity of capital and extensive due diligence and expertise required on the part of the investor, we believe that private debt securities typically offer higher returns than corporate bonds of equivalent credit quality.
Investment Process
The investment professionals employed by the Adviser or its affiliates have spent their careers developing the resources necessary to invest in private companies. Our current transaction process is highlighted below.
Our Transaction Process
Sourcing
The relationships of the Adviser and its affiliates provide us with access to a robust and established pipeline of investment opportunities sourced from a variety of different investment channels, including private equity sponsors, non-sponsored corporates, financial advisors, banks, brokers and family offices.
Evaluation
Screening. Once a potential investment has been identified, the Adviser screens the opportunity and makes a preliminary determination concerning whether to proceed with a more comprehensive deal-level due diligence review.
Pipeline/Risk Update. Upon review of the full deal pipeline, the Adviser raises key risks and issues to determine whether or not an investment meets our basic investment criteria and offers an acceptable probability of attractive returns with identifiable downside risk. The objective is for the Adviser to identify a suitable and attractive opportunity for a more comprehensive due diligence review based on the facts and circumstances surrounding the investment.
Deal-level Q&A: After an investment has been identified and preliminary due diligence has been completed, screening memos and a credit research analysis is prepared. These reports are reviewed by the Adviser’s investment committee, or the Investment Committee, to discuss key diligence and structuring issues. Following the Adviser’s review, the Investment Committee will complete any incremental due diligence prior to formal Investment Committee approval. Though each transaction may involve a somewhat different approach, the Adviser’s diligence of each opportunity could include:
•a full operational analysis to identify the key risks and opportunities of the target’s business, including a detailed review of historical and projected financial results;
•a detailed analysis of industry dynamics, competitive position, regulatory, tax and legal matters;
•on-site visits, if deemed necessary;
•background checks to further evaluate management and other key personnel;
•a review by legal and accounting professionals, environmental or other industry consultants, if necessary;
•financial sponsor due diligence, including portfolio company and lender reference checks, if necessary; and
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•a review of management’s experience and track record.
Execution
Following any incremental due diligence, the Investment Committee is presented with a formal recommendation for approval. Once the Investment Committee has determined that the portfolio company is suitable for investment, the Adviser works with the management team of the prospective company to finalize the structure and terms of the investment. We believe that structuring transactions appropriately is a key factor to producing strong investment results. Accordingly, we will actively consider transaction structures and seek to process and negotiate terms that provide the best opportunities for superior risk-adjusted returns.
Post-Investment Monitoring
Portfolio Monitoring. The Adviser monitors our portfolio with a focus toward anticipating negative credit events. To maintain portfolio company performance and help to ensure a successful exit, the Adviser works closely with, as applicable, the lead equity sponsor, loan syndicator, portfolio company management, consultants, advisers and other security holders to discuss financial position, compliance with covenants, financial requirements and execution of the company’s business plan. In addition, depending on the size, nature and performance of the transaction, we may occupy a seat or serve as an observer on a portfolio company’s board of directors or similar governing body.
Typically, the Adviser receives financial reports detailing operating performance, sales volumes, cost of goods sold, operating expenses, operating margins, cash flows, financial position and other key operating metrics on a quarterly basis from our portfolio companies. The Adviser uses this data, combined with due diligence gained through contact with the company’s customers, suppliers, competitors, market research and other methods, to conduct an ongoing, rigorous assessment of the company’s operating performance and prospects.
In addition to various risk management and monitoring tools, the Adviser uses an investment rating system to characterize and monitor the expected level of returns on each investment in our portfolio. The Adviser uses an investment rating scale of 1 to 4. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Portfolio Asset Quality” for a description of the conditions associated with each investment rating.
Valuation Process. Our board of directors is responsible for overseeing the valuation of our portfolio investments at fair value as determined in good faith pursuant to the Adviser's valuation policy. As permitted by Rule 2a-5 of the 1940 Act, our board of directors has designated the Adviser as our valuation designee with day-to-day responsibility for implementing the portfolio valuation process set forth in the Adviser's valuation policy.
Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosure, or ASC Topic 820, issued by the Financial Accounting Standards Board, or 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 prices in active markets for identical securities; 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.
The Adviser determines the fair value of our investment portfolio each quarter. Securities that are publicly-traded with readily available market prices will be valued at the reported closing price on the valuation date. Securities that are not publicly-traded with readily available market prices will be valued at fair value as determined in good faith by the Adviser. In connection with that determination, the Adviser will prepare 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 pricing and valuation services.
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 by the Adviser facilitating the delivery of updated quarterly financial and other information relating to each investment to an independent third-party pricing or valuation service;
•the independent third-party pricing or valuation service then reviews and analyzes the information, along with relevant market and economic data, and determines proposed valuations for each portfolio company or investment according to the valuation methodologies in the Adviser's valuation policy and communicates the information to the Adviser in the form of a valuation range for Level 3 assets;
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•the Adviser then reviews the preliminary valuation information for each portfolio company or investment and provides feedback about the accuracy, completeness and timeliness of the valuation-related inputs considered by the independent third-party pricing or valuation service and any suggested revisions thereto prior to the independent third-party pricing or valuation service finalizing its valuation range;
•the Adviser then provides the valuation committee with its valuation determinations and valuation-related information for each portfolio company or investment, along with any applicable supporting materials; and other information that is relevant to the fair valuation process as required by the Adviser's board reporting obligations;
•the valuation committee meets with the Adviser to receive the relevant quarterly reporting from the Adviser and to discuss any questions from the valuation committee in connection with the valuation committee's role in overseeing the fair valuation process; and
•following the completion of its fair value oversight activities, the valuation committee (with the assistance of the Adviser) provides our board of directors with a report regarding the quarterly valuation process.
In circumstances where the Adviser deems appropriate, the Adviser’s internal valuation team values certain investments. When performing the internal valuations, the Adviser utilizes similar valuation techniques as an independent third-party pricing service would use. Such valuations are approved by an internal valuation committee of the Adviser, as well as the valuation committee of the board of directors, as described above.
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, the Adviser may use any independent third-party pricing or valuation services for which it has performed the appropriate level of due diligence. However, the Adviser 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 sourced by the Adviser or provided by any independent third-party valuation or pricing service that the Adviser deems to be reliable in determining fair value under the circumstances. Below is a description of factors that the Adviser and any independent third-party valuation services may consider when determining the fair value of our investments.
The valuation methods utilized for each portfolio company may vary depending on industry and company-specific considerations. Typically, the first step is to make an assessment as to the enterprise value of the portfolio company's business in order to establish whether the portfolio company's enterprise value is greater than the amount of its debt as of the valuation date. This analysis helps to determine a risk profile for the applicable portfolio company and its related investments, and the appropriate valuation methodology to utilize as part of the security valuation analysis. The enterprise valuation may be determined using a market or income approach.
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, the Adviser may incorporate these factors into discounted cash flow models to arrive at fair value. Various methods may be used to determine the appropriate discount rate in a discounted cash flow model.
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 the 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. 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.
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. The Adviser subsequently values these warrants or other equity securities received at their fair value.
Managerial Assistance. As a BDC, we must offer, and provide upon request, managerial assistance to certain of our portfolio companies. This assistance could involve, among other things, monitoring the operations of our portfolio companies, participating in board and management meetings, consulting with and advising officers of portfolio companies and providing other organizational and financial guidance. Depending on the nature of the assistance required, the Adviser will provide such managerial assistance on our
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behalf to portfolio companies that request this assistance. To the extent fees are paid for these services, we, rather than the Adviser, will retain any fees paid for such assistance.
Exit
While we attempt to invest in securities that may be sold in a privately negotiated OTC market, providing us a means by which we may exit our positions, we expect that a large portion of our portfolio may not be sold on this secondary market. For any investments that are not able to be sold within this market, we focus primarily on investing in companies whose business models and growth prospects offer attractive exit possibilities, including repayment of our investments, an initial public offering of equity securities, a merger, a sale or a recapitalization, in each case with the potential for capital gains to the extent we maintain an equity interest in the underlying portfolio company.
Environmental, Social and Governance, or ESG, Policy
The Adviser generally integrates ESG considerations alongside traditional factors in the investment decision-making process. The Adviser considers such material ESG considerations to be those issues that it, in its sole discretion, determines have—or have the potential to have a substantial impact on an organization’s ability to create or preserve economic value. The Adviser applies proprietary criteria to assess potential financial and reputational risks to issuers. Examples of criteria the Adviser may consider in conducting this assessment include, without limitation, a carbon score based on the industry in which the company operates, environmental management, social management, diversity and inclusion, sponsor reputation, financial controls, committed management, organizational structure and litigation issues. An investment’s ESG considerations are assessed, monitored and re-evaluated on an ongoing basis. The identification of a risk related to one or more ESG considerations will not necessarily exclude a particular investment that, in the Adviser’s view, is otherwise suitable and attractively priced for investment. The Adviser may utilize data sources provided by third-party vendors and/or engage directly with issuers in assessing ESG issues.
While the Adviser may consider ESG factors when making an investment decision, the Company does not pursue an ESG-based investment strategy or limit its investments to those that meet specific ESG criteria or standards. Any reference in this Annual Report to environmental or social considerations is not intended to qualify the Company’s focus on seeking investments that it believes will generate attractive risk-adjusted returns, and ESG is not a principal investment strategy of the Company.
Risk Management
We seek to limit the downside potential of our investment portfolio by, among other things:
•applying our investment strategy guidelines for portfolio investments;
•requiring a total return on investments (including both interest and potential appreciation) that adequately compensates us for credit risk;
•allocating our portfolio among various issuers and industries, size permitting, with an adequate number of companies, across different industries, with different types of collateral; and
•negotiating or seeking debt investments with covenants or features that protect us while affording portfolio companies flexibility in managing their businesses consistent with preservation of capital, which may include affirmative and negative covenants, default penalties, lien protection, change of control provisions and board rights.
We may also enter into interest rate hedging transactions at the sole discretion of the Adviser. Such transactions will enable us to selectively modify interest rate exposure as market conditions dictate.
Affirmative Covenants
Affirmative covenants require borrowers to take actions that are meant to ensure the solvency of the company, facilitate the lender’s monitoring of the borrower, and ensure payment of interest and loan principal due to lenders. Examples of affirmative covenants include covenants requiring the borrower to maintain adequate insurance, accounting and tax records, and to produce frequent financial reports for the benefit of the lender.
Negative Covenants
Negative covenants impose restrictions on the borrower and are meant to protect lenders from actions that the borrower may take that could harm the credit quality of the lender’s investments. Examples of negative covenants include restrictions on the payment of dividends and restrictions on the issuance of additional debt without the lender’s approval. In addition, certain covenants restrict a
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borrower’s activities by requiring it to meet certain earnings interest coverage ratio and leverage ratio requirements. These covenants are also referred to as financial or maintenance covenants.
Operating and Regulatory Structure
Our investment activities are managed by the Adviser and supervised by our board of directors, a majority of whom are independent. Under the investment advisory agreement, we have agreed to pay the Adviser an annual base management fee based on the average weekly value of our gross assets (excluding cash and cash equivalents) and an incentive fee based on our performance. See Notes 2 and 4 to our consolidated financial statements included in this annual report on Form 10-K for a description of the fees we pay to the Adviser.
From time to time, the Adviser may enter into sub-advisory relationships with registered investment advisers that possess skills or attributes that the Adviser believes will aid it in achieving our investment objectives. The Adviser oversees our day-to-day operations, including the provision of general ledger accounting, fund accounting, legal services, investor relations, certain government and regulatory affairs activities, and other administrative services. The Adviser 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, the Adviser 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.
Pursuant to our administration agreement, dated April 9, 2018, or the administration agreement, we reimburse the Adviser for expenses necessary to perform services related to our administration and operations, including the Adviser’s allocable portion of the compensation and related expenses of certain personnel of FS Investments and KKR Credit providing administrative services to us on behalf of the Adviser. We reimburse the Adviser no less than quarterly for all costs and expenses incurred by the Adviser in performing its obligations and providing personnel and facilities under the administration agreement. The Adviser allocates the cost of such services to us based on factors such as total assets, revenues, time allocations and/or other reasonable metrics. Our board of directors reviews the methodology employed in determining how the expenses are allocated to us and the proposed allocation of administrative expenses among us and certain affiliates of the Adviser. Our board of directors then assesses the reasonableness of such reimbursements for expenses allocated to us based on the breadth, depth and quality of such services as compared to the estimated cost to us of obtaining similar services from third-party service providers known to be available. In addition, our 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, our board of directors compares the total amount paid to the Adviser for such services as a percentage of our net assets to the same ratio as reported by other comparable BDCs.
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 the Adviser, 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.
As a BDC, we are required to comply with certain regulatory requirements. Also, while we are permitted to finance investments using debt, our ability to use debt will be limited in certain significant respects pursuant to the 1940 Act. Within the limits of existing regulation, we will adjust our use of debt, according to market conditions, to the level we believe will allow us to generate maximum risk-adjusted returns. See “—Regulation.” We have elected to be treated for U.S. federal income tax purposes, and intend to qualify annually, as a RIC under the Code.
Regulation
We have elected to be regulated as a BDC under the 1940 Act and as a RIC under the Code. The 1940 Act contains prohibitions and restrictions relating to transactions between BDCs and their affiliates, principal underwriters and affiliates of those affiliates or underwriters, as described below. The 1940 Act also requires that a majority of our directors be persons other than “interested persons,” as that term is defined in the 1940 Act. In addition, the 1940 Act provides that we may not change the nature of our business so as to cease to be, or to withdraw our election as, a BDC unless approved by a majority of our outstanding voting securities. The 1940 Act defines “a majority of the outstanding voting securities” as the lesser of (i) 67% or more of the voting securities present at a meeting if the holders of more than 50% of our outstanding voting securities are present or represented by proxy or (ii) 50% of our outstanding voting securities.
We will generally not be able to issue and sell our common stock at a price per share, after deducting underwriting commissions and discounts, that is below our net asset value per share. We may, however, sell our common stock, or warrants, options or rights to acquire our common stock, at a price below the then-current net asset value of our common stock if our board of directors determines that such sale is in our best interests and the best interests of our stockholders, and our stockholders approve such sale. At the 2023 annual stockholders meeting, our stockholders approved the sale of shares of our common stock at a price below the then-current net
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asset value per share, subject to certain conditions, during the period beginning on August 22, 2023 and expiring on August 22, 2024. We currently do not intend to utilize this authority to sell shares of our common stock at a price below the then-current net asset value per share. In addition, we may generally issue new shares of our common stock at a price below net asset value per share in rights offerings to existing stockholders, in payment of dividends and in certain other limited circumstances.
As a BDC, we are subject to certain regulatory restrictions in making our 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 January 5, 2021, the SEC granted exemptive relief permitting us, subject to the satisfaction of certain conditions, to co-invest in certain privately negotiated investment transactions, including investments originated and directly negotiated by the Adviser or KKR Credit, with our co-investment affiliates. Under the terms of this relief, a “required majority” (as defined in Section 57(o) of the 1940 Act) of our independent directors must make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the proposed transaction, including the consideration to be paid, are reasonable and fair to us and our stockholders and do not involve overreaching of us or our stockholders on the part of any person concerned and (2) the transaction is consistent with the interests of our stockholders and is consistent with our investment objectives and strategy and any criteria established by our board of directors.
Under the 1940 Act, we may only invest up to 30% of our portfolio in entities that are not considered “eligible portfolio companies” under the 1940 Act, including companies located outside of the United States, entities that are operating pursuant to certain exceptions under the 1940 Act and publicly traded entities whose public equity market capitalization exceeds the levels provided for under the 1940 Act.
We may invest up to 100% of our assets in securities acquired directly from issuers in privately negotiated transactions. Our intention is to not write (sell) or buy put or call options to manage risks associated with the publicly traded securities of our portfolio companies. We may enter into hedging transactions to manage the risks associated with interest rate and currency fluctuations. We may purchase or otherwise receive warrants or options to purchase the common stock of our portfolio companies in connection with acquisition financings or other investments. In connection with such an acquisition, we may acquire rights to require the issuers of acquired securities or their affiliates to repurchase them under certain circumstances.
We also do not intend to acquire securities issued by any investment company that exceed the limits imposed by the 1940 Act. Under these limits, we generally cannot acquire more than 3% of the voting stock of any investment company (as defined in the 1940 Act), invest more than 5% of the value of our total assets in the securities of one investment company or invest more than 10% of the value of our total assets in the securities of investment companies in the aggregate. With regard to that portion of our portfolio invested in securities issued by investment companies, it should be noted that such investments might subject our stockholders to additional expenses.
On June 14, 2019, our stockholders approved the application of the modified asset coverage requirement set forth in Section 61(a)(2) of the 1940 Act, as amended by the Small Business Credit Availability Act. As a result, we are permitted, under specified conditions, to issue multiple classes of debt and one class of stock senior to our common stock if our asset coverage, as defined in the 1940 Act, is at least equal to 150% immediately after each such issuance, such that the Company’s maximum debt to equity ratio increased from a prior maximum of 1.0x (equivalent of $1 of debt outstanding for each $1 equity) to a maximum of 2.0x (equivalent to $2 of debt outstanding for each $1 of equity). In addition, while any senior securities remain outstanding, we must make provisions to prohibit any distribution to our stockholders or the repurchase of such securities or shares unless we meet the applicable asset coverage ratios at the time of the distribution or repurchase. We may also borrow amounts up to 5% of the value of our total assets for temporary purposes without regard to asset coverage.
During 2023, compliance with material governmental regulation applicable to us did not have a material effect on our capital expenditures, earnings, or competitive position.
Securities Exchange Act and Sarbanes-Oxley Act Compliance
We are subject to the reporting and disclosure requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, including the filing of quarterly, annual and current reports, proxy statements and other required items. In addition, we are subject to the Sarbanes-Oxley Act, which imposes a wide variety of regulatory requirements on publicly-held companies and their insiders. Many of these requirements affect us. For example:
•pursuant to Rule 13a-14 promulgated under the Exchange Act, our chief executive officer and chief financial officer are required to certify the accuracy of the financial statements contained in our periodic reports;
•pursuant to Item 307 of Regulation S-K, our periodic reports are required to disclose our conclusions about the effectiveness of our disclosure controls and procedures;
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•pursuant to Rule 13a-15 promulgated under the Exchange Act, our management is required to prepare a report regarding its assessment of our internal control over financial reporting; and
•pursuant to Item 308 of Regulation S-K, our auditors must attest to, and report on, our management’s assessment of our internal control over financial reporting.
The Sarbanes-Oxley Act requires us to review our current policies and procedures to determine whether we comply with the Sarbanes-Oxley Act and the regulations promulgated thereunder. We monitor our compliance with all regulations that are adopted under the Sarbanes-Oxley Act and take actions necessary to ensure that we are in compliance therewith.
The New York Stock Exchange Corporate Governance Regulations
The New York Stock Exchange, or NYSE, has adopted corporate governance regulations with which listed companies must comply. We believe we currently are in compliance with such corporate governance listing standards. We intend to monitor our compliance with all future listing standards and to take reasonably necessary actions to ensure that we stay in compliance.
Taxation as a RIC
We have elected to be subject to tax as a RIC under Subchapter M of the Code. As a RIC, we generally will not have to pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that we timely distribute each tax year as distributions to our stockholders. To qualify for and maintain our qualification as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements (as described below). In addition, in order to maintain RIC tax treatment, we must distribute to our stockholders, for each tax year, distributions generally of an amount at least equal to 90% of our “investment company taxable income,” which is generally the sum of our net ordinary income plus the excess, if any, of realized net short-term capital gains over realized net long-term capital losses, determined without regard to any deduction for distributions paid, or the Annual Distribution Requirement.
If we:
•qualify as a RIC; and
•satisfy the Annual Distribution Requirement,
then we will not be subject to U.S. federal income tax on the portion of our income or capital gains we distribute (or are deemed to distribute) as distributions to our stockholders. We will be subject to U.S. federal income tax at the regular corporate rates on any income or capital gains not distributed (or deemed distributed) as distributions to our stockholders.
As a RIC, we will be subject to a 4% nondeductible federal excise tax on certain undistributed income unless we distribute 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” (as 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, or the Excise Tax Avoidance Requirement. 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 have previously incurred, and may incur in the future, such excise tax on a portion of our income and capital gains. While we intend to distribute income and capital gains to minimize exposure to the 4% excise tax, we may not be able to, or may choose not to, distribute amounts sufficient to avoid the imposition of the tax entirely. In that event, we generally will be liable for the excise tax only on the amount by which we do not meet the excise tax avoidance requirement.
In order to qualify as a RIC for U.S. federal income tax purposes, we must, among other things:
•continue to qualify as a BDC under the 1940 Act at all times during each tax year;
•derive in each tax year at least 90% of our gross income from dividends, interest, payments with respect to certain securities, loans, gains from the sale of stock or other securities, net income from certain “qualified publicly-traded partnerships,” or other income derived with respect to our business of investing in such stock or other securities, or the 90% Income Test; and
•diversify our holdings so that at the end of each quarter of the tax year:
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▪at least 50% of the value of our assets consists of cash, cash equivalents, U.S. government securities, securities of other RICs, and other securities if such other securities of any one issuer do not represent more than 5% of the value of our assets or more than 10% of the outstanding voting securities of such issuer; and
▪no more than 25% of the value of our assets is invested in the securities, other than U.S. government securities or securities of other RICs, of one issuer, of two or more issuers that are controlled, as determined under applicable Code rules, by us and that are engaged in the same or similar or related trades or businesses or of certain “qualified publicly-traded partnerships,” or the Diversification Tests.
A RIC is limited in its ability to deduct expenses in excess of its investment company taxable income. If our expenses in a given tax year exceed our investment company taxable income, we may experience a net operating loss for that tax year. However, a RIC is not permitted to carry forward net operating losses to subsequent tax years and such net operating losses do not pass through to its stockholders. In addition, deductible expenses can be used only to offset investment company taxable income, not net capital gain. A RIC may not use any net capital losses (that is, the excess of realized capital losses over realized capital gains) to offset its investment company taxable income, but may carry forward such net capital losses, and use them to offset future capital gains, indefinitely. Due to these limits on deductibility of expenses and net capital losses, we may for tax purposes have aggregate taxable income for several years that we are required to distribute and that is taxable to our stockholders even if such taxable income is greater than the net income we actually earn during those years.
For U.S. federal income tax purposes, we may be required to recognize taxable income in circumstances in which we do not receive a corresponding payment in cash. For example, if we hold debt instruments that are treated under applicable tax rules as having original issue discount (such as debt instruments with PIK interest or, in certain cases, increasing interest rates or debt instruments that were issued with warrants), we must include in income each tax year a portion of the original issue discount that accrues over the life of the obligation, regardless of whether cash representing such income is received by us in the same tax year. We may also have to include in income other amounts that we have not yet received in cash, such as deferred loan origination fees that are paid after origination of the loan or are paid in non-cash compensation such as warrants or stock. We anticipate that a portion of our income may constitute original issue discount or other income required to be included in taxable income prior to receipt of cash. Further, we have elected to amortize market discount and include such amounts in our taxable income in the current tax year, instead of upon their disposition, as an election not to do so would limit our ability to deduct interest expense for tax purposes.
We invest a portion of our net assets in below investment grade instruments. Investments in these types of instruments may present special tax issues for us. U.S. federal income tax rules are not entirely clear about issues such as when we may cease to accrue interest, original issue discount or market discount, when and to what extent deductions may be taken for bad debts or worthless instruments, how payments received on obligations in default should be allocated between principal and income and whether exchanges of debt instruments in a bankruptcy or workout context are taxable. We will address these and other issues to the extent necessary in order to seek to ensure that we distribute sufficient income to avoid any material U.S. federal income or excise tax.
Because any original issue discount or other amounts accrued will be included in our investment company taxable income for the tax year of the accrual, we may be required to make a distribution to our stockholders in order to satisfy the Annual Distribution Requirement, even though we will not have received any corresponding cash amount. As a result, we may have difficulty meeting the Annual Distribution Requirement necessary to maintain RIC tax treatment under Subchapter M of the Code. We may have to sell or otherwise dispose of some of our investments at times and/or at prices we would not consider advantageous, raise additional debt or equity capital or forgo new investment opportunities for this purpose. If we are not able to obtain cash from other sources, we may fail to qualify for RIC tax treatment and thus become subject to corporate-level income tax.
Although we do not presently expect to do so, we are authorized to borrow funds and to sell or otherwise dispose of assets in order to satisfy distribution requirements. However, under the 1940 Act, we are not permitted to make distributions to our stockholders while our debt obligations and other senior securities are outstanding unless certain “asset coverage” tests are met. See “—Regulation—Senior Securities.” Moreover, our ability to sell or otherwise dispose of assets to meet the Annual Distribution Requirement may be limited by (1) the illiquid nature of our portfolio and/or (2) other requirements relating to our status as a RIC, including the Diversification Tests. If we sell or otherwise dispose of assets in order to meet the Annual Distribution Requirement or the Excise Tax Avoidance Requirement, we may make such dispositions at times that, from an investment standpoint, are not advantageous.
A portfolio company in which we invest may face financial difficulties that require us to work-out, modify or otherwise restructure our investment in the portfolio company. Any such transaction could, depending upon the specific terms of the transaction, result in unusable capital losses and future non-cash income. Any such transaction could also result in our receiving assets that give rise to non-qualifying income for purposes of the 90% Income Test or otherwise would not count toward satisfying the Diversification Tests.
Some of the income that we might otherwise earn, such as fees for providing managerial assistance, certain fees earned with respect to our investments, income recognized in a work-out or restructuring of a portfolio investment, or income recognized from an
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equity investment in an operating partnership, may not satisfy the 90% Income Test. To manage the risk that such income might disqualify us as a RIC for failure to satisfy the 90% Income Test, one or more subsidiary entities treated as U.S. corporations for entity-level income tax purposes may be employed to earn such income and (if applicable) hold the related asset. Such subsidiary entities will be required to pay U.S. federal income tax on their earnings, which ultimately will reduce the yield to our stockholders on such fees and income.
Competition
Our primary competitors for investments include other BDCs and investment funds (including private equity funds, mezzanine funds and CLO funds). In addition, alternative investment vehicles, such as hedge funds, have begun to invest in areas in which they have not traditionally invested, including making investments in middle market private U.S. companies. We also compete with traditional financial services companies such as commercial banks. We believe we will be able to compete with these entities for financing opportunities on the basis of, among other things, the experience of the Adviser and its affiliates.
Some of our competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. For example, some competitors may have a lower cost of capital and access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments than we have and may not be subject to the regulatory restrictions that the 1940 Act imposes on us as a BDC or the restrictions that the Code imposes on us as a RIC. These characteristics could allow our competitors to consider a wider variety of investments, establish more relationships and offer better pricing and more flexible structuring than us.
Employees
We do not currently have any employees. Each of our executive officers is a principal, officer or employee of the Adviser or its affiliates, which manages and oversees our investment operations. In the future, the Adviser may directly retain personnel based upon its needs.
Available Information
We file with or submit to the SEC annual, quarterly and current periodic reports, proxy statements and other information meeting the informational requirements of the Exchange Act. This information is available free of charge by calling us collect at (215) 495-1150 or on our website at www.fskkradvisor.com. Information contained on our website is not incorporated into this annual report on Form 10-K and you should not consider such information to be part of this annual report on Form 10-K. Such information is also available from the EDGAR database on the SEC's web site at www.sec.gov.
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Item 1A. Risk Factors
Investing in our securities involves a number of significant risks. In addition to the other information contained in this annual report on Form 10-K, investors should consider carefully the following information before making an investment in our securities. If any of the following events occur, our business, financial condition and results of operations could be materially and adversely affected. In such case, the net asset value and market price of our common stock could decline or the value of our debt or equity investments may decline, and investors may lose all or part of their investment.
Summary of Risk Factors
The following is a summary of the principal risk factors associated with an investment in the Company. Further details regarding each risk included in the below summary list can be found further below.
Risks Related to Our Business and Structure
•If our investment advisory agreement were to be terminated, or if the Adviser loses any members of its senior management team, our ability to achieve our investment objectives could be significantly harmed.
•The inability of the Adviser to generate investment opportunities through relationships with private equity sponsors, investment banks and commercial banks could adversely affect our business.
•We operate in a highly competitive market for investment opportunities.
•The SBCA Act allows us to incur additional leverage.
•Failure to safeguard the security of our data could compromise our ability to conduct business.
Risks Related to the Adviser and its Affiliates
•The Adviser and its affiliates face conflicts of interest as a result of arrangements between us and the Adviser and related to obligations the Adviser and its affiliates have to our affiliates and to other clients.
•We may be obligated to pay the Adviser incentive compensation on income that we have not received.
•We may face additional competition because employees of the Adviser are not prohibited from raising money for or managing another entity that makes the same types of investments that we target.
Risks Related to Business Development Companies and RICs
•Failure to maintain our status as a BDC would reduce our operating flexibility.
•Our ability to acquire investments may be adversely affected if we cannot obtain financing.
•The requirement that we invest a sufficient portion of our assets in qualifying assets could preclude us from investing in accordance with our current business strategy; conversely, the failure to invest a sufficient portion of our assets in qualifying assets could result in our failure to maintain our status as a BDC.
Risks Related to our Investments
•Inflation may adversely affect the business, results of operations and financial condition of our portfolio companies.
•Our investments in prospective portfolio companies may be risky, and we could lose all of our investment.
•Our investments in private investment funds subject us indirectly to the underlying risks of such private investment funds and additional fees and expenses.
•There may be circumstances where our debt investments could be subordinated to claims of other creditors or we could be subject to lender liability claims. If there is a default, the value of any collateral securing our debt investments may not be sufficient to repay in full both the other creditors and us.
•Declines in market values or fair market values of our investments could result in significant net unrealized depreciation of our portfolio, which in turn would reduce our net asset value.
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•A significant portion of our investment portfolio does not have a readily available market price and is and will be recorded at fair value in accordance with policies and procedures approved by our board of directors and, as a result, there is and will be uncertainty as to the value of our portfolio investments.
•We are exposed to risks associated with changes in interest rates.
•Our investments may include original issue discount and PIK instruments.
•We may from time to time enter into derivative transactions which expose us to certain risks.
Risks Related to Debt Financing
•We currently incur indebtedness to make investments, which magnifies the potential for gain or loss on amounts invested in our common stock and may increase the risk of investing in our common stock.
•The agreements governing our debt financing arrangements contain various covenants which, if not complied with, could have a material adverse effect on our ability to meet our investment obligations.
Risks Related to an Investment in Our Common Stock
•There is a risk that investors in our common stock may not receive distributions.
•Portions of the distributions that we make may represent a return of capital to stockholders.
•Our shares of common stock may trade at a discount to net asset value and we may issue shares at prices below our then-current net asset value.
•We may pay distributions from offering proceeds, borrowings or the sale of assets.
•Certain provisions of our charter and bylaws as well as provisions of the Maryland General Corporation Law could deter takeover attempts and have an adverse impact on the value of our common stock.
•Holders of any preferred stock that we issue will have the right to elect members of the board of directors.
General Risk Factors
•Future disruptions or instability in capital markets could negatively impact the valuation of our investments and our ability to raise capital.
•Future economic recessions or downturns could impair our portfolio companies and harm our operating results.
•Events outside of our control, including public health crises, could negatively affect our portfolio companies and our results of operations.
•If a period of capital market disruption and instability continues for an extended period of time, there is a risk that investors in our equity securities may not receive distributions consistent with historical levels or at all or that our distributions may not grow over time and a portion of our distributions may be a return of capital.
•Economic sanction laws in the United States and other jurisdictions may prohibit us and our affiliates from transacting with certain countries, individuals and companies.
Risks Related to Our Business and Structure
Our ability to achieve our investment objectives depends on the Adviser’s ability to manage and support our investment process and if our agreement with the Adviser were to be terminated, or if the Adviser loses any members of its senior management team, our ability to achieve our investment objectives could be significantly harmed.
Because we have no employees, we depend on the investment expertise, skill and network of business contacts of the Adviser. The Adviser evaluates, negotiates, structures, executes, monitors and services our investments. Our future success depends to a significant extent on the continued service of the Adviser, as well as its senior management team. The departure of any members of the Adviser’s senior management team could have a material adverse effect on our ability to achieve our investment objectives.
Our ability to achieve our investment objectives depends on the Adviser’s ability to identify, analyze, invest in, finance and monitor companies that meet our investment criteria. The Adviser’s capabilities in structuring the investment process, providing competent, attentive and efficient services to us, and facilitating access to financing on acceptable terms depend on the employment of
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investment professionals in an adequate number and of adequate sophistication to match the corresponding flow of transactions. To achieve our investment objectives, the Adviser may need to hire, train, supervise and manage new investment professionals to participate in our investment selection and monitoring process. The Adviser may not be able to find investment professionals in a timely manner or at all. Failure to support our investment process could have a material adverse effect on our business, financial condition and results of operations.
In addition, each of our investment advisory agreement and administration agreement with the Adviser has termination provisions that allow the parties to terminate the agreements without penalty. The investment advisory agreement and administration agreement may each be terminated at any time, without penalty, by the Adviser, upon 60 days’ notice to us. If the investment advisory agreement is terminated, it may adversely affect the quality of our investment opportunities. In addition, in the event such agreement is terminated, it may be difficult for us to replace the Adviser and the termination of such agreement may adversely impact the terms of any existing or future financing arrangement, which could have a material adverse effect on our business and financial condition.
Because our business model depends to a significant extent upon relationships with private equity sponsors, investment banks and commercial banks, the inability of the Adviser to maintain or develop these relationships, or the failure of these relationships to generate investment opportunities, could adversely affect our business.
We operate in a highly competitive market for investment opportunities, which could reduce returns and result in losses.
A number of entities compete with us to make the types of investments that we plan to make and we believe that recent market trends have increased the number of competitors seeking to invest in loans to private, middle market companies in the United States. We compete with public and private funds, commercial and investment banks, commercial financing companies and, to the extent they provide an alternative form of financing, private equity and hedge funds. Many of our competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. For example, we believe some of our competitors have access to funding sources that are not available to us. In addition, some of our competitors could have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than us. Furthermore, many of our competitors are not subject to the regulatory restrictions that the 1940 Act imposes on us as a business development company or the source of income, asset diversification and distribution requirements we must satisfy to maintain our qualification as a RIC. The competitive pressures we face could have a material adverse effect on our business, financial condition, results of operations and cash flows. As a result of this competition, we can provide no assurance that we will be able to take advantage of attractive investment opportunities that arise from time to time, and we can provide no assurance that we will be able to identify and make investments that are consistent with our investment objective.
The amount of capital in the private debt markets and overall competition for loans could result in short term returns for us that are lower than our long-term targets. If there is a decrease in the number of new investment opportunities in U.S. middle market companies like there was as a result of the COVID-19 pandemic during 2020, and if such conditions continue for an extended amount of time, they could have a material adverse effect on our business, financial condition and results of operations.
Identifying, structuring and consummating investments involves competition among capital providers and market and transaction uncertainty. The Adviser can provide no assurance that it will be able to identify a sufficient number of suitable investment opportunities or to avoid prepayment of existing investments to satisfy our investment objectives, including as necessary to effectively structure credit facilities or other forms of leverage. The loan origination market is very competitive, which can result in loan terms that are more favorable to borrowers, and conversely less favorable to lenders, such as lower interest rates and fees, weaker borrower financial and other covenants, borrower rights to cure defaults, and other terms more favorable to borrowers than current or historical norms. Increased competition could cause us to make more loans that are “cov-lite” in nature and, in a distressed scenario, there can be no assurance that these loans will retain the same value as loans with a full package of covenants. As a result of these conditions, the market for leveraged loans could become less advantageous than expected for us, and this could increase default rates, decrease recovery rates or otherwise harm our returns. The risk of prepayment is also higher in the current competitive environment if borrowers are offered more favorable terms by other lenders. The financial markets have experienced substantial fluctuations in prices and liquidity for leveraged loans. Any further disruption in the credit and other financial markets could have substantial negative effects on general economic conditions, the availability of required capital for companies and the operating performance of such companies. These conditions also could result in increased default rates and credit downgrades, and affect the liquidity and pricing of the investments made by us. Conversely, periods of economic stability and increased competition among capital providers could increase the difficulty of locating investments that are desirable for us.
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With respect to the investments we make, we do not seek to compete based primarily on the interest rates we offer, and we believe that some of our competitors could make loans with interest rates that will be lower than the rates we offer. In the secondary market for acquiring existing loans, we compete generally on the basis of pricing terms. With respect to all investments, we could lose some investment opportunities if we do not match our competitors’ pricing, terms and structure. However, if we match our competitors’ pricing, terms and structure, we could experience decreased net interest income, lower yields and increased risk of credit loss. We could also compete for investment opportunities with accounts managed or sponsored by the Adviser or its affiliates. Although the Adviser allocates opportunities in accordance with its allocation policy, allocations to such other accounts will reduce the amount and frequency of opportunities available to us and thus not necessarily be in the best interests of us and our securityholders. Moreover, the performance of investments will not be known at the time of allocation.
Our board of directors may change our operating policies and strategies without prior notice or stockholder approval.
Changes in laws or regulations governing our operations or the operations of our business partners may adversely affect our business or cause us to alter our business strategy.
The SBCA Act allows us to incur additional leverage.
We may invest in derivatives or other assets that expose us to certain risks, including market risk, liquidity risk and other risks similar to those associated with the use of leverage.
We may use derivative instruments including, in particular, swaps and other similar transactions, in seeking to achieve its investment objective or for other reasons, such as cash management, financing activities or to hedge its positions. Accordingly, these derivatives may be used in limited instances as a form of leverage or to seek to enhance returns, including speculation on changes in credit spreads, interest rates or other characteristics of the market, individual securities or groups of securities. If we invest in a derivative for speculative purposes, we will be fully exposed to the risks of loss of that derivative, which may sometimes be greater than the derivative’s cost. The use of derivatives may involve substantial leverage. The use of derivatives may subject us to various risks, including counterparty risk, currency risk, leverage risk, liquidity risk, correlation risk, index risk and regulatory risk.
Furthermore, our ability to successfully use derivatives depends on the Adviser’s ability to predict pertinent securities prices, interest rates, currency exchange rates and other economic factors, which cannot be assured. Additionally, segregated liquid assets,
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amounts paid by us as premiums and cash or other assets held in margin accounts with respect to derivatives are not otherwise available to us for investment purposes.
Rule 18f-4 under the 1940 Act (the “Derivatives Rule”) provides a comprehensive framework for the use of derivatives by business development companies. The Derivatives Rule permits business development companies, subject to various conditions described below, to enter into derivatives transactions and certain other transactions notwithstanding the restrictions on the issuance of “senior securities” under Section 18 of the 1940 Act.
Business development companies that don’t qualify as “limited derivatives users” as defined below, are required by the Derivatives Rule to, among other things, (i) adopt and implement a derivatives risk management program (“DRMP”) and new testing requirements; (ii) comply with a relative or absolute limit on fund leverage risk calculated based on value-at-risk (“VaR”); and (iii) comply with new requirements related to board and SEC reporting. The DRMP is administered by a “derivatives risk manager,” who is appointed by the Company's board of directors and periodically reviews the DRMP and reports to the Company's board of directors.
The Derivatives Rule provides an exception from the DRMP, VaR limit and certain other requirements for a business development company that limits its “derivatives exposure” to no more than 10% of its net assets (as calculated in accordance with the Derivatives Rule) (a “limited derivatives user”), provided that the business development company establishes appropriate policies and procedures reasonably designed to manage derivatives risks, including the risk of exceeding the 10% “derivatives exposure” threshold.
The requirements of the Derivatives Rule may limit our ability to engage in derivatives transactions as part of our investment strategies. These requirements may also increase the cost of our investments and cost of doing business, which could adversely affect the value of our investments and/or our performance. The rule also may not be effective to limit our risk of loss. In particular, measurements of VaR rely on historical data and may not accurately measure the degree of risk reflected in our derivatives or other investments. There may be additional regulation of the use of derivatives transactions by business development companies, which could significantly affect our use. The ultimate impact of the regulations remains unclear. Additional regulation of derivatives transactions may make them more costly, limit their availability or utility, otherwise adversely affect their performance or disrupt markets.
As a public company, we are subject to regulations not applicable to private companies, such as provisions of the Sarbanes-Oxley Act. Efforts to comply with such regulations will involve significant expenditures, and non-compliance with such regulations may adversely affect us.
As a public company, we incur legal, accounting and other expenses, including costs associated with the periodic reporting requirements applicable to a company whose securities are registered under the Exchange Act, as well as additional corporate governance requirements, including requirements under the Sarbanes-Oxley Act, and other rules implemented by the SEC and the listing standards of the NYSE. Our management is required to report on our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act and rules and regulations of the SEC thereunder. In particular, our management is required to review on an annual basis our internal control over financial reporting, and on a quarterly and annual basis to evaluate and disclose changes in our internal control over financial reporting. Section 404 of the Sarbanes-Oxley Act also generally requires an attestation from our independent registered public accounting firm on the effectiveness of our internal control over financial reporting.
We may experience fluctuations in our quarterly results.
If we, our affiliates and our and their respective third-party service providers are unable to maintain the availability of electronic data systems and safeguard the security of data, our ability to conduct business may be compromised, which could impair our liquidity, disrupt our business, damage our reputation or otherwise adversely affect our business.
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Cybersecurity refers to the combination of technologies, processes, and procedures established to protect information technology systems and data from unauthorized access, attack, or damage. We, our affiliates and our and their respective third-party service providers are subject to cybersecurity risks. Our business operations rely upon secure information technology systems for data processing, storage and reporting. We depend on the effectiveness of the information and cybersecurity policies, procedures and capabilities maintained by our affiliates and our and their respective third-party service providers to protect their computer and telecommunications systems and the data that reside on or are transmitted through them. Cybersecurity risks have significantly increased in recent years and, while we have not experienced any material losses relating to cyber-attacks or other information security breaches, we could suffer such losses in the future. Our, our affiliates and our and their respective third-party service providers’ computer systems, software and networks may be vulnerable to unauthorized access, computer viruses or other malicious code and other events that could have a security impact, as well as cyber-attacks that do not have a security impact but may nonetheless cause harm, such as causing denial-of-service attacks (i.e., efforts to make network services unavailable to intended users) on websites, servers or other online systems. If one or more of such events occur, it potentially could jeopardize confidential and other information, including nonpublic personal information and sensitive business data, processed and stored in, and transmitted through, computer systems and networks, or otherwise cause interruptions or malfunctions in our operations or the operations of our affiliates and our and their respective third-party service providers. This could result in significant losses, reputational damage, litigation, regulatory fines or penalties, or otherwise adversely affect our business, financial condition or results of operations.
Substantial costs may be incurred in order to prevent any cyber incidents in the future. The costs related to cyber or other security threats or disruptions may not be fully insured or indemnified by other means. Privacy and information security laws and regulation changes, and compliance with those changes, may result in cost increases due to system changes and the development of new administrative processes. In addition, we may be required to expend significant additional resources to modify our protective measures and to investigate and remediate vulnerabilities or other exposures arising from operational and security risks. There is no assurance that any efforts to mitigate cybersecurity risks undertaken by us, our affiliates, or our or their respective third-party service providers will be effective. If we fail to comply with the relevant laws and regulations, we could suffer financial losses, a disruption of our business, liability to investors, regulatory intervention or reputational damage.
We and our Adviser could be the target of litigation.
Our business and operations could be negatively affected if we become subject to stockholder activism, which could cause us to incur significant expense, hinder the execution of our investment strategy or impact our stock price.
Stockholder activism, which could take many forms, including making public demands that we consider certain strategic alternatives for the Company, engaging in public campaigns to attempt to influence our corporate governance and/or our management, and commencing proxy contests to attempt to elect the activists’ representatives or others to our board of directors, or arise in a variety of situations, has been increasing in the BDC space recently. While we are currently not subject to any stockholder activism, because of potential volatility of our stock price and for a variety of other reasons, we may in the future become the target of stockholder activism. Stockholder activism could result in substantial costs and divert management’s and our board of directors’ attention and resources from our business. Additionally, such stockholder activism could give rise to perceived uncertainties as to our future and adversely affect our relationships with service providers and our portfolio companies. Also, we may be required to incur significant legal and other expenses related to any activist stockholder matters. Further, our stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any stockholder activism.
ESG and Sustainability Risks
The Adviser will assess ESG risks on an investment-by-investment basis. The likely impacts of sustainability risks on the returns of the Company will depend on the Company’s exposure to investments that are vulnerable to sustainability risks and the materiality of the sustainability risks. The negative impacts of sustainability risks on the Company may be mitigated by the Adviser’s approach to integrating sustainability risks in its investment decision-making. However, there is no guarantee that these measures will mitigate or prevent sustainability risks from materializing in respect of the Company.
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The likely impact on the returns of the Company from an actual or potential material decline in the value of an investment due to an ESG event or condition will vary and depend on several factors including, but not limited to, the type, extent, complexity and duration of the event or condition, prevailing market conditions and the existence of any mitigating factors.
The ESG information used to determine whether companies are managed and behave responsibly may be provided by third-party sources and is based on backward-looking analysis. The subjective nature of non-financial ESG criteria means a wide variety of outcomes are possible. The data may not adequately address material sustainability factors. The analysis is also dependent on companies disclosing relevant data and the availability of this data can be limited.
Risks Related to the Adviser and its Affiliates
The Adviser and its affiliates, including our officers and some of our directors, face conflicts of interest as a result of compensation arrangements between us and the Adviser, which could result in actions that are not in the best interests of our stockholders.
We may be obligated to pay the Adviser incentive compensation on income that we have not received.
Any incentive fee payable by us that relates to our net investment income may be computed and paid on income that may include interest that has been accrued but not yet received. If a portfolio company defaults on a loan that is structured to provide accrued interest, it is possible that accrued interest previously included in the calculation of the incentive fee will become uncollectible. The Adviser is not under any obligation to reimburse us for any part of the incentive fee it received that was based on accrued income that we never received as a result of a default by an entity on the obligation that resulted in the accrual of such income, and such circumstances would result in our paying an incentive fee on income we never received.
There may be conflicts of interest related to obligations the Adviser’s senior management and investment teams have to our affiliates and to other clients.
The members of the senior management and investment teams of the Adviser serve or may serve as officers, directors or principals of entities that operate in the same or a related line of business as we do, or of investment vehicles managed by the same personnel. For example, the Adviser is also investment adviser to KKR FS Income Trust and KKR FS Income Trust Select, or together with the Company, the Fund Complex, and the officers, managers and other personnel of the Adviser serve and may serve in the future in similar or other capacities for the investment advisers to future investment vehicles affiliated with FS Investments or KKR Credit. In serving in these multiple and other capacities, they may have obligations to other clients or investors in those entities, the fulfillment of which may not be in our best interests or in the best interest of our stockholders. Our investment objectives may overlap with the investment objectives of such investment funds, accounts or other investment vehicles. For example, we rely on the Adviser to manage our day-to-day activities and to implement our investment strategy. The Adviser and certain of its affiliates are presently, and plan in the future to continue to be, involved with activities which are unrelated to us. As a result of these activities, the Adviser, its employees and certain of its affiliates will have conflicts of interest in allocating their time between us and other activities in which they are or may become involved, including the management of other entities affiliated with FS Investments or KKR Credit.
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The time and resources that the Adviser and individuals employed by the Adviser devote to us may be diverted and we may face additional competition due to the fact that the Adviser and individuals employed by the Adviser are not prohibited from raising money for or managing another entity that makes the same types of investments that we target.
The Adviser’s liability is limited under each of the investment advisory agreement and the administration agreement, and we are required to indemnify it against certain liabilities, which may lead it to act in a riskier manner on our behalf than it would when acting for its own account.
Risks Related to Business Development Companies
Failure to maintain our status as a BDC would reduce our operating flexibility.
We are uncertain of our sources for funding our future capital needs and if we cannot obtain debt or equity financing on acceptable terms, or at all, our ability to acquire investments and to expand our operations will be adversely affected.
The requirement that we invest a sufficient portion of our assets in qualifying assets could preclude us from investing in accordance with our current business strategy; conversely, the failure to invest a sufficient portion of our assets in qualifying assets could result in our failure to maintain our status as a BDC.
As a BDC, we may not acquire any assets other than “qualifying assets” unless, at the time of such acquisition, at least 70% of our total assets are qualifying assets. Therefore, we may be precluded from investing in what we believe are attractive investments if such investments are not qualifying assets. Similarly, these rules could prevent us from making additional investments in existing portfolio companies, which could result in the dilution of our position, or could require us to dispose of investments at an inopportune time to comply with the 1940 Act. If we were forced to sell non-qualifying investments in the portfolio for compliance purposes, the proceeds from such sale could be significantly less than the current value of such investments. Conversely, if we fail to invest a
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Regulations governing our operation as a BDC and a RIC will affect our ability to raise, and the way in which we raise, additional capital or borrow for investment purposes, which may have a negative effect on our growth.
As a result of our need to satisfy the Annual Distribution Requirement in order to maintain RIC tax treatment under Subchapter M of the Code, we may need to periodically access the capital markets to raise cash to fund new investments. We may issue “senior securities,” as defined in the 1940 Act, including issuing preferred stock, borrowing money from banks or other financial institutions, or issuing debt securities only in amounts such that our asset coverage, as defined in the 1940 Act, equals at least 150% after such incurrence or issuance. Our ability to issue certain other types of securities is also limited. Under the 1940 Act, we are also generally prohibited from issuing or selling our common stock at a price per share, after deducting underwriting commissions, that is below our net asset value per share, without first obtaining approval for such issuance from our stockholders and our independent directors. Compliance with these limitations on our ability to raise capital may unfavorably limit our investment opportunities. These limitations may also reduce our ability in comparison to other companies to profit from favorable spreads between the rates at which we can borrow and the rates at which we can lend.
Our ability to enter into transactions with our affiliates is restricted.
Risks Related to Our Investments
Inflation may adversely affect the business, results of operations and financial condition of our portfolio companies.
Certain of our portfolio companies are in industries that may be impacted by inflation. If such portfolio companies are unable to pass any increases in their costs of operations along to their customers, it could adversely affect their operating results and impact their ability to pay interest and principal on our loans, particularly if interest rates rise in response to inflation. In addition, any projected future decreases in our portfolio companies’ operating results due to inflation could adversely impact the fair value of those investments. Any decreases in the fair value of our investments could result in future realized or unrealized losses and therefore reduce our net assets resulting from operations.
Our investments in prospective portfolio companies may be risky, and we could lose all or part of our investment.
Our investments in senior secured loans, second lien secured loans, senior secured bonds, subordinated debt and equity of private U.S. companies, including middle market companies, may be risky and there is no limit on the amount of any such investments in which we may invest.
Senior Secured Loans, Second Lien Secured Loans and Senior Secured Bonds. There is a risk that any collateral pledged by portfolio companies in which we have taken a security interest may decrease in value over time or lose its entire value, may be difficult to sell in a timely manner, may be difficult to appraise and may fluctuate in value based upon the success of the business and market conditions, including as a result of the inability of the portfolio company to raise additional capital. To the extent our debt
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investment is collateralized by the securities of a portfolio company’s subsidiaries, such securities may lose some or all of their value in the event of the bankruptcy or insolvency of the portfolio company. Also, in some circumstances, our security interest may be contractually or structurally subordinated to claims of other creditors. In addition, deterioration in a portfolio company’s financial condition and prospects, including its inability to raise additional capital, may be accompanied by deterioration in the value of the collateral for the debt. Secured debt that is under-collateralized involves a greater risk of loss. In addition, second lien secured debt is granted a second priority security interest in collateral, which means that any realization of collateral will generally be applied to pay senior secured debt in full before second lien secured debt is paid. Consequently, the fact that debt is secured does not guarantee that we will receive principal and interest payments according to the debt’s terms, or at all, or that we will be able to collect on the debt should we be forced to enforce our remedies.
Subordinated Debt. Our subordinated debt investments will generally rank junior in priority of payment to senior debt and will generally be unsecured. This may result in a heightened level of risk and volatility or a loss of principal, which could lead to the loss of the entire investment. These investments may involve additional risks that could adversely affect our investment returns. To the extent interest payments associated with such debt are deferred, such debt may be subject to greater fluctuations in valuations, and such debt could subject us and our stockholders to non-cash income. Because we will not receive any principal repayments prior to the maturity of some of our subordinated debt investments, such investments will be of greater risk than amortizing loans.
Equity and Equity-Related Securities. We may make select equity investments. In addition, in connection with our debt investments, we on occasion receive equity interests such as warrants or options as additional consideration. The equity interests we receive may not appreciate in value and, in fact, may decline in value. Accordingly, we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience.
Convertible Securities. We may invest in convertible securities, such as bonds, debentures, notes, preferred stocks or other securities that may be converted into, or exchanged for, a specified amount of common stock of the same or different issuer within a particular period of time at a specified price or formula. A convertible security may be subject to redemption at the option of the issuer at a price established in the convertible security’s governing instrument. If a convertible security held by us is called for redemption, it will be required to permit the issuer to redeem the security, convert it into the underlying common stock or sell it to a third party. Any of these actions could have an adverse effect on our ability to achieve our investment objective.
Non-U.S. Securities. We may invest in non-U.S. securities, which may include securities denominated in U.S. dollars or in non-U.S. currencies and securities of companies in emerging markets, to the extent permitted by the 1940 Act. Because evidences of ownership of such securities usually are held outside the United States, we would be subject to additional risks if we invested in non-U.S. securities, which include possible adverse political and economic developments, seizure or nationalization of foreign deposits and adoption of governmental restrictions which might adversely affect or restrict the payment of principal and interest on the non-U.S. securities to investors located outside the country of the issuer, whether from currency blockage or otherwise. Because non-U.S. securities may be purchased with and payable in foreign currencies, the value of these assets as measured in U.S. dollars may be affected unfavorably by changes in currency rates and exchange control regulations. In addition, investing in securities of companies in emerging markets involves many risks, including potential inflationary economic environments, regulation by foreign governments, different accounting standards, political uncertainties and economic, social, political, financial, tax and security conditions in the applicable emerging market, any of which could negatively affect the value of companies in emerging markets or investments in their securities.
Investments in Asset-Based Opportunities. We may invest in asset-based opportunities through joint ventures, investment platforms, private investment funds or other business entities that provide one or more of the following services: origination or sourcing of potential investment opportunities, due diligence and negotiation of potential investment opportunities and/or servicing, development and management (including turnaround) and disposition of investments. Such investments may be in or alongside existing or newly formed operators, consultants and/or managers that pursue such opportunities and may or may not include capital and/or assets contributed by third party investors. Such investments may include opportunities to direct-finance physical assets, such as airplanes and ships, and/or operating assets, such as financial service entities, as opposed to investment securities, or to invest in origination and/or servicing platforms directly. In valuing our investments, we rely primarily on information provided by operators, consultants and/or managers. Valuations of illiquid securities involve various judgments and consideration of factors that may be subjective. There is a risk that inaccurate valuations could adversely affect the value of our common stock. We may not be able to promptly withdraw our investment in these asset-based opportunities, which may result in a loss to us and adversely affect our investment returns.
Structured Products. We may invest in structured products, which may include collateralized debt obligations, collateralized bond obligations, collateralized loan obligations, structured notes and credit-linked notes. When investing in structured products, we may invest in any level of the subordination chain, including subordinated (lower-rated) tranches and residual interests (the lowest tranche). Structured products may be highly levered and therefore, the junior debt and equity tranches that we may invest in are subject to a higher risk of total loss and deferral or nonpayment of interest than the more senior tranches to which they are
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subordinated. In addition, we will generally have the right to receive payments only from the issuer or counterparty, and will generally not have direct rights against the underlying borrowers or entities. Furthermore, the investments we make in structured products are at times thinly traded or have only a limited trading market. As a result, investments in such structured products may be characterized as illiquid securities.
Derivatives. We may invest from time to time in derivatives, including total return swaps, interest rate swaps, credit default swaps and foreign currency forward contracts. Derivative investments have risks, including: the imperfect correlation between the value of such instruments and our underlying assets, which creates the possibility that the loss on such instruments may be greater than the gain in the value of the underlying assets in our portfolio; the loss of principal; the possible default of the other party to the transaction; and illiquidity of the derivative investments. If a counterparty becomes bankrupt or otherwise fails to perform its obligations under a derivative contract due to financial difficulties, we may experience significant delays in obtaining any recovery under the derivative contract in a bankruptcy or other reorganization proceeding, or may not recover at all. In addition, in the event of the insolvency of a counterparty to a derivative transaction, the derivative contract would typically be terminated at its fair market value. If we are owed this fair market value in the termination of the derivative contract and our claim is unsecured, we will be treated as a general creditor of such counterparty and will not have any claim with respect to the underlying security. Certain of the derivative investments in which we may invest may, in certain circumstances, give rise to a form of financial leverage, which may magnify the risk of owning such instruments. The ability to successfully use derivative investments depends on the ability of the Adviser to predict pertinent market movements, which cannot be assured. In addition, amounts paid by us as premiums and cash or other assets held in margin accounts with respect to our derivative investments would not be available to it for other investment purposes, which may result in lost opportunities for gain.
International investments create additional risks.
We expect to make investments in portfolio companies that are domiciled outside of the United States. We anticipate that up to 30% of our investments may be in these types of assets. Our investments in foreign portfolio companies are deemed “non-qualifying assets,” which means, as required by the 1940 Act, they, along with other non-qualifying assets, may not constitute more than 30% of our total assets at the time of our acquisition of any asset, after giving effect to the acquisition. Notwithstanding the limitation on our ownership of foreign portfolio companies, such investments subject us to many of the same risks as our domestic investments, as well as certain additional risks, including the following:
•foreign governmental laws, rules and policies, including those restricting the ownership of assets in the foreign country or the repatriation of profits from the foreign country to the United States;
•foreign currency devaluations that reduce the value of and returns on our foreign investments;
•adverse changes in the availability, cost and terms of investments due to the varying economic policies of a foreign country in which we invest;
•adverse changes in tax rates, the tax treatment of transaction structures and other changes in operating expenses of a particular foreign country in which we invest;
•the assessment of foreign-country taxes (including withholding taxes, transfer taxes and value added taxes, any or all of which could be significant) on income or gains from our investments in the foreign country;
•adverse changes in foreign-country laws, including those relating to taxation, bankruptcy and ownership of assets;
•changes that adversely affect the social, political and/or economic stability of a foreign country in which we invest;
•high inflation in the foreign countries in which we invest, which could increase the costs to us of investing in those countries;
•deflationary periods in the foreign countries in which we invest, which could reduce demand for our assets in those countries and diminish the value of such investments and the related investment returns to us; and
•legal and logistical barriers in the foreign countries in which we invest that materially and adversely limit our ability to enforce our contractual rights with respect to those investments.
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Our investments in private investment funds, including hedge funds, private equity funds, limited liability companies and other business entities, subject us indirectly to the underlying risks of such private investment funds and additional fees and expenses.
We may invest in private investment funds, including hedge funds, private equity funds, limited liability companies and other business entities which would be required to register as investment companies but for an exemption under Sections 3(c)(1) and 3(c)(7) of the 1940 Act. Our investments in private funds are subject to substantial risks. Investments in such private investment funds expose us to the risks associated with the businesses of such funds or entities as well as such private investment funds’ portfolio companies. These private investment funds may or may not be registered investment companies and, thus, may not be subject to protections afforded by the 1940 Act, covering, among other areas, liquidity requirements, governance by an independent board, affiliated transaction restrictions, leverage limitations, public disclosure requirements and custody requirements.
We rely primarily on information provided by managers of private investment funds in valuing our investments in such funds. There is a risk that inaccurate valuations provided by managers of private investment funds could adversely affect the value of our common stock. In addition, there can be no assurance that a manager of a private investment fund will provide advance notice of any material change in such private investment fund’s investment program or policies and thus, our investment portfolio may be subject to additional risks which may not be promptly identified by the Adviser. Moreover, we may not be able to withdraw our investments in certain private investment funds promptly after we make a decision to do so, which may result in a loss to us and adversely affect our investment returns.
Investments in the securities of private investment funds may also involve duplication of advisory fees and certain other expenses. By investing in private investment funds indirectly through us, you bear a pro rata portion of our advisory fees and other expenses, and also indirectly bear a pro rata portion of the advisory fees, performance-based allocations and other expenses borne by us as an investor in the private investment funds. In addition, the purchase of the shares of some private investment funds requires the payment of sales loads and (in the case of closed-end investment companies) sometimes substantial premiums above the value of such investment companies’ portfolio securities.
We may acquire various structured financial instruments for purposes of “hedging” or reducing our risks, which may be costly and ineffective and could reduce the cash available to service debt or for distribution to stockholders.
Investing in middle market companies involves a number of significant risks, any one of which could have a material adverse effect on our operating results.
Investments in middle market companies involve some of the same risks that apply generally to investments in larger, more established companies. However, such investments have more pronounced risks in that they:
•may have limited financial resources and may be unable to meet the obligations under their debt securities that we hold, which may be accompanied by a deterioration in the value of any collateral pledged under such securities and a reduction in the likelihood of us realizing any guarantees we may have obtained in connection with our investment;
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•have shorter operating histories, narrower product lines and smaller market shares than larger businesses, which tends to render them more vulnerable to competitors’ actions and changing market conditions, as well as general economic downturns;
•are more likely to depend on the management talents and efforts of a small group of persons; therefore, the death, disability, resignation or termination of one or more of these persons could have a material adverse impact on our portfolio company and, in turn, on us;
•generally have less predictable operating results, may from time to time be parties to litigation, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence, and may require substantial additional capital to support their operations, finance expansion or maintain their competitive position. In addition, our executive officers and directors and members of the Adviser may, in the ordinary course of business, be named as defendants in litigation arising from our investments in the portfolio companies; and
Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies.
There may be circumstances where our debt investments could be subordinated to claims of other creditors or we could be subject to lender liability claims.
Second priority liens on collateral securing debt investments that we make to our portfolio companies may be subject to control by senior creditors with first priority liens. If there is a default, the value of the collateral may not be sufficient to repay in full both the first priority creditors and us.
Certain debt investments that we make in portfolio companies may be secured on a second priority basis by the same collateral securing first priority debt of such companies. The first priority liens on the collateral will secure the portfolio company’s obligations under any outstanding senior debt and may secure certain other future debt that may be permitted to be incurred by such company under the agreements governing the loans. The holders of obligations secured by the first priority liens on the collateral will generally control the liquidation of and be entitled to receive proceeds from any realization of the collateral to repay their obligations in full before us. In addition, the value of the collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors. There can be no assurance that the proceeds, if any, from the sale or sales of all of the collateral would be sufficient to satisfy the debt obligations secured by the second priority liens after payment in full of all obligations secured by the first priority liens on the collateral. If such proceeds are not sufficient to repay amounts outstanding under the debt obligations secured by the second priority liens, then we, to the extent not repaid from the proceeds of the sale of the collateral, will only have an unsecured claim against such company’s remaining assets, if any.
We may also make unsecured debt investments in portfolio companies, meaning that such investments will not benefit from any interest in collateral of such companies. Liens on any such portfolio company’s collateral, if any, will secure the portfolio company’s obligations under its outstanding secured debt and may secure certain future debt that is permitted to be incurred by the portfolio company under its secured debt agreements. The holders of obligations secured by such liens will generally control the liquidation of, and be entitled to receive proceeds from, any realization of such collateral to repay their obligations in full before us. In addition, the value of such collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors. There can be no assurance that the proceeds, if any, from sales of such collateral would be sufficient to satisfy our unsecured
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debt obligations after payment in full of all secured debt obligations. If such proceeds were not sufficient to repay the outstanding secured debt obligations, then our unsecured claims would rank equally with the unpaid portion of such secured creditors’ claims against the portfolio company’s remaining assets, if any.
We generally will not control our portfolio companies.
Declines in market values or fair market values of our investments could result in significant net unrealized depreciation of our portfolio, which in turn would reduce our net asset value.
A significant portion of our investment portfolio does not have a readily available market price and is and will be recorded at fair value in accordance with policies and procedures approved by our board of directors and, as a result, there is and will be uncertainty as to the value of our portfolio investments.
Under the 1940 Act, we are required to carry our portfolio investments at market value or, if there is no readily available market value, at fair value, in accordance with policies and procedures approved by our board of directors. There is not a public market for the securities of the privately held companies in which we invest. Most of our investments are not publicly traded or actively traded on a secondary market but are, instead, traded on a privately negotiated OTC secondary market for institutional investors or are not traded at all. As a result, the Adviser, with oversight from our board of directors, will value these securities quarterly at fair value.
We are exposed to risks associated with changes in interest rates.
We are subject to financial market risks, including changes in interest rates. General interest rate fluctuations may have a substantial negative impact on our investments, investment opportunities and cost of capital and, accordingly, may have a material adverse effect on our investment objectives, our rate of return on invested capital and our ability to service our debt and make distributions to our stockholders. Any reduction in the level of interest rates on new investments relative to interest rates on our current investments could also adversely impact our net investment income. In addition, an increase in interest rates would make it more expensive to use debt for our financing needs, if any.
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Our investment portfolio primarily consists of senior secured debt with maturities typically ranging from three to seven years. The longer the duration of these securities, generally, the more susceptible they are to changes in market interest rates. As market interest rates have increased, those securities with a lower yield-at-cost have experienced a mark-to-market unrealized loss. An impairment of the fair market value of our investments, even if unrealized, must be reflected in our financial statements for the applicable period and may therefore have a material adverse effect on our results of operations for that period.
Because we incur indebtedness to make investments, our net investment income is dependent, in part, upon the difference between the rate at which we borrow funds or pay interest on outstanding debt securities and the rate at which we invest these funds. The recent increases in interest rates have made it more expensive to use debt to finance our investments and to refinance our current financing arrangements. In addition, certain of our financing arrangements provide for adjustments in the loan interest rate along with changes in market interest rates. Therefore, in periods of rising interest rates, our cost of funds will increase, which could materially reduce our net investment income. Any reduction in the level of interest rates on new investments relative to interest rates on our current investments could also adversely impact our net investment income.
We have and may continue to structure the majority of our debt investments with floating interest rates to position our portfolio more favorably for rate increases. However, there can be no assurance that this will successfully mitigate our exposure to interest rate risk. For example, in rising interest rate environments, payments under floating rate debt instruments generally will rise and there may be a significant number of issuers of such floating rate debt instruments that will be unable or unwilling to pay such increased interest costs and may otherwise be unable to repay their loans. Rising interest rates could also cause portfolio companies to shift cash from other productive uses to the payment of interest, which may have a material adverse effect on their business and operations and could, over time, lead to increased defaults. Investments in floating rate debt instruments may also decline in value in response to rising interest rates if the interest rates of such investments do not rise as much, or as quickly, as market interest rates in general. Similarly, during periods of rising interest rates, our fixed rate investments may decline in value because the fixed rate of interest paid thereunder may be below market interest rates.
Following their publication on June 30, 2023, no settings of the London Interbank Offered Rate, or LIBOR, continue to be published on a representative basis and publication of many non-U.S. dollar LIBOR settings has been entirely discontinued. On July 29, 2021, the U.S. Federal Reserve System, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, formally recommended replacing U.S.-dollar LIBOR with SOFR, a new index calculated by short-term repurchase agreements, backed by Treasury securities. In April 2018, the Bank of England began publishing its proposed alternative rate, the Sterling Overnight Index Average, or SONIA. Each of SOFR and SONIA significantly differ from LIBOR, both in the actual rate and how it is calculated. Further, on March 15, 2022, the Consolidation Appropriations Act of 2022, which includes the Adjustable Interest Rate (LIBOR) Act, or the LIBOR Act, was signed into law in the United States. This legislation establishes a uniform benchmark replacement process for certain financial contracts that mature after June 30, 2023 that do not contain clearly defined or practicable LIBOR fallback provisions. The legislation also creates a safe harbor that shields lenders from litigation if they choose to utilize a replacement rate recommended by the Board of Governors of the Federal Reserve System.
In addition, the U.K. Financial Conduct Authority, or the FCA, which regulates the publisher of LIBOR (ICE Benchmark Administration), has announced that it will require the continued publication of the one-, three- and six-month tenors of U.S.-dollar LIBOR on a non-representative synthetic basis until the end of September 2024, which may result in certain non-U.S. law-governed contracts and U.S. law-governed contracts not covered by the federal legislation remaining on synthetic U.S.-dollar LIBOR until the end of this period. Although the transition process away from LIBOR has become increasingly well-defined (e.g. the LIBOR Act now provides a uniform benchmark replacement for certain LIBOR-based instruments in the United States), the transition process is complex, and it could cause a disruption in the credit markets generally and could have adverse impacts on our business, financial condition and results of operations, including, among other things, increased volatility or illiquidity in markets for instruments that continue to rely on LIBOR or which have been transitioned away from LIBOR to a different rate like SOFR and, in any case, could result in a reduction in the value of certain of our investments.
A covenant breach by our portfolio companies may harm our operating results.
Our portfolio companies may be highly leveraged.
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We may not realize gains from our equity investments.
An investment strategy focused primarily on privately held companies presents certain challenges, including the lack of available information about these companies.
A lack of liquidity in certain of our investments may adversely affect our business.
We may not have the funds or ability to make additional investments in our portfolio companies.
Prepayments of our debt investments by our portfolio companies could adversely impact our results of operations and reduce our return on equity.
We are subject to the risk that the investments we make in our portfolio companies may be repaid prior to maturity. When this occurs, we will generally reinvest these proceeds in temporary investments, pending their future investment in new portfolio
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Our investments may include original issue discount and PIK instruments.
To the extent that we invest in original issue discount or PIK instruments and the accretion of original issue discount or PIK interest income constitutes a portion of our income, we will be exposed to risks associated with the requirement to include such non-cash income in taxable and accounting income prior to receipt of cash, including the following:
•The higher interest rates on PIK instruments reflect the payment deferral and increased credit risk associated with these instruments, and PIK instruments generally represent a significantly higher credit risk than coupon loans;
•Original issue discount and PIK instruments may have unreliable valuations because the accruals require judgments about collectability of the deferred payments and the value of any associated collateral;
•An election to defer PIK interest payments by adding them to the principal on such instruments increases our future investment income which increases our gross assets and, as such, increases the Adviser’s future base management fees which, thus, increases the Adviser’s future income incentive fees at a compounding rate;
•Market prices of PIK instruments and other zero coupon instruments are affected to a greater extent by interest rate changes, and may be more volatile than instruments that pay interest periodically in cash. While PIK instruments are usually less volatile than zero coupon debt instruments, PIK instruments are generally more volatile than cash pay securities;
•The deferral of PIK interest on an instrument increases the loan-to-value ratio, which is a measure of the riskiness of a loan, with respect to such instrument;
•Even if the conditions for income accrual under GAAP are satisfied, a borrower could still default when actual payment is due upon the maturity of such loan;
•For accounting purposes, cash distributions to investors representing original issue discount income are not derived from paid-in capital, although they may be paid from the offering proceeds. Thus, although a distribution of original issue discount income may come from the cash invested by investors, the 1940 Act does not require that investors be given notice of this fact;
•Tax legislation requires that income be recognized for tax purposes no later than when recognized for financial reporting purposes;
•The required recognition of PIK interest for U.S. federal income tax purposes may have a negative impact on liquidity, as it represents a non-cash component of our investment company taxable income that may require cash distributions to stockholders in order to maintain our ability to be subject to tax as a RIC; and
We may from time to time enter into total return swaps, credit default swaps or other derivative transactions which expose us to certain risks, including credit risk, market risk, liquidity risk and other risks similar to those associated with the use of leverage.
We may from time to time enter into total return swaps, credit default swaps or other derivative transactions that seek to modify or replace the investment performance of a particular reference security or other asset. These transactions are typically individually negotiated, non-standardized agreements between two parties to exchange payments, with payments generally calculated by reference to a notional amount or quantity. Swap contracts and similar derivative contracts are not traded on exchanges; rather, banks and dealers act as principals in these markets. These investments may present risks in excess of those resulting from the referenced security or other asset. Because these transactions are not an acquisition of the referenced security or other asset itself, the investor has no right directly to enforce compliance with the terms of the referenced security or other asset and has no voting or other consensual rights of ownership with respect to the referenced security or other asset. In the event of insolvency of a counterparty, we will be treated as a general creditor of the counterparty and will have no claim of title with respect to the referenced security or other asset.
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A total return swap is a contract in which one party agrees to make periodic payments to another party based on the change in the market value of the referenced security or other assets underlying the total return swap during a specified period, in return for periodic payments based on a fixed or variable interest rate.
A total return swap is subject to market risk, liquidity risk and risk of imperfect correlation between the value of the total return swap and the debt obligations underlying the total return swap. In addition, we may incur certain costs in connection with a total return swap that could in the aggregate be significant.
A credit default swap is a contract in which one party buys or sells protection against a credit event with respect to an issuer, such as an issuer’s failure to make timely payments of interest or principal on its debt obligations, bankruptcy or restructuring during a specified period. Generally, if we sell credit protection using a credit default swap, we will receive fixed payments from the swap counterparty and if a credit event occurs with respect to the applicable issuer, we will pay the swap counterparty par for the issuer’s defaulted debt securities and the swap counterparty will deliver the defaulted debt securities to us. Generally, if we buy credit protection using a credit default swap, we will make fixed payments to the counterparty and if a credit event occurs with respect to the applicable issuer, we will deliver the issuer’s defaulted securities underlying the swap to the swap counterparty and the counterparty will pay us par for the defaulted securities. Alternatively, a credit default swap may be cash settled and the buyer of protection would receive the difference between the par value and the market value of the issuer’s defaulted debt securities from the seller of protection.
Credit default swaps are subject to the credit risk of the underlying issuer. If we are selling credit protection, there is a risk that we will not properly assess the risk of the underlying issuer, a credit event will occur and we will have to pay the counterparty. If we are buying credit protection, there is a risk that we will not properly assess the risk of the underlying issuer, no credit event will occur and we will receive no benefit for the premium paid.
A derivative transaction is also subject to the risk that a counterparty will default on its payment obligations thereunder or that we will not be able to meet our obligations to the counterparty. In some cases, we may post collateral to secure our obligations to the counterparty, and we may be required to post additional collateral upon the occurrence of certain events such as a decrease in the value of the reference security or other asset. In some cases, the counterparty may not collateralize any of its obligations to us.
We may invest through joint ventures, partnerships or other special purpose vehicles and our investments through these vehicles may entail greater risks, and investments in which we have a non-controlling interest may involve risks specific to third-party management of those investments.
Risks Related to Debt Financing
We currently incur indebtedness to make investments, which magnifies the potential for gain or loss on amounts invested in our common stock and may increase the risk of investing in our common stock.
The use of borrowings and other types of financing, also known as leverage, magnifies the potential for gain or loss on amounts invested and, therefore, increases the risks associated with investing in our common stock. When we use leverage to partially finance our investments, through borrowing from banks and other lenders or issuing debt securities, we, and therefore our stockholders, will experience increased risks of investing in our common stock. Any lenders and debt holders would have fixed dollar claims on our assets that are senior to the claims of our stockholders. If the value of our assets increases, then leverage would cause the net asset value attributable to our common stock to increase more sharply than it would have had we not utilized leverage. Conversely, if the value of our assets decreases, leverage would cause net asset value to decline more sharply than it otherwise would have had we not
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utilized leverage. Similarly, any increase in our income in excess of interest payable on our indebtedness would cause our net investment income to increase more than it would without leverage, while any decrease in our income would cause net investment income to decline more sharply than it would have had we not utilized leverage. Such a decline could negatively affect our ability to make distributions to stockholders. Leverage is generally considered a speculative investment technique.
In addition, the decision to utilize leverage will increase our assets and, as a result, will increase the amount of base management fees payable to the Adviser. See “Risks Related to the Adviser and its Affiliates—The Adviser and its affiliates, including our officers and some of our directors, face conflicts of interest as a result of compensation arrangements between us and the Adviser, which could result in actions that are not in the best interests of our stockholders.”
Illustration. The following table illustrates the effect of leverage on returns from an investment in shares of our common stock assuming various annual returns, net of expenses. The calculations in the table below are hypothetical and actual returns may be higher or lower than those appearing below. The calculation assumes (i) $19.2 billion in total assets, (ii) a weighted average cost of funds of 5.29%, (iii) $11.6 billion in debt outstanding and (iv) $6.9 billion in stockholders’ equity. In order to compute the “Corresponding return to stockholders,” the “Assumed Return on Our Portfolio (net of expenses)” is multiplied by the assumed total assets to obtain an assumed return to us. From this amount, the interest expense is calculated by multiplying the assumed weighted average cost of funds times the assumed debt outstanding, and the product is subtracted from the assumed return to us in order to determine the return available to stockholders. The return available to stockholders is then divided by our stockholders’ equity to determine the “Corresponding return to stockholders.” Actual interest payments may be different.
| Assumed Return on Our Portfolio (net of expenses) | (10)% | (5)% | —% | 5% | 10% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Corresponding return to stockholders | ( | % | ( | % | ( | % | % | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
The agreements governing our debt financing arrangements contain, and agreements governing future debt financing arrangements may contain, various covenants which, if not complied with, could have a material adverse effect on our ability to meet our investment obligations and to pay distributions to our stockholders.
The agreements governing certain of our debt financing arrangements contain, and agreements governing future debt financing arrangements may contain, certain financial and operational covenants. These covenants require us and our subsidiaries to, among other things, maintain certain financial ratios, including asset coverage and minimum stockholders’ equity. Compliance with these covenants depends on many factors, some of which are beyond our and their control. In the event of deterioration in the capital markets and pricing levels subsequent to this period, net unrealized depreciation in our and our subsidiaries’ portfolios may increase in the future and could result in non-compliance with certain covenants, or our taking actions which could disrupt our business and impact our ability to meet our investment objectives.
Risks Related to an Investment in Our Common Stock
There is a risk that investors in our common stock may not receive distributions.
Our distribution proceeds may exceed our earnings. Therefore, portions of the distributions that we make may represent a return of capital to stockholders, which will lower their tax basis in their shares of common stock.
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Our shares of common stock may trade at a discount to net asset value, and such discount may be significant.
We may pay distributions from offering proceeds, borrowings or the sale of assets to the extent our cash flows from operations, net investment income or earnings are not sufficient to fund declared distributions.
A stockholder’s interest in us will be diluted if we issue additional shares, which could reduce the overall value of an investment in us.
Stockholders may experience dilution in their ownership percentage if they do not participate in our distribution reinvestment plan.
Certain provisions of our charter and bylaws as well as provisions of the Maryland General Corporation Law could deter takeover attempts and have an adverse impact on the value of our common stock.
The Maryland General Corporation Law, or the MGCL, and our charter and bylaws contain certain provisions that may have the effect of discouraging, delaying or making difficult a change in control of our company or the removal of our incumbent directors. Under the Business Combination Act of the MGCL, certain business combinations between us and an “interested stockholder” (defined generally to include any person who beneficially owns 10% or more of the voting power of our outstanding shares) or an affiliate thereof is prohibited for five years and thereafter is subject to special stockholder voting requirements, to the
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extent that such statute is not superseded by applicable requirements of the 1940 Act. However, our board of directors has adopted a resolution exempting from the Business Combination Act any business combination between us and any person to the extent that such business combination receives the prior approval of our board of directors, including a majority of our directors who are not “interested persons” as defined in the 1940 Act. Under the Maryland Control Share Acquisition Act, or the MCSAA, “control shares” acquired in a “control share acquisition” have no voting rights except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter, excluding shares owned by the acquirer, by officers or by directors who are employees of the corporation. Our bylaws contain a provision exempting from the MCSAA any and all acquisitions by any person of shares of our common stock, but such provision may be repealed at any time (before or after a control share acquisition). However, we will amend our bylaws to repeal such provision (so as to be subject to the MCSAA) only if our board of directors determines that it would be in our best interests and if the staff of the SEC does not object to our determination that our being subject to the MCSAA does not conflict with the 1940 Act. The Business Combination Act (if our board of directors should repeal the resolution) and the MCSAA (if we amend our bylaws to be subject to that Act) may discourage others from trying to acquire control of us and increase the difficulty of consummating any offer.
We have also adopted measures that may make it difficult for a third party to obtain control of us, including provisions of our charter: (a) classifying our board of directors into three classes serving staggered three-year terms, (b) providing that a director may be removed only for cause and only by vote of at least two-thirds of the votes entitled to be cast, and (c) authorizing our board of directors to (i) classify or reclassify shares of our stock into one or more classes or series, (ii) cause the issuance of additional shares of our stock, and (iii) amend our charter from time to time, without stockholder approval, to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that we have authority to issue. These provisions, as well as other provisions of our charter and bylaws, may discourage, delay, defer, make more difficult or prevent a transaction or a change in control that might otherwise be in the best interest of our stockholders.
Recent court decisions have created uncertainty surrounding the application of MCSAA.
The net asset value of our common stock may fluctuate significantly.
The market price of our common stock may fluctuate significantly.
The market price and liquidity of the market for our common stock may be significantly affected by numerous factors, some of which are beyond our control and may not be directly related to our operating performance. These factors include:
•significant volatility in the market price and trading volume of securities of publicly traded RICs, BDCs or other companies in our sector, which are not necessarily related to the operating performance of these companies;
•price and volume fluctuations in the overall stock market from time to time;
•changes in law, regulatory policies or tax guidelines, or interpretations thereof, particularly with respect to RICs or BDCs;
•loss of our BDC or RIC status;
•changes in our earnings or variations in our operating results;
•changes in the value of our portfolio of investments;
•any shortfall in revenue or net income or any increase in losses from levels expected by investors or securities analysts;
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•departure of the Adviser’s key personnel;
•operating performance of companies comparable to us;
•short-selling pressure with respect to shares of our common stock or BDCs generally;
•future sales of our securities convertible into or exchangeable or exercisable for our common stock or the conversion of such securities;
•uncertainty surrounding the strength of the economy;
•general economic trends and other external factors; and
•loss of a major funding source.
Future sales of our common stock in the public market or the issuance of securities senior to our common stock could adversely affect the trading price of our common stock and our ability to raise funds in new stock offerings.
Future sales of substantial amounts of our common stock or equity-related securities in the public market, or the perception that such sales could occur, could adversely affect prevailing trading prices of our common stock and could impair our ability to raise capital through future offerings of equity or equity-related securities. No prediction can be made as to the effect, if any, that future sales of shares of common stock or the availability of shares of common stock for future sale, will have on the trading price of our common stock.
If we issue preferred stock, debt securities or convertible debt securities, the net asset value and market value of our common stock may become more volatile.
We also cannot assure you that the issuance of preferred stock, debt securities or convertible debt securities would result in a higher yield or return to the holders of our common stock. The issuance of preferred stock, debt securities or convertible debt securities would likely cause the net asset value and market value of our common stock to become more volatile. If the dividend rate on the preferred stock, or the interest rate on the debt securities, were to approach the net rate of return on our investment portfolio, the benefit of leverage to the holders of our common stock would be reduced. If the dividend rate on the preferred stock, or the interest rate on the debt securities, were to exceed the net rate of return on our portfolio, the use of leverage would result in a lower rate of return to the holders of common stock than if we had not issued the preferred stock or debt securities. Any decline in the net asset value of our investment would be borne entirely by the holders of our common stock. Therefore, if the market value of our portfolio were to decline, the leverage would result in a greater decrease in net asset value to the holders of our common stock than if we were not leveraged through the issuance of preferred stock. This decline in net asset value would also tend to cause a greater decline in the market price for our common stock.
Holders of any preferred stock that we may issue will have the right to elect members of the board of directors and have class voting rights on certain matters.
The 1940 Act requires that holders of shares of preferred stock must be entitled as a class to elect two directors at all times and to elect a majority of the directors if dividends on such preferred stock are in arrears by two years or more, until such arrearage is eliminated. In addition, certain matters under the 1940 Act require the separate vote of the holders of any issued and outstanding preferred stock, including changes in fundamental investment restrictions and conversion to open-end status and, accordingly, preferred stockholders could veto any such changes. Restrictions imposed on the declarations and payment of dividends or other
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We have obtained the approval of our stockholders to issue shares of our common stock at prices below the then-current net asset value per share of our common stock, and any such issuance could materially dilute our stockholders’ interest in our common stock and reduce our net asset value per share.
We have obtained the approval of our stockholders to issue shares of our common stock at prices below the then-current net asset value of our common stock, subject to certain conditions, during the twelve-month period concluding on August 22, 2024. Any sale or other issuance of shares of our common stock at a price below net asset value per share would result in an immediate dilution to our common stock and a reduction of our net asset value per share. This dilution would occur as a result of a proportionately greater decrease in a stockholder’s interest in our earnings and assets and voting interest in us than the increase in our assets resulting from such issuance. Such dilutive effects may be material.
Risks Related to U.S. Federal Income Tax
We will be subject to corporate-level income tax if we are unable to qualify as a RIC under Subchapter M of the Code or to satisfy the RIC annual distribution requirements.
Besides maintaining our election to be treated as a BDC under the 1940 Act, in order for us to qualify as a RIC under Subchapter M of the Code, we must meet the following annual distribution, income source and asset diversification requirements. See “Item 1. Business—Taxation as a RIC.”
•The Annual Distribution Requirement will be satisfied if we distribute to our stockholders on an annual basis at least 90% of our net ordinary income and net short-term capital gain in excess of net long-term capital loss. if any. We will be subject to a 4% nondeductible U.S. federal excise tax, however, to the extent that we do not satisfy certain additional minimum distribution requirements on a calendar year basis. Because we use debt financing, we are subject to certain asset coverage ratio requirements under the 1940 Act and are currently, and may in the future become, subject to certain financial covenants under loan and credit agreements that could, under certain circumstances, restrict us from making distributions necessary to satisfy the Annual Distribution Requirement. If we are unable to obtain cash from other sources, we could fail to qualify for RIC tax treatment and thus become subject to corporate-level U.S. federal income tax.
•The 90% Income Test will be satisfied if we earn at least 90% of our gross income for each tax year from dividends, interest, gains from the sale of securities or similar sources.
•The Diversification Tests will be satisfied if we meet certain asset diversification requirements at the end of each quarter of our tax year. To satisfy these requirements, at least 50% of the value of our assets must consist of cash, cash equivalents, U.S. government securities, securities of other RICs, and other securities if such securities of any one issuer do not represent more than 5% of the value of our assets or more than 10% of the outstanding voting securities of such issuer; and no more than 25% of the value of our assets can be invested in the securities, other than U.S. government securities or securities of other RICs, of one issuer, of two or more issuers that are controlled, as determined under applicable Code rules, by us and that are engaged in the same or similar or related trades or businesses or of certain “qualified publicly-traded partnerships.” Failure to meet these requirements may result in our having to dispose of certain investments quickly in order to prevent the loss of RIC status. Because most of our investments will be in private companies, and therefore will be relatively illiquid, any such dispositions could be made at disadvantageous prices and could result in substantial losses.
Some of our investments may be subject to corporate-level income tax.
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We may have difficulty paying our required distributions if we recognize income before or without receiving cash representing such income.
For U.S. federal income tax purposes, we may be required to recognize taxable income in circumstances in which we do not receive a corresponding payment in cash. For example, our investments may include debt instruments that are treated under applicable tax rules as having original issue discount (such as debt instruments with PIK interest or, in certain cases, increasing interest rates or debt instruments that were issued with warrants). To the extent original issue discount or PIK interest constitutes a portion of our income, we must include in taxable income each tax year a portion of the original issue discount or PIK interest that accrues over the life of the instrument, regardless of whether cash representing such income is received by us in the same tax year. We may also have to include in income other amounts that we have not yet received in cash, such as deferred loan origination fees that are paid after origination of the loan or are paid in non-cash compensation such as warrants or stock. We anticipate that a portion of our income may constitute original issue discount or other income required to be included in taxable income prior to receipt of cash. Further, we may elect to amortize market discount and include such amounts in our taxable income in the current tax year, instead of upon disposition, as not making the election would limit our ability to deduct interest expenses for tax purposes.
Because any original issue discount or other amounts accrued will be included in our investment company taxable income for the tax year of the accrual, we may be required to make a distribution to our stockholders in order to satisfy the Annual Distribution Requirement, even though we will not have received any corresponding cash amount. As a result, we may have difficulty meeting the Annual Distribution Requirement necessary to qualify for and maintain RIC tax treatment under Subchapter M of the Code. We may have to sell some of our investments at times and/or at prices we would not consider advantageous, raise additional debt or equity capital or forgo new investment opportunities for this purpose. If we are not able to obtain cash from other sources, we may fail to qualify for or maintain RIC tax treatment and thus become subject to corporate-level income tax.
Our portfolio investments may present special tax issues.
If we do not qualify as a “publicly offered regulated investment company,” as defined in the Code, you will be taxed as though you received a distribution of some of our expenses.
A “publicly offered regulated investment company” is a RIC whose shares are either (i) continuously offered pursuant to a public offering, (ii) regularly traded on an established securities market or (iii) held by at least 500 persons at all times during the tax year. If we do not qualify as a publicly offered regulated investment company for any tax year, a noncorporate stockholder’s allocable portion of our affected expenses, including our management fees, will be treated as an additional distribution to the stockholder and will be deductible by such stockholder only to the extent permitted under the limitations described below. For noncorporate stockholders, including individuals, trusts, and estates, significant limitations generally apply to the deductibility of certain expenses of a non-publicly offered regulated investment company, including management fees. In particular, these expenses, referred to as miscellaneous itemized deductions, are deductible to an individual only to the extent they exceed 2% of such a stockholder’s adjusted gross income for the taxable years after 2025 and are entirely not deductible against gross income before 2026, are not deductible for
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Legislative or regulatory tax changes could adversely affect investors.
At any time, the federal income tax laws governing RICs or the administrative interpretations of those laws or regulations may be amended. Any of those new laws, regulations or interpretations may take effect retroactively and could adversely affect the taxation of us or our stockholders. Therefore, changes in tax laws, regulations or administrative interpretations or any amendments thereto could diminish the value of an investment in our shares or the value or the resale potential of our investments.
General Risks
Future disruptions or instability in capital markets could negatively impact the valuation of our investments and our ability to raise capital.
From time to time, the global capital markets may experience periods of disruption and instability, which could be prolonged and which could materially and adversely impact the broader financial and credit markets, have a negative impact on the valuations of our investments and reduce the availability to us of debt and equity capital. For example, between 2008 and 2009, instability in the global capital markets resulted in disruptions in liquidity in the debt capital markets, significant write-offs in the financial services sector, the re-pricing of credit risk in the broadly syndicated credit market and the failure of major domestic and international financial institutions. In particular, the financial services sector was negatively impacted by significant write-offs as the value of the assets held by financial firms declined, impairing their capital positions and abilities to lend and invest. While market conditions have recovered from the events of 2008 and 2009, there have been continuing periods of volatility. For example, continued uncertainty surrounding the negotiation of trade deals between Britain and the European Union (the “EU”) following the United Kingdom’s (the “U.K.”) exit from the EU and uncertainty between the United States and other countries with respect to trade policies, treaties, and tariffs, among other factors, have caused disruption in the global markets. There can be no assurance that market conditions will not worsen in the future.
Future economic recessions or downturns could impair our portfolio companies and harm our operating results.
Many of our portfolio companies may be susceptible to economic slowdowns or recessions and may be unable to repay our loans or meet other obligations during these periods. Therefore, our non-performing assets are likely to increase, and the value of our portfolio is likely to decrease during these periods. Adverse economic conditions may also decrease the value of any collateral securing our debt investments and the value of our equity investments. Economic slowdowns or recessions could lead to losses of value in our portfolio and a decrease in our revenues, net income, net worth and assets. Unfavorable economic conditions also could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us on terms we deem acceptable. These events could prevent us from increasing investments and harm our operating results. Economic downturns or recessions may also result in a portfolio company’s failure to satisfy financial or operating covenants imposed by us or other lenders, which could lead to defaults and, potentially, acceleration of the time when the loans are due and foreclosure on its assets representing collateral for its obligations, which could trigger cross defaults under other agreements and jeopardize our portfolio company’s ability to meet its obligations under the debt that we hold and the value of any equity securities we own. We may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms with a defaulting portfolio company. In addition, if one of our portfolio companies were to go bankrupt, even though we may have structured our interest as senior debt or preferred equity, depending on the facts and circumstances, including the extent to which we actually provided managerial assistance to that portfolio company, a bankruptcy court might recharacterize our debt or equity holding and subordinate all or a portion of our claim to those of other creditors.
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Events outside of our control, including public health crises, could negatively affect our portfolio companies and our results of operations.
Periods of market volatility have occurred and could continue to occur in response to pandemics or other events outside of the Company's control. The Company, the Adviser, and the portfolio companies in which the Company invests in could be affected by force majeure events (i.e., events beyond the control of the party claiming that the event has occurred, such as acts of God, fire, flood, earthquakes, outbreaks of an infectious disease, pandemic or any other serious public health concern, war, terrorism, labor strikes, major plant breakdowns, pipeline or electricity line ruptures, failure of technology, defective design and construction, accidents, demographic changes, government macroeconomic policies, social instability, etc.). Some force majeure events could adversely affect the ability of a party (including the Company, the Adviser, a portfolio company or a counterparty to the Company, the Adviser, or a portfolio company) to perform its obligations until it is able to remedy the force majeure event. In addition, force majeure events, such as the cessation of the operation of equipment for repair or upgrade, could similarly lead to the unavailability of essential equipment and technologies. These risks could, among other effects, adversely impact the cash flows available from a portfolio company, cause personal injury or loss of life, including to a senior manager of the Adviser or its affiliates, damage property, or instigate disruptions of service. In addition, the cost to a portfolio company or the Company of repairing or replacing damaged assets resulting from such force majeure event could be considerable. It will not be possible to insure against all such events, and insurance proceeds received, if any, could be inadequate to completely or even partially cover any loss of revenues or investments, any increases in operating and maintenance expenses, or any replacements or rehabilitation of property. Certain events causing catastrophic loss could be either uninsurable, or insurable at such high rates as to adversely impact the Company, the Adviser, or portfolio companies, as applicable. Force majeure events that are incapable of or are too costly to cure could have permanent adverse effects. Certain force majeure events (such as war or an outbreak of an infectious disease) could have a broader negative impact on the world economy and international business activity generally, or in any of the countries in which the Company invests or its portfolio companies operate specifically. Such force majeure events could result in or coincide with: increased volatility in the global securities, derivatives and currency markets; a decrease in the reliability of market prices and difficulty in valuing assets; greater fluctuations in currency exchange rates; increased risk of default (by both government and private issuers); further social, economic, and political instability; nationalization of private enterprise; greater governmental involvement in the economy or in social factors that impact the economy; less governmental regulation and supervision of the securities markets and market participants and decreased monitoring of the markets by governments or self-regulatory organizations and reduced enforcement of regulations; limited, or limitations on, the activities of investors in such markets; controls or restrictions on foreign investment, capital controls and limitations on repatriation of invested capital; inability to purchase and sell investments or otherwise settle security or derivative transactions (i.e., a market freeze); unavailability of currency hedging techniques; substantial, and in some periods extremely high, rates of inflation, which can last many years and have substantial negative effects on credit and securities markets as well as the economy as a whole; recessions; and difficulties in obtaining and/or enforcing legal judgments.
In early 2020, an outbreak of a novel strain of coronavirus, or COVID-19, emerged globally. The outbreak of COVID-19 and its variants resulted in closing international borders, enhanced health screenings, healthcare service preparation and delivery, quarantines, cancellations, disruptions to supply chains and customer activity, as well as general public concern and uncertainty. This outbreak negatively affected the worldwide economy, as well as the economies of individual countries, the financial health of individual companies and the market in general in significant and unforeseen ways. In May 2023, the World Health Organization declared the end of the global emergency status for COVID-19, and the United States subsequently ended the federal COVID-19 public health emergency declaration effective May 11, 2023. Although vaccines for COVID-19 are widely available, it is unknown how long certain circumstances related to the pandemic will persist, whether they will reoccur in the future, and what additional implications may follow from the pandemic. The impact of these events and other epidemics or pandemics in the future could adversely affect the performance of the Adviser, the Company, and the Company's portfolio companies.
We are currently operating in a period of capital markets disruption and economic uncertainty.
The success of our activities is affected by general economic and market conditions, including, among others, interest rates, availability of credit, inflation rates, economic uncertainty, changes in laws, and trade barriers. These factors could affect the level and volatility of securities prices and the liquidity of our investments. Volatility or illiquidity could impair our profitability or result in losses. These factors also could adversely affect the availability or cost of our leverage, which would result in lower returns. In addition, the U.S. capital markets have experienced extreme volatility and disruption including, as a result of the COVID-19 pandemic, certain regional bank failures, and an inflationary economic environment. Disruptions in the capital markets have increased the spread between the yields realized on risk-free and higher risk securities, resulting in illiquidity in parts of the capital markets.
These and future market disruptions and/or illiquidity would be expected to have an adverse effect on our business, financial condition, results of operations and cash flows. Unfavorable economic conditions also would be expected to increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. These events have limited and could continue to limit our investment originations, limit our ability to grow and have a material negative impact on our operating results and the fair values of our debt and equity investments.
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If a period of capital market disruption and instability continues for an extended period of time, there is a risk that investors in our equity securities may not receive distributions consistent with historical levels or at all or that our distributions may not grow over time and a portion of our distributions may be a return of capital.
Our ability to pay distributions consistent with our historical range or to continue to pay our distribution fully in cash rather than shares of common stock might be adversely affected by the impact of one or more of the risk factors described in this annual report on Form 10-K, including the COVID-19 pandemic. If we are unable to satisfy the asset coverage test applicable to us under the 1940 Act as a business development company or if we violate certain covenants under our existing or future credit facilities or other leverage, we may also be limited in our ability to make distributions. If we declare a distribution and if more stockholders opt to receive cash distributions rather than participate in our dividend reinvestment plan, we may be forced to sell some of our investments in order to make cash distribution payments. To the extent we make distributions to stockholders that include a return of capital, such portion of the distribution essentially constitutes a return of the stockholder’s investment. Although such return of capital may not be taxable, such distributions would generally decrease a stockholder’s basis in our common stock and may therefore increase such stockholder’s tax liability for capital gains upon the future sale of such stock. A return of capital distribution may cause a stockholder to recognize a capital gain from the sale of our common stock even if the stockholder sells its shares for less than the original purchase price.
Global economic, political and market conditions, including potential downgrades of the U.S. credit rating, may adversely affect our business, results of operations and financial condition.
The current global financial market situation, as well as various social and political tensions in the United States and around the world (including the current conflict in Ukraine and the Israel-Hamas conflict) may contribute to increased market volatility, may have long-term effects on the United States and worldwide financial markets and may cause economic uncertainties or deterioration in the U.S. and worldwide.
For example, the impact of downgrades by rating agencies to the U.S. government’s sovereign credit rating or its perceived creditworthiness as well as potential government shutdowns and uncertainty surrounding transfers of power could adversely affect the U.S. and global financial markets and economic conditions. Since 2010, several EU countries have faced budget issues, some of which may have negative long-term effects for the economies of those countries and other EU countries. There is concern about national-level support for the Euro and the accompanying coordination of fiscal and wage policy among European Economic and Monetary Union member countries. In addition, the fiscal policy of foreign nations, such as Russia and China, may have a severe impact on the worldwide and U.S. financial markets. The U.K.’s decision to leave the EU, or Brexit, led to volatility in global financial markets. The longer term economic, legal, political and social implications of Brexit remain unclear. Brexit has led to ongoing political and economic uncertainty and periods of increased volatility in both the U.K. and in wider European markets for some time. Brexit could lead to calls for similar referendums in other European jurisdictions, which could cause increased economic volatility in the European and global markets. This mid- to long-term uncertainty could have adverse effects on the economy generally and on our ability to earn attractive returns. In particular, currency volatility could mean that our returns are adversely affected by market movements and could make it more difficult, or more expensive, for us to execute prudent currency hedging policies. Potential decline in the value of the British Pound and/or the Euro against other currencies, along with the potential further downgrading of the U.K.’s sovereign credit rating, could also have an impact on the performance of certain investments made in the U.K. or Europe.
We cannot predict the effects of these or similar events in the future on the U.S. and global economies and securities markets or on our investments. We monitor developments in economic, political and market conditions and seek to manage our investments in a manner consistent with achieving our investment objective, but there can be no assurance that we will be successful in doing so.
We and our portfolio companies may maintain cash balances at financial institutions that exceed federally insured limits and may otherwise be materially affected by adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults or non-performance by financial institutions or transactional counterparties.
Our cash is held in accounts at U.S. banking institutions. Cash held by us and our portfolio companies in non-interest-bearing and interest-bearing operating accounts may exceed the Federal Deposit Insurance Corporation insurance limits. If such banking institutions were to fail, we or our portfolio companies could lose all or a portion of those amounts held in excess of such insurance limitations. In addition, actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems, which could adversely affect our and our portfolio companies’ business, financial condition, results of operations, or prospects.
Although we assess our portfolio companies’ banking relationships as necessary or appropriate, our and our portfolio companies’ access to funding sources and other credit arrangements in amounts adequate to finance or capitalize our or our portfolio companies’ respective current and projected future business operations could be significantly impaired by factors that affect us or our portfolio companies, the financial institutions with which we or our portfolio companies have arrangements directly, or the financial
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services industry or economy in general. These factors could include, among others, events such as liquidity constraints or failures, the ability to perform obligations under various types of financial, credit or liquidity agreements or arrangements, disruptions or instability in the financial services industry or financial markets, or concerns or negative expectations about the prospects for companies in the financial services industry. These factors could involve financial institutions or financial services industry companies with which we or our portfolio companies have financial or business relationships, but could also include factors involving financial markets or the financial services industry generally.
In addition, investor concerns regarding the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us or our portfolio companies to acquire financing on acceptable terms or at all.
The ongoing invasion of Ukraine by Russia may have a material adverse impact on us and our portfolio companies.
The ongoing invasion of Ukraine by Russia and related sanctions have increased global political and economic uncertainty. In February 2022, Russia invaded Ukraine and, in response, the United States and many other countries placed economic sanctions on certain Russian entities and individuals. Because Russia is a major exporter of oil and natural gas, the invasion and related sanctions have reduced the supply, and increased the price, of energy, which is accelerating inflation and may exacerbate ongoing supply chain issues. There is also the risk of retaliatory actions by Russia against countries which have enacted sanctions, including cyberattacks against financial and governmental institutions, which could result in business disruptions and further economic turbulence. Although we have no direct exposure to Russia or Ukraine, the broader consequences of the invasion may have a material adverse impact on our portfolio and the value of an investment in us. Moreover, sanctions and export control laws and regulations are complex, frequently changing, and increasing in number, and they may impose additional legal compliance costs or business risks associated with our operations.
Changes to United States tariff and import/export regulations may have a negative effect on our portfolio companies.
There have been significant changes to United States trade policies, treaties and tariffs, and in the future there may be additional significant changes. These and any future developments, and continued uncertainty surrounding trade policies, treaties and tariffs, may have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global trade and, in particular, trade between the impacted nations and the United States. Any of these factors could depress economic activity and restrict our portfolio companies’ access to suppliers or customers and could have material adverse effects on our business, financial condition and results of operations.
Economic sanction laws in the United States and other jurisdictions may prohibit us and our affiliates from transacting with certain countries, individuals and companies.
Economic sanction laws in the United States and other jurisdictions may prohibit us or our affiliates from transacting with certain countries, individuals and companies. In the United States, the U.S. Department of the Treasury’s Office of Foreign Assets Control administers and enforces laws, executive orders and regulations establishing U.S. economic and trade sanctions, which prohibit, among other things, transactions with, and the provision of services to, certain non-U.S. countries, territories, entities and individuals. These types of sanctions may significantly restrict or completely prohibit investment activities in certain jurisdictions, and if we, our portfolio companies or other issuers in which we invest were to violate any such laws or regulations, we may face significant legal and monetary penalties.
The Foreign Corrupt Practices Act, or FCPA, and other anti-corruption laws and regulations, as well as anti-boycott regulations, may also apply to and restrict our activities, our portfolio companies and other issuers of our investments. If an issuer or we were to violate any such laws or regulations, such issuer or we may face significant legal and monetary penalties. The U.S. government has indicated that it is particularly focused on FCPA enforcement, which may increase the risk that an issuer or we become the subject of such actual or threatened enforcement. In addition, certain commentators have suggested that private investment firms and the funds that they manage may face increased scrutiny and/or liability with respect to the activities of their underlying portfolio companies. As such, a violation of the FCPA or other applicable regulations by us or an issuer of our portfolio investments could have a material adverse effect on us. We are committed to complying with the FCPA and other anti-corruption laws and regulations, as well as anti-boycott regulations, to which it is subject. As a result, we may be adversely affected because of its unwillingness to enter into transactions that violate any such laws or regulations.
Item 1B. Unresolved Staff Comments.
None.
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Item 1C. Cybersecurity.
Cybersecurity
The Company has effective processes in place to assess, identify, and manage material risks from cybersecurity threats. The Company’s business is dependent on the communications and information systems of the Adviser, as an affiliate of FS Investments. The Company also relies on the communications and systems of other third-party service providers. FS Investments has implemented a cybersecurity program that applies to all of its subsidiaries and affiliates, including the Company and its operations.
Cybersecurity Program Overview
FS Investments has instituted a cybersecurity program designed to identify, assess, and manage cyber risks applicable to the Company. The cyber risk management program involves, inter alia, risk assessments, implementation of security measures, and ongoing monitoring of systems and networks, including networks on which the Company relies. FS Investments actively monitors the current threat landscape in an effort to identify material risks arising from new and evolving cybersecurity threats, including material risks faced by the Company.
The Company relies on FS Investments to engage external experts, including cybersecurity assessors, consultants, and auditors to evaluate cybersecurity measures and risk management processes, including those applicable to the Company. The Company is also included in the FS Investments risk management program and processes, which include cyber risk assessments.
The Company depends on and engages various third parties, including suppliers, vendors, and service providers, to operate its business. The Company relies on the expertise of FS Investments’ third-party risk management, legal, information technology, and compliance personnel of the Adviser and FS Investments, including the Chief Information Security Officer, or the CISO, of FS Investments, when identifying and overseeing risks from cybersecurity threats associated with our use of such entities.
Board Oversight of Cybersecurity Risks
The audit committee of the board of directors of the Company, or the Audit Committee, provides strategic oversight on cybersecurity matters, including risks associated with cybersecurity threats. The Audit Committee receives periodic updates from the FS Investments CISO and the Company’s Chief Compliance Officer, or the CCO, regarding the overall state of the FS Investments cybersecurity program, information on the current threat landscape, and risks from cybersecurity threats and cybersecurity incidents impacting the Company.
Management's Role in Cybersecurity Risk Management
The Company’s management, including the Company’s CCO, is responsible for assessing and managing material risks from cybersecurity threats. The CCO oversees the Company’s risk management function generally and relies on the FS Investments CISO to assist with assessing and managing material risks from cybersecurity threats. The CISO has over ten years of experience in activity managing cybersecurity and information security programs for financial services companies with complex information systems. The CCO has been responsible for this oversight function as CCO to the Company for ten years and has worked in the financial services industry for over 40 years, during which the CCO has gained expertise in assessing and managing risk applicable to the Company.
Management of the Company is informed about and monitors the prevention, detection, mitigation, and remediation of cybersecurity incidents impacting the Company, including through the receipt of notifications from service providers and reliance on communications with risk management, legal, information technology, and/or compliance personnel of the Adviser and FS Investments.
Assessment of Cybersecurity Risk
The potential impact of risks from cybersecurity threats on the Company are assessed on an ongoing basis, and how such risks could materially affect the Company’s business strategy, operational results, and financial condition are regularly evaluated. During the reporting period, the Company has not identified any impact from cybersecurity threats, including as a result of previous cybersecurity incidents, that the Company believes have materially affected, or are reasonably likely to materially affect, the Company, including its business strategy, operational results, and financial condition.
Item 2. Properties.
We do not own any real estate or other physical properties materially important to our operation. Our headquarters are located at 201 Rouse Boulevard, Philadelphia, Pennsylvania, 19112. We believe that our office facilities are suitable and adequate for our business as it is presently conducted.
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Item 3. 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 current legal proceedings cannot be predicted with certainty, we do not expect any current matters will materially affect our financial condition or results of operations; however, there can be no assurance whether any pending legal proceedings will have a material adverse effect on our financial condition or results of operations in any future reporting period.
Item 4. Mine Safety Disclosures.
Not applicable.
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PART II
Many of the amounts and percentages presented in Part II have been rounded for convenience of presentation, and all dollar amounts, excluding share and per share amounts, are presented in millions unless otherwise noted.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Our common stock has been listed on the NYSE since April 16, 2014. Our common stock traded under the ticker symbol "FSIC" until December 19, 2018 and has traded under the ticker symbol "FSK" since December 20, 2018. Prior to April 16, 2014, there was no public market for our common stock. Our shares of common stock have historically traded at prices both above and below our net asset value per share. It is not possible to predict whether shares of our common stock will trade at, above or below our net asset value in the future. See "Risk Factors—Risks Related to an Investment in Our Common Stock—Our shares of common stock may trade at a discount to net asset value."
As of January 31, 2024, we had 10,766 record holders of our common stock which does not include beneficial owners of shares of common stock held in "street name" by brokers and other institutions on behalf of stockholders.
Distributions
Subject to applicable legal restrictions and the sole discretion of our board of directors, we intend to declare and pay regular cash distributions on a quarterly basis. 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.
The following table reflects the cash distributions per share that we have declared on our common stock during the years ended December 31, 2023, 2022 and 2021:
| Distribution | ||||||||||||||
| For the Year Ended December 31, | Per Share | Amount | ||||||||||||
| 2021 | $ | 2.47 | $ | 511 | ||||||||||
| 2022 | $ | 2.66 | $ | 754 | ||||||||||
| 2023 | $ | 2.95 | $ | 827 | ||||||||||
See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—RIC Status and Distributions” and Note 5 to our consolidated financial statements contained in this annual report on Form 10-K for additional information regarding our distributions and our distribution reinvestment plan.
Stock Repurchase Programs
Share Repurchase Program
In November 2020, the Company’s board of directors authorized a stock repurchase program, which went into effect in September 2021 following the consummation of the 2021 Merger (as defined below), or the Share Repurchase Program. Under the Share Repurchase Program originally approved by the Company's board of directions, the Company was permitted to repurchase up to $100 in the aggregate of its outstanding common stock in the open market at prices below the then-current net asset value per share. On September 15, 2022, the program expired and was terminated pursuant to the terms of the program. On October 31, 2022, the board of directors approved a renewal of the Share Repurchase Program. The program provided for the aggregate purchases of the Company's common stock in amounts up to $54, which was the aggregate amount remaining of the $100 amount originally approved by the board of directors.
During the year ended December 31, 2023, the Company repurchased 1,665,317 shares of common stock pursuant to the Share Repurchase Program at an average price per share (inclusive of commissions paid) of $18.89 (totaling $32). The program has concluded since the aggregate repurchase amount that was approved by the Company's board of directors has been expended.
Affiliated Purchaser Programs
As previously disclosed, certain affiliates of the owners of the Adviser committed $100 to a $350 investment vehicle that may invest from time to time in shares of the Company. In September 2021, that investment vehicle entered into a written trading plan with a third party broker in accordance with Rule 10b5-1 and Rule 10b-18 promulgated under the Exchange Act, or the September 2021 Affiliated Purchaser Program, to facilitate the purchase of shares of our common stock pursuant to the terms and conditions of such
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plan. The September 2021 Affiliated Purchaser Program provided for the purchase of up to $100 worth of shares of our common stock, subject to the limitations provided therein. The September 2021 Affiliated Purchaser Program has concluded since the aggregate repurchase amount that was approved by the Company’s board of directors has been expended.
In December 2021, that investment vehicle entered into a written trading plan with a third party broker in accordance with Rule 10b5-1 and Rule 10b-18 promulgated under the Exchange Act, or the December 2021 Affiliated Purchaser Program and, together with the September 2021 Affiliated Purchaser Program, the Affiliated Purchaser Program, to facilitate the purchase of shares of our common stock pursuant to the terms and conditions of such plan. The December 2021 Affiliated Purchaser Program provided for the purchase of up to $70 worth of shares of our common stock, subject to the limitations provided therein. The December 2021 Affiliated Purchaser Program has concluded since the aggregate repurchase amount under the plan has been expended.
In September 2022, that investment vehicle entered into a written trading plan with a third-party broker in accordance with Rule 10b5-1 and Rule 10b-18 promulgated under the Exchange Act, or the September 2022 Affiliated Seller Program, to facilitate the sale of shares of our common stock pursuant to the terms and conditions of such plan. The September 2022 Affiliated Seller Program provided for the sale of up to 18.7 million shares of our common stock, subject to the limitations provided therein.
In August 2023, that investment vehicle entered into a written trading plan with a third-party broker in accordance with Rule 10b5-1 and Rule 10b-18 promulgated under the Exchange Act, or the August 2023 Affiliated Seller Program, to facilitate the sale of shares of our common stock pursuant to the terms and conditions of such plan. The August 2023 Affiliated Seller Program provided for the sale of up to 16.4 million shares of our common stock, subject to the limitations provided therein.
The table below provides information concerning purchases of our shares of common stock by or on behalf of the Company or any “affiliated purchaser,” as defined by Rule 10b-18(a)(3) promulgated under the Exchange Act during the quarterly period ended December 31, 2023. Dollar amounts in the table below and the related notes are presented in millions, except for share and per share amounts.
| Period | Total Number of Shares Purchased | Average Price Paid per Share(1) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(2) | Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs | ||||||||||||||||||||||
| October 1, 2023 through October 31, 2023 | — | $ | — | — | $ | — | ||||||||||||||||||||
| November 1, 2023 through November 30, 2023 | — | — | — | — | ||||||||||||||||||||||
| December 1, 2023 through December 31, 2023 | — | — | — | — | ||||||||||||||||||||||
| — | $ | — | — | |||||||||||||||||||||||
(1)Amount includes commissions paid.
(2)Includes amounts pursuant to the Share Repurchase Program and the Affiliated Purchaser Program.
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Stock Performance Graph
This performance graph shall not be deemed "soliciting material" or to be "filed" with the SEC for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of FS KKR Capital Corp. under the Securities Act.
The following graph shows a comparison from April 16, 2014 (the date our shares of common stock commenced trading on the NYSE) through December 31, 2023 of the cumulative total return for our common stock, the S&P 500 Index, the Russell 2000 Financial Services Index and the MVIS US Business Development Companies Index. The graph assumes that $100 was invested at the market close on April 16, 2014 in our common stock, the S&P 500 Index, the Russell 2000 Financial Services Index and the MVIS US Business Development Companies Index, is based on historical stock prices and assumes all dividends or distributions are reinvested on the respective dividend or distribution payment dates without commissions. The stock price performance reflected by the following graph is not necessarily indicative of future stock price performance.
Item 6. Reserved
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The information contained in this section should be read in conjunction with our consolidated financial statements and related notes thereto appearing elsewhere in this annual report on Form 10-K.
Forward-Looking Statements
Some of the statements in this annual report on Form 10-K constitute forward-looking statements because they relate to future events or our future performance or financial condition. The forward-looking statements contained in this annual report on Form 10-K may include statements as to:
•our future operating results;
•our business prospects and the prospects of the companies in which we may invest, including our and their ability to achieve our respective objectives as a result of the COVID-19 pandemic;
•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;
•receiving and maintaining corporate credit ratings and changes in the general interest rate environment;
•the elevated levels of inflation, and its impact on our portfolio companies and on the industries in which we invest;
•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;
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•actual and potential conflicts of interest with the other funds managed by the Adviser, FS Investments, KKR Credit or any of their respective affiliates;
•the dependence of our future success on the general economy and its effect on the industries in which we may invest;
•general economic, political and industry trends and other external factors, including the COVID-19 pandemic and related disruptions caused thereby;
•our use of financial leverage;
•the ability of the Adviser to locate suitable investments for us and to monitor and administer our investments;
•the ability of the Adviser 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 U.S. and international financial reform legislation, rules and regulations;
•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.
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 annual report on Form 10-K are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict and could cause our actual results to differ materially from those expressed or forecasted in the forward-looking statements for any reason, including those factors set forth in “Item 1A. Risk Factors.” Factors that could cause actual results to differ materially include changes relating to those set forth above and the following, among others:
•changes in the economy;
•geo-political risks;
•risks associated with possible disruption in our operations or the economy generally due to terrorism, natural disasters or pandemics;
•future changes in laws or regulations and conditions in our operating areas; and
•the price at which shares of our common stock may trade on the NYSE.
We have based the forward-looking statements included in this annual report on Form 10-K on information available to us on the date of this annual report on Form 10-K. You should not place undue reliance on these forward-looking statements. 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 annual report on Form 10-K are excluded from the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Exchange Act.
Overview
We were incorporated under the general corporation laws of the State of Maryland on December 21, 2007 and formally commenced investment operations on January 2, 2009. 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.
We are externally managed by the Adviser pursuant to the investment advisory agreement and supervised by our board of directors, a majority of whom are independent.
Our investment objectives are to generate current income and, to a lesser extent, long-term capital appreciation. We seek to meet our investment objectives by:
•utilizing the experience and expertise of the management team of the Adviser;
•employing a defensive investment approach focused on long-term credit performance and principal protection;
•focusing primarily on debt investments in a broad array of private U.S. companies, including middle-market companies, which we define as companies with annual EBITDA of $50 million to $150 million at the time of investment;
•investing primarily in established, stable enterprises with positive cash flows; and
•maintaining rigorous portfolio monitoring in an attempt to anticipate and pre-empt negative credit events within our portfolio, such as an event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a portfolio company.
We pursue our investment objective by investing primarily in the debt of middle market U.S. companies with a focus on originated transactions sourced through the network of the Adviser and its affiliates. We define direct originations as any investment
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where the Company's investment adviser, sub-adviser or their affiliates had negotiated the terms of the transaction beyond just the price, which, for example, may include negotiating financial covenants, maturity dates or interest rate terms. These directly originated transactions include participation in other originated transactions where there may be third parties involved, or a bank acting as an intermediary, for a closely held club, or similar transactions.
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 and certain asset-based financing 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 OTC 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, including through a co-investment with a financial sponsor or possibly the restructuring of an investment. In addition, a portion of our portfolio may be comprised of corporate bonds, structured products, other debt securities and derivatives, including total return swaps and credit default swaps. The Adviser 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 structures of our portfolio companies or otherwise make opportunistic investments, such as where the market price of loans, bonds or other securities reflects a lower value than deemed warranted by the Adviser’s fundamental analysis. Such investment opportunities may occur due to 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 and may include event driven investments, anchor orders and structured products.
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 three to four years. However, we may invest in loans and securities with any maturity or duration. Our debt investments may be rated by a NRSRO and, in such case, generally will carry a rating below investment grade (rated lower than “Baa3” by Moody's or lower than “BBB-” by S&P). We may invest without limit in debt or other securities of any rating, as well as debt or other securities that have not been rated by a NRSRO.
Acquisition of FS KKR Capital Corp. II
On June 16, 2021, pursuant to the Agreement and Plan of Merger dated as of November 23, 2020, or the 2020 Merger Agreement, we completed the merger of Rocky Merger Sub, Inc., or the Merger Sub, with and into FS KKR Capital Corp. II, or FSKR, with FSKR continuing as the surviving company, and as a wholly-owned subsidiary of the Company, or the First Merger, and immediately thereafter, FSKR merged with and into the Company, with the Company continuing as the surviving company, or together with the First Merger, the 2021 Merger. In accordance with the terms of the 2020 Merger Agreement, (i) each outstanding share of FSKR common stock was converted into the right to receive 0.9498 shares of the Company’s common stock. This exchange ratio was determined based on the closing net asset value, or NAV, per share of $26.77 and $25.42 for the Company and FSKR, respectively, as of June 14, 2021, to ensure that the NAV of shares investors will own in FSK is equal to the NAV of the shares they held in FSKR. As a result, the Company issued an aggregate of approximately 161,374,028 shares of its common stock to former FSKR stockholders. Following the consummation of the 2021 Merger, we entered into the investment advisory agreement.
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. 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 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. We may also generate revenues in the form of dividends and other distributions on the equity or other securities we hold.
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Expenses
Our primary operating expenses include the payment of management and incentive fees and other expenses under the investment advisory agreement and the administration agreement, interest expense from financing arrangements and other indebtedness, and other expenses necessary for our operations. The management and incentive fees compensate the Adviser for its work in identifying, evaluating, negotiating, executing, monitoring and servicing our investments.
The Adviser oversees our day-to-day operations, including the provision of general ledger accounting, fund accounting, legal services, investor relations, certain government and regulatory affairs activities, and other administrative services. The Adviser 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, the Adviser 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.
Pursuant to the administration agreement, we reimburse the Adviser for expenses necessary to perform services related to our administration and operations, including the Adviser’s allocable portion of the compensation and related expenses of certain personnel of FS Investments and KKR Credit providing administrative services to us on behalf of the Adviser. We reimburse the Adviser no less than quarterly for all costs and expenses incurred by the Adviser in performing its obligations and providing personnel and facilities under the administration agreement. The Adviser allocates the cost of such services to us based on factors such as total assets, revenues, time allocations and/or other reasonable metrics. Our board of directors reviews the methodology employed in determining how the expenses are allocated to us and the proposed allocation of administrative expenses among us and certain affiliates of the Adviser. Our board of directors then assesses the reasonableness of such reimbursements for expenses allocated to us based on the breadth, depth and quality of such services as compared to the estimated cost to us of obtaining similar services from third-party service providers known to be available. In addition, our 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, our board of directors compares the total amount paid to the Adviser for such services as a percentage of our net assets to the same ratio as reported by other comparable BDCs.
We bear all other expenses of our operations and transactions, including (without limitation) fees and expenses relating to:
•corporate and organization expenses relating to offerings of our securities, subject to limitations included in the investment advisory agreement;
•the cost of calculating our net asset value, including the cost of any third-party pricing or valuation services;
•the cost of effecting sales and repurchases of shares of our common stock and other securities;
•investment advisory fees;
•fees payable to third parties relating to, or associated with, making investments and valuing investments, including fees and expenses associated with performing due diligence reviews of prospective investments;
•interest payments on our debt or related obligations;
•transfer agent and custodial fees;
•research and market data (including news and quotation equipment and services, and any computer hardware and connectivity hardware (e.g., telephone and fiber optic lines) incorporated into the cost of obtaining such research and market data);
•fees and expenses associated with marketing efforts;
•federal and state registration fees;
•federal, state and local taxes;
•fees and expenses of directors not also serving in an executive officer capacity for us or the Adviser;
•costs of proxy statements, stockholders’ reports, notices and other filings;
•fidelity bond, directors and officers/errors and omissions liability insurance and other insurance premiums;
•direct costs such as printing, mailing, long distance telephone and staff;
•fees and expenses associated with accounting, corporate governance, government and regulatory affairs activities, independent audits and outside legal costs;
•costs associated with our reporting and compliance obligations under the 1940 Act and applicable federal and state securities laws, including compliance with the Sarbanes-Oxley Act;
•brokerage commissions for our investments; and
•all other expenses incurred by the Adviser or us in connection with administering our business, including expenses incurred by the Adviser in performing administrative services for us and administrative personnel paid by the Adviser, to the extent they are not controlling persons of the Adviser or any of its affiliates, subject to the limitations included in the investment advisory agreement and the administration agreement.
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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 the Adviser, 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.
Portfolio Investment Activity for the Years Ended December 31, 2023 and 2022
Total Portfolio Activity
The following tables present certain selected information regarding our portfolio investment activity for the years ended December 31, 2023 and 2022:
| For the Year Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Investment Activity | December 31, 2023 | December 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Purchases | $ | 1,817 | $ | 4,642 | ||||||||||||||||||||||||||||||||||||||||||||||
| Sales and Repayments | (2,570) | (4,741) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net Portfolio Activity | $ | (753) | $ | (99) | ||||||||||||||||||||||||||||||||||||||||||||||
| For the Year Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2023 | December 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||
| New Investment Activity by Asset Class | Purchases | Percentage | Sales and Repayments | Percentage | Purchases | Percentage | Sales and Repayments | Percentage | ||||||||||||||||||||||||||||||||||||||||||
| Senior Secured Loans—First Lien | $ | 1,220 | 67 | % | $ | (1,981) | 77 | % | $ | 2,778 | 60 | % | $ | 2,926 | 62 | % | ||||||||||||||||||||||||||||||||||
| Senior Secured Loans—Second Lien | 6 | 0 | % | (132) | 5 | % | 121 | 3 | % | 278 | 6 | % | ||||||||||||||||||||||||||||||||||||||
| Other Senior Secured Debt | 21 | 1 | % | (32) | 1 | % | 1 | 0 | % | — | — | |||||||||||||||||||||||||||||||||||||||
| Subordinated Debt | 26 | 2 | % | — | — | 187 | 4 | % | 38 | 1 | % | |||||||||||||||||||||||||||||||||||||||
| Asset Based Finance | 511 | 28 | % | (321) | 13 | % | 848 | 18 | % | 1,102 | 23 | % | ||||||||||||||||||||||||||||||||||||||
| Credit Opportunities Partners JV, LLC | — | — | — | — | 175 | 4 | % | — | — | |||||||||||||||||||||||||||||||||||||||||
Equity/Other(1) | 33 | 2 | % | (104) | 4 | % | 532 | 11 | % | 397 | 8 | % | ||||||||||||||||||||||||||||||||||||||
| Total | $ | 1,817 | 100 | % | $ | (2,570) | 100 | % | $ | 4,642 | 100 | % | $ | 4,741 | 100 | % | ||||||||||||||||||||||||||||||||||
(1) Equity/Other includes investments in preferred equity investments. During the year ended December 31, 2023, purchases of preferred equity investments were $21 and sales and repayments of preferred equity investments were $64. | ||||||||||||||||||||||||||||||||||||||||||||||||||
The following table summarizes the composition of our investment portfolio at cost and fair value as of December 31, 2023 and 2022: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2023 | December 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||
Amortized Cost(1) | Fair Value | Percentage of Portfolio | Amortized Cost(1) | Fair Value | Percentage of Portfolio | |||||||||||||||||||||||||||||||||||||||||||||
| Senior Secured Loans—First Lien | $ | 8,890 | $ | 8,529 | 58.2 | % | $ | 9,607 | $ | 9,278 | 60.3 | % | ||||||||||||||||||||||||||||||||||||||
| Senior Secured Loans—Second Lien | 1,158 | 1,090 | 7.5 | % | 1,299 | 1,194 | 7.8 | % | ||||||||||||||||||||||||||||||||||||||||||
| Other Senior Secured Debt | 106 | 99 | 0.7 | % | 152 | 110 | 0.7 | % | ||||||||||||||||||||||||||||||||||||||||||
| Subordinated Debt | 308 | 323 | 2.2 | % | 384 | 265 | 1.7 | % | ||||||||||||||||||||||||||||||||||||||||||
| Asset Based Finance | 2,237 | 2,077 | 14.2 | % | 2,024 | 1,903 | 12.4 | % | ||||||||||||||||||||||||||||||||||||||||||
| Credit Opportunities Partners JV, LLC | 1,572 | 1,397 | 9.5 | % | 1,572 | 1,428 | 9.3 | % | ||||||||||||||||||||||||||||||||||||||||||
Equity/Other(2) | 1,149 | 1,134 | 7.7 | % | 1,276 | 1,199 | 7.8 | % | ||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 15,420 | $ | 14,649 | 100.0 | % | $ | 16,314 | $ | 15,377 | 100.0 | % | ||||||||||||||||||||||||||||||||||||||
| (1) Amortized costs represent the original cost adjusted for the amortization of premiums and/or accretion of discounts, as applicable, on investments. | ||||||||||||||||||||||||||||||||||||||||||||||||||
(2) As of December 31, 2023, Equity/Other included $858 of preferred equity investments at fair value. | ||||||||||||||||||||||||||||||||||||||||||||||||||
The following table presents certain selected information regarding the composition of our investment portfolio as of December 31, 2023 and 2022: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2023 | December 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Number of Portfolio Companies | 204 | 197 | ||||||||||||||||||||||||||||||||||||||||||||||||
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% Variable Rate Debt Investments (based on fair value)(1)(2) | 66.0% | 69.6% | ||||||||||||||||||||||||||||||||||||||||||||||||
% Fixed Rate Debt Investments (based on fair value)(1)(2) | 7.9% | 8.6% | ||||||||||||||||||||||||||||||||||||||||||||||||
% Other Income Producing Investments (based on fair value)(3) | 15.2% | 15.0% | ||||||||||||||||||||||||||||||||||||||||||||||||
% Non-Income Producing Investments (based on fair value)(2) | 5.4% | 4.4% | ||||||||||||||||||||||||||||||||||||||||||||||||
| % of Investments on Non-Accrual (based on fair value) | 5.5% | 2.4% | ||||||||||||||||||||||||||||||||||||||||||||||||
Weighted Average Annual Yield on Accruing Debt Investments(2)(4) | 12.7% | 12.0% | ||||||||||||||||||||||||||||||||||||||||||||||||
Weighted Average Annual Yield on All Debt Investments(5) | 11.2% | 11.2% | ||||||||||||||||||||||||||||||||||||||||||||||||
(1)"Debt Investments” means investments that pay or are expected to pay a stated interest rate, stated dividend rate or other similar stated return.
(2)Does not include investments on non-accrual status.
(3)"Other Income Producing Investments” means investments that pay or are expected to pay interest, dividends or other income to the Company on an ongoing basis but do not have a stated interest rate, stated dividend rate or other similar stated return.
(4)The Weighted Average Annual Yield on Accruing Debt Investments is computed as (i) the sum of (a) the stated annual interest rate, dividend rate or other similar stated return of each accruing Debt Investment, multiplied by its par amount, adjusted to U.S. dollars and for any partial income accrual when necessary, as of the end of the applicable reporting period, plus (b) the annual amortization of the purchase or original issue discount or premium of each accruing Debt Investment; divided by (ii) the total amortized cost of Debt Investments included in the calculated group as of the end of the applicable reporting period. Stated annual interest rate for floating rate Debt Investments assumes the greater of (a) the respective base rate in effect as of December 31, 2023, and (b) the stated base rate floor. The base rate utilized in this calculation may not be indicative of the base rates for specific contracts as of December 31, 2023.
(5)The Weighted Average Annual Yield on All Debt Investments is computed as (i) the sum of (a) the stated annual interest rate, dividend rate or other similar stated return of each Debt Investment, multiplied by its par amount, adjusted to U.S. dollars and for any partial income accrual when necessary, as of the end of the applicable reporting period, plus (b) the annual amortization of the purchase or original issue discount or premium of each Debt Investment; divided by (ii) the total amortized cost of Debt Investments included in the calculated group as of the end of the applicable reporting period. Stated annual interest rate for floating rate Debt Investments assumes the greater of (a) the respective base rate in effect as of December 31, 2023, and (b) the stated base rate floor. The base rate utilized in this calculation may not be indicative of the base rates for specific contracts as of December 31, 2023.
For the year ended December 31, 2023, our total return based on net asset value was 10.12% and our total return based on market value was 32.45%. For the year ended December 31, 2022, our total return based on net asset value was 1.40% and our total return based on market value was (4.61)%. See footnotes 7 and 8 to the table included in Note 12 to our audited consolidated financial statements included herein for information regarding the calculation of our total return based on net asset value and total return based on market value, respectively.
Direct Originations
We define Direct Originations as any investment where the Adviser or its affiliates negotiates the terms of the transaction beyond just the price, which, for example, may include negotiating financial covenants, maturity dates or interest rate terms. These Direct Originations include participation in other originated transactions where there may be third parties involved, or a bank acting as an intermediary, for a closely held club, or similar transactions. The following table presents certain selected information regarding our Direct Originations as of December 31, 2023 and 2022:
Characteristics of All Direct Originations held in Portfolio | December 31, 2023 | December 31, 2022 | ||||||||||||||||||||||||
| Number of Portfolio Companies | 196 | 183 | ||||||||||||||||||||||||
| % of Investments on Non-Accrual (based on fair value) | 4.5% | 2.4% | ||||||||||||||||||||||||
| Total Cost of Direct Originations | $14,797.5 | $15,654.2 | ||||||||||||||||||||||||
| Total Fair Value of Direct Originations | $14,176.1 | $14,885.5 | ||||||||||||||||||||||||
| % of Total Investments, at Fair Value | 96.8% | 96.8% | ||||||||||||||||||||||||
Weighted Average Annual Yield on Accruing Debt Investments(1) | 12.7% | 12.0% | ||||||||||||||||||||||||
Weighted Average Annual Yield on All Debt Investments(2) | 11.4% | 11.2% | ||||||||||||||||||||||||
________________
(1)The Weighted Average Annual Yield on Accruing Debt Investments is computed as (i) the sum of (a) the stated annual interest rate, dividend rate or other similar stated return of each accruing Debt Investment, multiplied by its par amount, adjusted to U.S. dollars and for any partial income accrual when necessary, as of the end of the applicable reporting period, plus (b) the annual amortization of the purchase or original issue discount or premium of each accruing Debt Investment; divided by (ii) the total amortized cost of Debt Investments included in the calculated group as of the end of the applicable reporting period. Does not include Debt Investments on non-accrual status. Stated annual interest rate for floating rate Debt Investments assumes the greater of (a) the respective base rate in effect as of December 31,
54
2023, and (b) the stated base rate floor. The base rate utilized in this calculation may not be indicative of the base rates for specific contracts as of December 31, 2023.
(2)The Weighted Average Annual Yield on All Debt Investments is computed as (i) the sum of (a) the stated annual interest rate, dividend rate or other similar stated return of each Debt Investment, multiplied by its par amount, adjusted to U.S. dollars and for any partial income accrual when necessary, as of the end of the applicable reporting period, plus (b) the annual amortization of the purchase or original issue discount or premium of each Debt Investment; divided by (ii) the total amortized cost of Debt Investments included in the calculated group as of the end of the applicable reporting period. Stated annual interest rate for floating rate Debt Investments assumes the greater of (a) the respective base rate in effect as of December 31, 2023, and (b) the stated base rate floor. The base rate utilized in this calculation may not be indicative of the base rates for specific contracts as of December 31, 2023.
Credit Opportunities Partners JV, LLC
COPJV, is a joint venture between the Company and South Carolina Retirement Systems Group Trust, or SCRS. SCRS purchased its interests in COPJV from Conway Capital, LLC, an affiliate of Guggenheim Life and Annuity Company and Delaware Life Insurance Company, in June 2019, which had no impact on the significant terms governing COPJV other than an increase in the aggregate capital commitment (but not the percentage of the aggregate capital committed by each member) to COPJV. Effective as of June 18, 2021, Credit Opportunities Partners, LLC, or COP, merged with and into COPJV, with COPJV surviving the merger, or the COPJV Merger. As of June 18, 2021, COPJV assumed all of COP’s obligations under its credit facilities, and COP’s wholly- owned special purpose financing subsidiaries became wholly-owned special purpose financing subsidiaries of COPJV, in each case, as a result of the consummation of the COPJV Merger. COPJV’s second amended and restated limited liability company agreement, or the COPJV Agreement, requires the Company and SCRS to provide capital to COPJV of up to $2,440 in the aggregate where the Company and SCRS would provide 87.5% and 12.5%, respectively, of the committed capital. Pursuant to the terms of the COPJV Agreement, the Company and SCRS each have 50% voting control of COPJV and are required to agree on all investment decisions as well as certain other significant actions for COPJV. COPJV invests its capital in a range of investments, including senior secured loans (both first lien and second lien) to middle market companies, broadly syndicated loans, equity, warrants and other investments. As administrative agent of COPJV, the Company performs certain day-to-day management responsibilities on behalf of COPJV and is entitled to a fee of 0.25% of COPJV’s assets under administration, calculated and payable quarterly in arrears. As of December 31, 2023, the Company and SCRS have funded approximately $1,799.8 to COPJV, of which $1,574.8 was from the Company.
Below is a summary of COPJV’s portfolio as of December 31, 2023 and 2022:
| As of | ||||||||||||||
| December 31, 2023 | December 31, 2022 | |||||||||||||
Total debt investments(1) | $ | 3,131.6 | $ | 2,954.2 | ||||||||||
Weighted average annual yield on debt investments(2) | 11.6 | % | 8.1 | % | ||||||||||
| Number of portfolio companies in COPJV | 124 | 95 | ||||||||||||
Largest investment in a single portfolio company(1) | $ | 134.2 | $ | 131.5 | ||||||||||
Unfunded commitments(1) | $ | 24.7 | $ | 1.9 | ||||||||||
____________
(1)“Debt Investments” means investments that pay or are expected to pay a stated interest rate, stated dividend rate or other similar stated return.
(2)The Weighted Average Annual Yield on Accruing Debt Investments is computed as (i) the sum of (a) the stated annual interest rate, dividend rate or other similar stated return of each accruing Debt Investment, multiplied by its par amount, adjusted to U.S. dollars and for any partial income accrual when necessary, as of the end of the applicable reporting period, plus (b) the annual amortization of the purchase or original issue discount or premium of each accruing Debt Investment; divided by (ii) the total amortized cost of Debt Investments included in the calculated group as of the end of the applicable reporting period. Stated annual interest rate for floating rate Debt Investments assumes the greater of (a) the respective base rate in effect as of December 31, 2023, and (b) the stated base rate floor. The base rate utilized in this calculation may not be indicative of the base rates for specific contracts as of December 31, 2023.
55
Portfolio Composition by Industry Classification
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 December 31, 2023 and 2022:
| December 31, 2023 | December 31, 2022 | |||||||||||||||||||||||||
| Industry Classification | Fair Value | Percentage of Portfolio | Fair Value | Percentage of Portfolio | ||||||||||||||||||||||
| Automobiles & Components | $ | 4 | 0.0 | % | $ | 25 | 0.2 | % | ||||||||||||||||||
| Banks | 8 | 0.1 | % | — | — | |||||||||||||||||||||
| Capital Goods | 1,970 | 13.5 | % | 2,366 | 15.4 | % | ||||||||||||||||||||
| Commercial & Professional Services | 1,826 | 12.5 | % | 1,670 | 10.9 | % | ||||||||||||||||||||
| Consumer Discretionary Distribution & Retail | 259 | 1.8 | % | 282 | 1.8 | % | ||||||||||||||||||||
| Consumer Durables & Apparel | 185 | 1.3 | % | 235 | 1.5 | % | ||||||||||||||||||||
| Consumer Services | 240 | 1.6 | % | 189 | 1.2 | % | ||||||||||||||||||||
| Consumer Staples Distribution & Retail | 105 | 0.7 | % | 103 | 0.7 | % | ||||||||||||||||||||
| Credit Opportunities Partners JV, LLC | 1,397 | 9.5 | % | 1,428 | 9.3 | % | ||||||||||||||||||||
| Energy | 162 | 1.1 | % | 272 | 1.8 | % | ||||||||||||||||||||
| Equity Real Estate Investment Trusts (REITs) | 293 | 2.0 | % | 336 | 2.2 | % | ||||||||||||||||||||
| Financial Services | 986 | 6.7 | % | 844 | 5.5 | % | ||||||||||||||||||||
| Food, Beverage & Tobacco | 181 | 1.2 | % | 226 | 1.4 | % | ||||||||||||||||||||
| Health Care Equipment & Services | 1,709 | 11.7 | % | 1,963 | 12.8 | % | ||||||||||||||||||||
| Household & Personal Products | 166 | 1.1 | % | 242 | 1.6 | % | ||||||||||||||||||||
| Insurance | 839 | 5.7 | % | 974 | 6.3 | % | ||||||||||||||||||||
| Materials | 228 | 1.6 | % | 197 | 1.3 | % | ||||||||||||||||||||
| Media & Entertainment | 717 | 4.9 | % | 695 | 4.5 | % | ||||||||||||||||||||
| Pharmaceuticals, Biotechnology & Life Sciences | 286 | 2.0 | % | 231 | 1.5 | % | ||||||||||||||||||||
| Real Estate Management & Development | 79 | 0.5 | % | 156 | 1.0 | % | ||||||||||||||||||||
| Software & Services | 2,472 | 16.9 | % | 2,591 | 16.8 | % | ||||||||||||||||||||
| Technology Hardware & Equipment | 4 | 0.0 | % | 1 | 0.0 | % | ||||||||||||||||||||
| Telecommunication Services | 79 | 0.5 | % | 76 | 0.5 | % | ||||||||||||||||||||
| Transportation | 454 | 3.1 | % | 275 | 1.8 | % | ||||||||||||||||||||
| Total | $ | 14,649 | 100.0 | % | $ | 15,377 | 100.0 | % | ||||||||||||||||||
Portfolio Asset Quality
In addition to various risk management and monitoring tools, the Adviser uses an investment rating system to characterize and monitor the expected level of returns on each investment in our portfolio. The Adviser uses an investment rating scale of 1 to 4. The following is a description of the conditions associated with each investment rating:
| Investment Rating | Summary Description | |||||||
| 1 | Performing Investment—generally executing in accordance with plan and there are no concerns about the portfolio company’s performance or ability to meet covenant requirements. | |||||||
| 2 | Performing investment—no concern about repayment of both interest and our cost basis but company’s recent performance or trends in the industry require closer monitoring. | |||||||
| 3 | Underperforming investment—some loss of interest or dividend possible, but still expecting a positive return on investment. | |||||||
| 4 | Underperforming investment—concerns about the recoverability of principal or interest. | |||||||
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The following table shows the distribution of our investments on the 1 to 4 investment rating scale at fair value as of December 31, 2023 and 2022:
| December 31, 2023 | December 31, 2022 | |||||||||||||||||||||||||
| Investment Rating | Fair Value | Percentage of Portfolio | Fair Value | Percentage of Portfolio | ||||||||||||||||||||||
| 1 | $ | 10,429 | 71 | % | $ | 11,565 | 75 | % | ||||||||||||||||||
| 2 | 3,165 | 22 | % | 2,899 | 19 | % | ||||||||||||||||||||
| 3 | 550 | 4 | % | 452 | 3 | % | ||||||||||||||||||||
| 4 | 505 | 3 | % | 461 | 3 | % | ||||||||||||||||||||
| Total | $ | 14,649 | 100 | % | $ | 15,377 | 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 Years Ended December 31, 2023, 2022 and 2021
Revenues
Our investment income for the years ended December 31, 2023, 2022 and 2021 was as follows:
| Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||
| 2023 | 2022 | 2021 | ||||||||||||||||||||||||||||||||||||
| Amount | Percentage of Total Income | Amount | Percentage of Total Income | Amount | Percentage of Total Income | |||||||||||||||||||||||||||||||||
| Interest income | $ | 1,295 | 70.8 | % | $ | 1,106 | 67.6 | % | $ | 687 | 63.6 | % | ||||||||||||||||||||||||||
| Paid-in-kind interest income | 192 | 10.5 | % | 163 | 10.0 | % | 107 | 9.9 | % | |||||||||||||||||||||||||||||
| Fee income | 35 | 1.9 | % | 80 | 4.9 | % | 91 | 8.4 | % | |||||||||||||||||||||||||||||
| Dividend income | 308 | 16.8 | % | 286 | 17.5 | % | 196 | 18.1 | % | |||||||||||||||||||||||||||||
Total investment income(1) | $ | 1,830 | 100.0 | % | $ | 1,635 | 100.0 | % | $ | 1,081 | 100.0 | % | ||||||||||||||||||||||||||
____________
(1)Such revenues represent $1,584, $1,398 and $915 of cash income earned as well as $246, $237 and $166 in non-cash portions relating to accretion of discount and PIK interest for the years ended December 31, 2023, 2022 and 2021, 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 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 and structuring fees. As such, fee income is generally dependent on new Direct Origination investments and the occurrence of events at existing portfolio companies resulting in such fees.
The increase in interest and PIK income during the year ended December 31, 2023 compared to the year ended December 31, 2022 can primarily be attributed to the rising rate environment. The increase in interest and PIK income during the year ended December 31, 2022 compared to the year ended December 31, 2021 can primarily be attributed to the rising interest rate environment, along with the increase in assets resulting from the 2021 Merger.
The decrease in fee income during the year ended December 31, 2023 compared to the year ended December 31, 2022 can primarily be attributed to reduced structuring fees and repayment activity during the current period. The decrease in fee income during the year ended December 31, 2022 compared to the year ended December 31, 2021 can primarily be attributed to reduced structuring fees and repayment activity during the period.
The increase in dividend income during the year ended December 31, 2023 compared to the year ended December 31, 2022 can be primarily attributed to the increase in dividends paid in respect to our investment in COPJV. The increase in dividend income during the year ended December 31, 2022 compared to the year ended December 31, 2021 can be primarily attributed to the increase in dividends paid in respect to our investment in COPJV.
Expenses
57
Our operating expenses, together with excise taxes, for the years ended December 31, 2023, 2022 and 2021 were as follows:
| Year Ended December 31, | ||||||||||||||||||||
| 2023 | 2022 | 2021 | ||||||||||||||||||
| Management fees | $ | 226 | $ | 245 | $ | 173 | ||||||||||||||
| Subordinated income incentive fees | 181 | 159 | 77 | |||||||||||||||||
| Administrative services expenses | 12 | 15 | 12 | |||||||||||||||||
| Accounting and administrative fees | 4 | 5 | 3 | |||||||||||||||||
| Interest expense | 467 | 365 | 231 | |||||||||||||||||
| Other expenses | 26 | 22 | 19 | |||||||||||||||||
| Total operating expenses | $ | 916 | $ | 811 | $ | 515 | ||||||||||||||
| Incentive fee waiver | — | (60) | (30) | |||||||||||||||||
| Net operating expenses before taxes | 916 | 751 | 485 | |||||||||||||||||
| Excise taxes | 22 | 19 | 12 | |||||||||||||||||
| Total net expenses, including excise taxes | $ | 938 | $ | 770 | $ | 497 | ||||||||||||||
The following table reflects selected expense ratios as a percent of average net assets for the years ended December 31, 2023, 2022 and 2021:
| Year Ended December 31, | ||||||||||||||||||||
| 2023 | 2022 | 2021 | ||||||||||||||||||
| Ratio of operating expenses and excise taxes to average net assets | 13.32 | % | 10.96 | % | 9.35 | % | ||||||||||||||
Ratio of incentive fee waiver to average net assets(1) | — | (0.79) | % | (0.53) | % | |||||||||||||||
| Ratio of net operating expenses to average net assets | 13.32 | % | 10.17 | % | 8.82 | % | ||||||||||||||
Ratio of incentive fees, interest expense and excise taxes to average net assets(1) | 9.51 | % | 6.38 | % | 5.15 | % | ||||||||||||||
| Ratio of net operating expenses, excluding certain expenses, to average net assets | 3.81 | % | 3.79 | % | 3.67 | % | ||||||||||||||
______________
(1)Ratio data may be rounded in order to recompute the ending ratio of net operating expenses, excluding certain expenses, to average net assets.
The increase in expenses during the year ended December 31, 2023 compared to the year ended December 31, 2022 can primarily be attributed to an increase in subordinated income incentive fees and interest expense as a result of the rising rate environment.
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 amounts outstanding under our financing arrangements and benchmark interest rates such as SOFR, among other factors.
Net Investment Income
Our net investment income totaled $892 ($3.18 per share), $865 ($3.05 per share) and $584 ($2.76 per share) for the years ended December 31, 2023, 2022 and 2021, respectively.
The increase in net investment income during the year ended December 31, 2023 compared to the year ended December 31, 2022 and during the year ended December 31, 2022 compared to the year ended December 31, 2021 can primarily be attributed to higher investment income during the respective years ended December 31, 2023 and December 31, 2022 as discussed above.
Net Realized Gains or Losses
Our net realized gains (losses) on investments, financial instruments and foreign currency for the years ended December 31, 2023, 2022 and 2021 were as follows:
| Year Ended December 31, | ||||||||||||||||||||
| 2023 | 2022 | 2021 | ||||||||||||||||||
Net realized gain (loss) on investments(1) | $ | (343) | $ | 149 | $ | 171 | ||||||||||||||
| Net realized gain (loss) on foreign currency forward contracts | 8 | 10 | 0 | |||||||||||||||||
| Net realized gain (loss) on foreign currency | 12 | 23 | (7) | |||||||||||||||||
| Total net realized gain (loss) | $ | (323) | $ | 182 | $ | 164 | ||||||||||||||
______________
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(1)We sold investments and received principal repayments, respectively, of $1,659 and $911 during the year ended December 31, 2023, $2,076 and $2,665 during the year ended December, 31, 2022 and $2,258 and $3,317 during the year ended December 31, 2021.
Provision for Taxes on Realized and Unrealized Gains on Investments
We recorded a provision for taxes on realized and unrealized gains with respect to two of our equity investments of $(3) and $(5) and $0 during the years ended December 31, 2023, 2022 and 2021, respectively.
Realized Losses from Extinguishment of Debt
During the years ended December 31, 2023, 2022 and 2021, we recorded a net realized loss from the extinguishment of debt of $0, $0 and $(3), respectively.
Net Change in Unrealized Appreciation (Depreciation)
Our net change in unrealized appreciation (depreciation) on investments, foreign currency forward contracts and unrealized gain (loss) on foreign currency for the years ended December 31, 2023, 2022 and 2021 were as follows:
| Year Ended December 31, | ||||||||||||||||||||
| 2023 | 2022 | 2021 | ||||||||||||||||||
| Net change in unrealized appreciation (depreciation) on investments | $ | 166 | $ | (981) | $ | 728 | ||||||||||||||
| Net change in unrealized appreciation (depreciation) on foreign currency forward contracts | (15) | 16 | 12 | |||||||||||||||||
| Net change in unrealized gain (loss) on foreign currency | (21) | 15 | 30 | |||||||||||||||||
| Total net change in unrealized appreciation (depreciation) | $ | 130 | $ | (950) | $ | 770 | ||||||||||||||
During the year ended December 31, 2023, the net change in unrealized appreciation (depreciation) was driven primarily by the conversion of unrealized depreciation to realized losses on several specific assets in the portfolio. During the year ended December 31, 2022, the net change in unrealized appreciation (depreciation) on our investments was driven primarily by a general widening of credit spreads. During the year ended December 31, 2021, the net change in unrealized appreciation (depreciation) on our investments was driven primarily by $628 of appreciation resulting from the merger accounting associated with the 2021 Merger.
Net Increase (Decrease) in Net Assets Resulting from Operations
For the years ended December 31, 2023, 2022 and 2021, the net increase (decrease) in net assets resulting from operations was $696 ($2.48 per share), $92 ($0.32 per share) and $1,515 ($7.16 per share), respectively.
Financial Condition, Liquidity and Capital Resources
Overview
As of December 31, 2023, we had $231 in cash and foreign currency, which we or our wholly-owned financing subsidiaries held in custodial accounts, and $3,409 in borrowings available under our financing arrangements, subject to borrowing base and other limitations. As of December 31, 2023, we also had broadly syndicated investments and opportunistic investments that could be sold to create additional liquidity. As of December 31, 2023, we had unfunded debt investments with aggregate unfunded commitments of $995.1, unfunded equity/other commitments of $616.4 and unfunded commitments of $560.2 of COPJV. 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 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 the Adviser, but in no event will leverage employed exceed the maximum amount permitted by the 1940 Act. Prior to June 14, 2019, in accordance with the 1940 Act, we were allowed to borrow amounts such that our asset coverage, calculated pursuant to the 1940 Act, was at least 200% after such borrowing. Effective June 15, 2019, our asset coverage requirement applicable to senior securities was reduced from 200% to 150%. As of December 31, 2023, the aggregate amount outstanding of the senior securities issued by us was $8.2 billion. As of December 31, 2023, our asset coverage was 183%. 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 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
59
The following table presents summary information with respect to our outstanding financing arrangements as of December 31, 2023:
| As of December 31, 2023 | ||||||||||||||||||||||||||||||||
| Arrangement | Type of Arrangement | Rate | Amount Outstanding | Amount Available | Maturity Date | |||||||||||||||||||||||||||
Ambler Credit Facility(2)(9) | Revolving Credit Facility | SOFR+2.75%(1) | $ | 132 | $ | 68 | May 22, 2027 | |||||||||||||||||||||||||
CCT Tokyo Funding Credit Facility(2) | Revolving Credit Facility | SOFR+1.90% - 2.05%(1)(3) | 294 | — | June 2, 2026 | |||||||||||||||||||||||||||
Darby Creek Credit Facility(2)(9) | Revolving Credit Facility | SOFR+2.65%(1) | 654 | 96 | February 26, 2027 | |||||||||||||||||||||||||||
Meadowbrook Run Credit Facility(2)(9) | Revolving Credit Facility | SOFR+2.70%(1) | 225 | 75 | November 22, 2026 | |||||||||||||||||||||||||||
Senior Secured Revolving Credit Facility(2) | Revolving Credit Facility | SOFR+1.75% - 1.88%(1)(4) | 1,429(5) | 3,170(6) | October 31, 2028 | |||||||||||||||||||||||||||
4.625% Notes due 2024(7) | Unsecured Notes | 4.63% | 400 | — | July 15, 2024 | |||||||||||||||||||||||||||
1.650% Notes due 2024(7) | Unsecured Notes | 1.65% | 500 | — | October 12, 2024 | |||||||||||||||||||||||||||
4.125% Notes due 2025(7) | Unsecured Notes | 4.13% | 470 | — | February 1, 2025 | |||||||||||||||||||||||||||
4.250% Notes due 2025(7)(9) | Unsecured Notes | 4.25% | 475 | — | February 14, 2025 | |||||||||||||||||||||||||||
8.625% Notes due 2025(7) | Unsecured Notes | 8.63% | 250 | — | May 15, 2025 | |||||||||||||||||||||||||||
3.400% Notes due 2026(7) | Unsecured Notes | 3.40% | 1,000 | — | January 15, 2026 | |||||||||||||||||||||||||||
2.625% Notes due 2027(7) | Unsecured Notes | 2.63% | 400 | — | January 15, 2027 | |||||||||||||||||||||||||||
3.250% Notes due 2027(7) | Unsecured Notes | 3.25% | 500 | — | July 15, 2027 | |||||||||||||||||||||||||||
3.125% Notes due 2028(7) | Unsecured Notes | 3.13% | 750 | — | October 12, 2028 | |||||||||||||||||||||||||||
7.875% Notes due 2029(7) | Unsecured Notes | 7.88% | 400 | — | January 15, 2029 | |||||||||||||||||||||||||||
CLO-1 Notes(2)(8) | Collateralized Loan Obligation | SOFR+1.85% - 3.01%(1) | 344 | — | January 15, 2031 | |||||||||||||||||||||||||||
| Total | $ | 8,223 | $ | 3,409 | ||||||||||||||||||||||||||||
(1)The benchmark rate is subject to a 0% floor.
(2)The carrying amount outstanding under the facility approximates its fair value.
(3)As of December 31, 2023, there was $196 term loan outstanding at SOFR+1.90% and $98 revolving commitment outstanding at SOFR+2.05%.
(4)The spread over the benchmark rate is determined by reference to the ratio of the value of the borrowing base to the aggregate amount of certain outstanding indebtedness of the Company. In addition to the spread over the benchmark rate, a credit spread adjustment of 0.10% and 0.0326% is applicable to borrowings in U.S. dollars and pounds sterling, respectively.
(5)Amount includes borrowing in Euros, Canadian dollars, pounds sterling and Australian dollars. Euro balance outstanding of €356 has been converted to U.S. dollars at an exchange rate of €1.00 to $1.11 as of December 31, 2023 to reflect total amount outstanding in U.S. dollars. Canadian dollar balance outstanding of CAD4 has been converted to U.S dollars at an exchange rate of CAD1.00 to $0.76 as of December 31, 2023 to reflect total amount outstanding in U.S. dollars. Pounds sterling balance outstanding of £88 has been converted to U.S dollars at an exchange rate of £1.00 to $1.27 as of December 31, 2023 to reflect total amount outstanding in U.S. dollars. Australian dollar balance outstanding of AUD38 has been converted to U.S dollars at an exchange rate of AUD1.00 to $0.68 as of December 31, 2023 to reflect total amount outstanding in U.S. dollars.
(6)The amount available for borrowing under the Senior Secured Revolving Credit Facility is reduced by any standby letters of credit issued under the Senior Secured Revolving Credit Facility. As of December 31, 2023, $18 of such Letters of Credit have been issued.
(7)As of December 31, 2023, the fair value of the 4.625% notes, the 1.650% notes, the 4.125% notes, the 4.250% notes, the 8.625% notes, the 3.400% notes, the 2.625% notes, the 3.250% notes, the 3.125% notes and the 7.875% notes was approximately $397, $483, $458, $463, $255, $947, $359, $455,$654 and $424 respectively. These valuations are considered Level 2 valuations within the fair value hierarchy.
(8)As of December 31, 2023, there were $273.6 of Class A-1R notes outstanding at SOFR+1.85%, $20.5 of Class A-2R notes outstanding at SOFR+2.25%, $32.4 of Class B-1R notes outstanding at SOFR+2.60% and $17.4 of Class B-2R notes outstanding at 3.011%.
(9)As of June 16, 2021, the Company assumed all of FSKR’s obligations under its notes and credit facilities, and FSKR’s wholly-owned special purpose financing subsidiaries became wholly-owned special purpose financing subsidiaries of the Company, in each case, as a result of the consummation of the 2021 Merger.
See Note 9 to our consolidated financial statements included herein for additional information regarding our financing arrangements.
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 tax 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
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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 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 authorize, declare and pay regular cash distributions on a quarterly 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.
During certain periods, our distributions may exceed our earnings. As a result, it is possible that a portion of the distributions we make 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 our investment activities. Each year a statement on Form 1099-DIV identifying the sources of the distributions will be mailed to our stockholders. No portion of the distributions paid during the tax years ended December 31, 2023, 2022 or 2021 represented a return of capital.
We intend to continue to make our regular distributions in the form of cash, out of assets legally available for distribution, except for those stockholders who receive their distributions in the form of shares of our common stock under our distribution reinvestment plan. Any distributions reinvested under the plan will nevertheless remain taxable to a U.S. stockholder.
The following table reflects the cash distributions per share that we have declared on our common stock during the years ended December 31, 2023, 2022 and 2021:
| Distribution | ||||||||||||||
| For the Year Ended December 31, | Per Share | Amount | ||||||||||||
| 2021 | $ | 2.47 | $ | 511 | ||||||||||
| 2022 | $ | 2.66 | $ | 754 | ||||||||||
| 2023 | $ | 2.95 | $ | 827 | ||||||||||
See Note 5 to our consolidated financial statements contained in this annual report on Form 10-K 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 years ended December 31, 2023, 2022 and 2021.
Recent Developments
None.
Critical Accounting Policies and Estimates
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. Management has utilized available information, including our past history, industry standards and the current economic environment, among other factors, in forming the 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. Understanding our accounting policies and the extent to which we use management judgment and estimates in applying these policies is integral to understanding our financial statements. We describe our most significant accounting policies in "Note 2. Summary of Significant Accounting Policies" in our consolidated financial statements. 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. We evaluate our critical accounting estimates and judgments required by our policies on an ongoing basis and update them as necessary based on changing conditions. We have identified one of our accounting policies, valuation of portfolio investments, specifically the valuation of Level 3 investments, as critical because it involves significant judgments and assumptions about highly complex and inherently uncertain matters, and the use of reasonably different estimates and assumptions could have a material impact on our reported results of operations or financial condition. 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
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Our board of directors is responsible for overseeing the valuation of our portfolio investments at fair value as determined in good faith pursuant to the Adviser's valuation policy. As permitted by Rule 2a-5 of the 1940 Act, our board of directors has designated the Adviser as our valuation designee with day-to-day responsibility for implementing the portfolio valuation process set forth in the Adviser's valuation policy.
The Adviser determines the fair value of our investment portfolio each quarter. Securities that are publicly-traded with readily available market prices will be valued at the reported closing price on the valuation date. Securities that are not publicly-traded with readily available market prices will be valued at fair value as determined in good faith by the Adviser. In connection with that determination, the Adviser will prepare 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 pricing and valuation services.
ASC Topic 820 issued by the 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 prices in active markets for identical securities; 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 by the Adviser facilitating the delivery of updated quarterly financial and other information relating to each investment to an independent third-party pricing or valuation service;
•the independent third-party pricing or valuation service then reviews and analyzes the information, along with relevant market and economic data, and determines proposed valuations for each portfolio company or investment according to the valuation methodologies in the Adviser's valuation policy and communicates the information to the Adviser in the form of a valuation range for Level 3 assets;
•the Adviser then reviews the preliminary valuation information for each portfolio company or investment and provides feedback about the accuracy, completeness and timeliness of the valuation-related inputs considered by the independent third-party pricing or valuation service and any suggested revisions thereto prior to the independent third-party pricing or valuation service finalizing its valuation range;
•the Adviser then provides the valuation committee with its valuation determinations and valuation-related information for each portfolio company or investment, along with any applicable supporting materials; and other information that is relevant to the fair valuation process as required by the Adviser's board reporting obligations;
•the valuation committee meets with the Adviser to receive the relevant quarterly reporting from the Adviser and to discuss any questions from the valuation committee in connection with the valuation committee's role in overseeing the fair valuation process; and
•following the completion of its fair value oversight activities, the valuation committee (with the assistance of the Adviser) provides our board of directors with a report regarding the quarterly valuation process.
In circumstances where the Adviser deems appropriate, the Adviser’s internal valuation team values certain investments. When performing the internal valuations, the Adviser utilizes similar valuation techniques as an independent third-party pricing service would use. Such valuations are approved by an internal valuation committee of the Adviser, as well as the valuation committee of the board of directors, as described above.
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, the Adviser may use any independent third-party pricing or valuation services for which it has performed the appropriate level of due diligence. However, the Adviser 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 sourced by the Adviser or provided by any independent third-party valuation or pricing service that the Adviser deems to be reliable in determining fair value under the circumstances. Below is a description of factors that the Adviser and any independent third-party valuation services may consider when determining the fair value of our investments.
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The valuation methods utilized for each portfolio company may vary depending on industry and company-specific considerations. Typically, the first step is to make an assessment as to the enterprise value of the portfolio company's business in order to establish whether the portfolio company's enterprise value is greater than the amount of its debt as of the valuation date. This analysis helps to determine a risk profile for the applicable portfolio company and its related investments, and the appropriate valuation methodology to utilize as part of the security valuation analysis. The enterprise valuation may be determined using a market or income approach.
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, the Adviser may incorporate these factors into discounted cash flow models to arrive at fair value. Various methods may be used to determine the appropriate rate in a discounted cash flow model.
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. 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.
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. The Adviser subsequently values these warrants or other equity securities received at their fair value.
See Note 8 to our consolidated financial statements included herein for additional information regarding the fair value of our financial instruments.
Contractual Obligations
We have entered into agreements with the Adviser to provide us with investment advisory and administrative services. Payments for investment advisory services under the investment advisory agreement are equal to (a) an annual base management fee based on the average weekly value of our gross assets (excluding cash and cash equivalents) and (b) an incentive fee based on our performance. The Adviser is reimbursed for administrative expenses incurred on our behalf. See Note 4 to our consolidated financial statements included herein for a discussion of these agreements and for the amount of fees and expenses accrued under these agreements during the years ended December 31, 2023, 2022 and 2021.
Recently Issued Accounting Standards
In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”),” which clarifies guidance for fair value measurement of an equity security subject to a contractual sale restriction and establishes new disclosure requirements for such equity securities. ASU 2022-03 is effective for fiscal years beginning after December 15, 2023 and for interim periods within those fiscal years, with early adoption permitted. The Company has concluded that this guidance will not have a material impact on its consolidated financial statements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Interest Rate Risk
We are subject to financial market risks, including changes in interest rates. As of December 31, 2023, 66.0% of our portfolio investments (based on fair value) were debt investments paying variable interest rates and 7.9% were debt investments paying fixed interest rates while 15.2% were other income producing investments, 5.4% consisted of non-income producing investments, and the remaining 5.5% consisted of investments on non-accrual status. 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 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, and may result in a substantial increase in our net investment income and to the amount of incentive fees payable to the Adviser with respect to our increased pre-incentive fee net
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investment income. Previously, the U.S. Federal Reserve and other central banks have reduced certain interest rates in response to the COVID-19 pandemic and market conditions. A prolonged reduction in interest rates may reduce our net investment income.
Pursuant to the terms of the Ambler Credit Facility, CCT Tokyo Funding Credit Facility, Darby Creek Credit Facility, Meadowbrook Run Credit Facility, Senior Secured Revolving Credit Facility and the CLO-1 Notes, we borrow at a floating rate based on a benchmark interest rate. Under the indentures governing the 4.625% notes, the 1.650% notes, the 4.125% notes, the 4.250% notes, the 8.625% notes, the 3.400% notes, the 2.625% notes, the 3.250% notes, the 3.125% notes and the 7.875% notes, we pay interest to the holders of such notes at a fixed rate. To the extent that any present or future credit facilities 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 December 31, 2023 (dollar amounts are presented in millions):
| 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 | $(98) | $(31) | $(67) | (7.0)% | ||||||||||||||||||||||
| Down 50 basis points | (49) | (15) | (34) | (3.6)% | ||||||||||||||||||||||
| Up 50 basis points | 49 | 15 | 34 | 3.6% | ||||||||||||||||||||||
| Up 100 basis points | 98 | 31 | 67 | 7.0% | ||||||||||||||||||||||
| Up 150 basis points | 147 | 46 | 101 | 10.6% | ||||||||||||||||||||||
| Up 200 basis points | 196 | 62 | 134 | 14.1% | ||||||||||||||||||||||
| Up 250 basis points | 245 | 77 | 168 | 17.7% | ||||||||||||||||||||||
_______________
(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 years ended December 31, 2023, 2022 and 2021 we did not engage in interest rate hedging activities.
Foreign Currency Risk
From time to time, we may make investments that are denominated in a foreign currency that are subject to the effects of exchange rate movements between the foreign currency of each such investment and the U.S. dollar, which may affect future fair values and cash flows, as well as amounts translated into U.S. dollars for inclusion in our consolidated financial statements.
The table below presents the effect that a 10% immediate, unfavorable change in the foreign currency exchange rates (i.e. strengthening of the U.S. dollar) would have on the fair value of our investments denominated in foreign currencies as of December 31, 2023, by foreign currency, all other valuation assumptions remaining constant. In addition, the table below presents the par value of our investments denominated in foreign currencies and the notional amount of foreign currency forward contracts in local currency in place as of December 31, 2023 to hedge against foreign currency risks.
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Investments Denominated in Foreign Currencies As of December 31, 2023 | Economically Hedged As of December 31, 2023 | |||||||||||||||||||||||||||||||||||||
| Cost in Local Currency | Cost in US$ | Fair Value | Reduction in Fair Value as of December 31, 2023 if 10% Adverse Change in Exchange Rate(1) | Net Foreign Currency Hedge Amount in Local Currency | Net Foreign Currency Hedge Amount in U.S. Dollars | |||||||||||||||||||||||||||||||||
| Australian Dollars | A$ | 52.6 | $ | 35.9 | $ | 34.3 | $ | 3.4 | A$ | 12.8 | $ | 8.8 | ||||||||||||||||||||||||||
| British Pounds Sterling | £ | 113.8 | 145.0 | 145.4 | 14.5 | £ | 36.7 | 46.8 | ||||||||||||||||||||||||||||||
| Canadian Dollars | C$ | 2.6 | 2.0 | 2.0 | 0.2 | C$ | 1.1 | 0.8 | ||||||||||||||||||||||||||||||
| Euros | € | 441.9 | 488.8 | 358.7 | 35.9 | € | — | — | ||||||||||||||||||||||||||||||
| Icelandic Krona | ISK | 1,384.2 | 10.2 | 9.8 | 1.0 | ISK | — | — | ||||||||||||||||||||||||||||||
| Swedish Krona | SEK | 1,587.2 | 157.9 | 135.8 | 13.6 | SEK | 1,115.8 | 111.1 | ||||||||||||||||||||||||||||||
| Total | $ | 839.8 | $ | 686.0 | $ | 68.6 | $ | 167.5 | ||||||||||||||||||||||||||||||
_______________
(1)Excludes effect, if any, of any foreign currency hedges.
As illustrated in the table above, we use derivative instruments from time to time, including foreign currency forward contracts and cross currency swaps, to manage the impact of fluctuations in foreign currency exchange rates. In addition, we have the ability to borrow in foreign currencies under our Senior Secured Revolving Credit Facility, which provides a natural hedge with regard to changes in exchange rates between the foreign currencies and U.S. dollar and reduces our exposure to foreign exchange rate differences. We are typically a net receiver of these foreign currencies as related for our international investment positions, and, as a result, our investments denominated in foreign currencies, to the extent not hedged, benefit from a weaker U.S. dollar and are adversely affected by a stronger U.S. dollar.
As of December 31, 2023, the net contractual amount of our foreign currency forward contracts totaled $167.5, all of which related to hedging of our foreign currency denominated debt investments. As of December 31, 2023, we had outstanding borrowings denominated in foreign currencies of €356, CAD4, £88 and AUD38 under our Senior Secured Revolving Credit Facility.
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.”
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Item 8. Financial Statements and Supplementary Data.
Index to Financial Statements
| Page | ||||||||||||||
Reports of Independent Registered Public Accounting Firm (PCAOB ID 34) | ||||||||||||||
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MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. In connection with the preparation of our annual financial statements, management has conducted an assessment of the effectiveness of our internal control over financial reporting based on the framework set forth in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013 (“COSO”). Management’s assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of those controls. Based on this evaluation, we have concluded that, as of December 31, 2023, our internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Our internal control over financial reporting as of December 31, 2023 has been audited by our independent registered public accounting firm.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of FS KKR Capital Corp.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of FS KKR Capital Corp. and subsidiaries (the “Company”) as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2023, of the Company and our report dated February 26, 2024, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
San Francisco, California
February 26, 2024
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of FS KKR Capital Corp.
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying consolidated balance sheets of FS KKR Capital Corp. and subsidiaries (the "Company"), including the consolidated schedules of investments, as of December 31, 2023 and 2022, the related consolidated statements of operations, changes in net assets, and cash flows for each of the three years in the period ended December 31, 2023, the financial highlights for each of the five years in the period ended December 31, 2023, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations, changes in net assets, and cash flows for each of the three years in the period ended December 31, 2023, and the financial highlights for each of the five years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 26, 2024 expressed an unqualified opinion on the Company's internal control over financial reporting.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements and financial highlights based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of investments owned as of December 31, 2023 and 2022, by correspondence with the custodian, loan agents, and borrowers; when replies were not received, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Fair Value — Level 3 Investments — Refer to Notes 2, 6, and 8 to the financial statements
Critical Audit Matter Description
The Company held investments classified as Level 3 investments under accounting principles generally accepted in the United States of America. These investments included less liquid corporate bonds and loans, unlisted equity securities, and derivatives that lack observable market prices. The valuation techniques used in estimating the fair value of these investments vary and certain significant inputs used were unobservable.
We identified the valuation of Level 3 investments as a critical audit matter because of the judgments necessary for management to select valuation techniques and to use significant unobservable inputs, such as selected discount rates, projected future cash flows, and comparable company multiples, to estimate the fair value as of December 31, 2023. This required a high degree of auditor judgment
69
and extensive audit effort, including the need to involve fair value specialists who possess significant valuation experience, to evaluate the appropriateness of the valuation techniques and the significant unobservable inputs, when performing audit procedures to audit management’s estimate of fair value of Level 3 investments.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to valuation techniques and unobservable inputs used by management to estimate the fair value of Level 3 investments included the following, among others:
•We tested the effectiveness of controls over management’s valuation of Level 3 investments, including those related to valuation techniques and significant unobservable inputs.
•We evaluated the appropriateness of the valuation techniques used for Level 3 investments and tested the related significant unobservable inputs by comparing these inputs to external sources. We evaluated the reasonableness of any significant changes in valuation techniques or significant unobservable inputs. For a selected sample of Level 3 investments, we performed these procedures with the assistance of our fair value specialists.
•In instances where the selection of valuation techniques or significant unobservable inputs were more subjective, with the assistance of our fair value specialists, we developed an independent estimate of the fair value and compared our estimates to management’s estimates.
•We evaluated management’s ability to reasonably estimate fair value by comparing management’s historical estimates to subsequent transactions, taking into account changes in market or investment specific conditions, where applicable.
/s/ Deloitte & Touche LLP
San Francisco, California
February 26, 2024
We have served as the Company’s auditor since 2019.
70
Part I—FINANCIAL INFORMATION
FS KKR Capital Corp.
Consolidated Balance Sheets
(in millions, except share and per share amounts)
| December 31, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| Assets | ||||||||||||||
| Investments, at fair value | ||||||||||||||
Non-controlled/unaffiliated investments (amortized cost—$ | $ | $ | ||||||||||||
Non-controlled/affiliated investments (amortized cost—$ | ||||||||||||||
Controlled/affiliated investments (amortized cost—$ | ||||||||||||||
Total investments, at fair value (amortized cost—$ | ||||||||||||||
| Cash | ||||||||||||||
Foreign currency, at fair value (cost—$ | ||||||||||||||
| Receivable for investments sold and repaid | ||||||||||||||
| Income receivable | ||||||||||||||
| Unrealized appreciation on foreign currency forward contracts | ||||||||||||||
| Deferred financing costs | ||||||||||||||
| Prepaid expenses and other assets | ||||||||||||||
| Total assets | $ | $ | ||||||||||||
| Liabilities | ||||||||||||||
| Payable for investments purchased | $ | $ | ||||||||||||
Debt (net of deferred financing costs and discount of $ | ||||||||||||||
| Unrealized depreciation on foreign currency forward contracts | ||||||||||||||
| Stockholder distributions payable | ||||||||||||||
| Management and investment adviser fees payable | ||||||||||||||
Subordinated income incentive fees payable(2) | ||||||||||||||
| Administrative services expense payable | ||||||||||||||
| Interest payable | ||||||||||||||
| Other accrued expenses and liabilities | ||||||||||||||
| Total liabilities | ||||||||||||||
Commitments and contingencies(3) | ||||||||||||||
| Stockholders’ equity | ||||||||||||||
Preferred stock, $ | ||||||||||||||
Common stock, $ | ||||||||||||||
| Capital in excess of par value | ||||||||||||||
Retained earnings (accumulated deficit)(4) | ( | ( | ||||||||||||
| Total stockholders’ equity | ||||||||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||||||||
| Net asset value per share of common stock at year end | $ | $ | ||||||||||||
_______________
(1)See Note 9 for a discussion of the Company’s financing arrangements.
(2)See Note 2 and 4 for a discussion of the methodology employed by the Company in calculating the subordinated income incentive fees.
(3)See Note 10 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 consolidated financial statements.
71
FS KKR Capital Corp.
Consolidated Statements of Operations
(in millions, except share and per share amounts)
| Year Ended December 31, | ||||||||||||||||||||
| 2023 | 2022 | 2021 | ||||||||||||||||||
| Investment income | ||||||||||||||||||||
| From non-controlled/unaffiliated investments: | ||||||||||||||||||||
| Interest income | $ | $ | $ | |||||||||||||||||
| Paid-in-kind interest income | ||||||||||||||||||||
| Fee income | ||||||||||||||||||||
| Dividend and other income | ||||||||||||||||||||
| From non-controlled/affiliated investments: | ||||||||||||||||||||
| Interest income | ||||||||||||||||||||
| Paid-in-kind interest income | ||||||||||||||||||||
| Fee income | ||||||||||||||||||||
| Dividend and other income | ||||||||||||||||||||
| From controlled/affiliated investments: | ||||||||||||||||||||
| Interest income | ||||||||||||||||||||
| Paid-in-kind interest income | ||||||||||||||||||||
| Fee income | ||||||||||||||||||||
| Dividend and other income | ||||||||||||||||||||
| Total investment income | ||||||||||||||||||||
| Operating expenses | ||||||||||||||||||||
| Management fees | ||||||||||||||||||||
Subordinated income incentive fees(1) | ||||||||||||||||||||
| Administrative services expenses | ||||||||||||||||||||
| Accounting and administrative fees | ||||||||||||||||||||
Interest expense(2) | ||||||||||||||||||||
| Other general and administrative expenses | ||||||||||||||||||||
| Total operating expenses | ||||||||||||||||||||
Incentive fee waiver(1) | ( | ( | ||||||||||||||||||
| Net expenses | ||||||||||||||||||||
| Net investment income before taxes | ||||||||||||||||||||
| Excise taxes | ||||||||||||||||||||
| Net investment income | ||||||||||||||||||||
| Realized and unrealized gain/loss | ||||||||||||||||||||
| Net realized gain (loss) on investments: | ||||||||||||||||||||
| Non-controlled/unaffiliated investments | ( | |||||||||||||||||||
| Non-controlled/affiliated investments | ( | |||||||||||||||||||
| Controlled/affiliated investments | ( | ( | ( | |||||||||||||||||
| Net realized gain (loss) on foreign currency forward contracts | ||||||||||||||||||||
| Net realized gain (loss) on foreign currency | ( | |||||||||||||||||||
| Net change in unrealized appreciation (depreciation) on investments: | ||||||||||||||||||||
| Non-controlled/unaffiliated investments | ( | |||||||||||||||||||
| Non-controlled/affiliated investments | ( | |||||||||||||||||||
| Controlled/affiliated investments | ( | |||||||||||||||||||
| Net change in unrealized appreciation (depreciation) on foreign currency forward contracts | ( | |||||||||||||||||||
| Net change in unrealized gain (loss) on foreign currency | ( | |||||||||||||||||||
| Total net realized and unrealized gain (loss) | ( | ( | ||||||||||||||||||
| Provision for taxes on realized and unrealized gains on investments | ( | ( | ||||||||||||||||||
| Realized loss on extinguishment of debt | ( | |||||||||||||||||||
| Net increase (decrease) in net assets resulting from operations | $ | $ | $ | |||||||||||||||||
See notes to consolidated financial statements.
72
FS KKR Capital Corp.
Consolidated Statements of Operations (continued)
(in millions, except share and per share amounts)
| Year Ended December 31, | ||||||||||||||||||||
| 2023 | 2022 | 2021 | ||||||||||||||||||
| Per share information—basic and diluted | ||||||||||||||||||||
| Net increase (decrease) in net assets resulting from operations (Earnings per Share) | $ | $ | $ | |||||||||||||||||
| Weighted average shares outstanding | ||||||||||||||||||||
_______________
(1)See Note 2 and 4 for a discussion of the methodology employed by the Company in calculating the subordinated income incentive fees.
(2)See Note 9 for a discussion of the Company’s financing arrangements.
See notes to consolidated financial statements.
73
| Year Ended December 31, | ||||||||||||||||||||
| 2023 | 2022 | 2021 | ||||||||||||||||||
| Operations | ||||||||||||||||||||
| Net investment income | $ | $ | $ | |||||||||||||||||
| Net realized gain (loss) on investments, foreign currency forward contracts, foreign currency, provision for taxes on realized gains on investments and extinguishment of debt | ( | |||||||||||||||||||
Net change in unrealized appreciation (depreciation) on investments and foreign currency forward contracts(1) | ( | |||||||||||||||||||
| Net change in unrealized gain (loss) on foreign currency | ( | |||||||||||||||||||
| Net increase (decrease) in net assets resulting from operations | ||||||||||||||||||||
Stockholder distributions(2) | ||||||||||||||||||||
| Distributions to stockholders | ( | ( | ( | |||||||||||||||||
| Net decrease in net assets resulting from stockholder distributions | ( | ( | ( | |||||||||||||||||
Capital share transactions(3) | ||||||||||||||||||||
| Issuance of common stock | ||||||||||||||||||||
| Reinvestment of stockholder distributions | ||||||||||||||||||||
| Repurchases of common stock | ( | ( | ( | |||||||||||||||||
| Net increase (decrease) in net assets resulting from capital share transactions | ( | ( | ||||||||||||||||||
| Total increase (decrease) in net assets | ( | ( | ||||||||||||||||||
| Net assets at beginning of year | ||||||||||||||||||||
| Net assets at end of year | $ | $ | $ | |||||||||||||||||
_______________
(1)See Note 7 for a discussion of the Company’s financial instruments.
(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 consolidated financial statements.
74
| Year Ended December 31, | |||||||||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||||||||
| Cash flows from operating activities | |||||||||||||||||||||||
| Net increase (decrease) in net assets resulting from operations | $ | $ | $ | ||||||||||||||||||||
| 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) | ( | ( | ( | ||||||||||||||||||||
| Paid-in-kind interest | ( | ( | ( | ||||||||||||||||||||
| Proceeds from sales and repayments of investments | |||||||||||||||||||||||
| Net realized (gain) loss on investments | ( | ( | |||||||||||||||||||||
Net change in unrealized (appreciation) depreciation on investments(2) | ( | ( | |||||||||||||||||||||
| Net change in unrealized (appreciation) depreciation on foreign currency forward contracts | ( | ( | |||||||||||||||||||||
| Realized loss on extinguishment of debt | |||||||||||||||||||||||
| Accretion of discount | ( | ( | ( | ||||||||||||||||||||
| Amortization of deferred financing costs and discount | |||||||||||||||||||||||
| Unrealized (gain)/loss on borrowings in foreign currency | ( | ( | |||||||||||||||||||||
| (Increase) decrease in receivable for investments sold and repaid | ( | ( | |||||||||||||||||||||
| (Increase) decrease in income receivable | ( | ( | ( | ||||||||||||||||||||
| (Increase) decrease in deferred merger costs | |||||||||||||||||||||||
| (Increase) decrease in prepaid expenses and other assets | ( | ( | |||||||||||||||||||||
| Increase (decrease) in payable for investments purchased | ( | ||||||||||||||||||||||
| Increase (decrease) in management fees payable | ( | ( | |||||||||||||||||||||
| Increase (decrease) in subordinated income incentive fees payable | |||||||||||||||||||||||
| Increase (decrease) in administrative services expense payable | ( | ||||||||||||||||||||||
| Increase (decrease) in interest payable | |||||||||||||||||||||||
| Increase (decrease) in other accrued expenses and liabilities | |||||||||||||||||||||||
| Cash acquired in merger | |||||||||||||||||||||||
| Other assets acquired from merger net of other assets | |||||||||||||||||||||||
| Merger costs capitalized into purchase price | ( | ||||||||||||||||||||||
| Mark-to-market of merged debt | |||||||||||||||||||||||
| Net cash provided by (used in) operating activities | ( | ||||||||||||||||||||||
| Cash flows from financing activities | |||||||||||||||||||||||
| Repurchases of common stock | ( | ( | ( | ||||||||||||||||||||
| Stockholder distributions | ( | ( | ( | ||||||||||||||||||||
Borrowings under financing arrangements(3) | |||||||||||||||||||||||
Repayments of financing arrangements(3) | ( | ( | ( | ||||||||||||||||||||
| Deferred financing costs paid | ( | ( | ( | ||||||||||||||||||||
| Net cash provided by (used in) financing activities | ( | ( | |||||||||||||||||||||
| Total increase (decrease) in cash | ( | ( | |||||||||||||||||||||
| Cash and foreign currency at beginning of year | |||||||||||||||||||||||
| Cash and foreign currency at end of year | $ | $ | $ | ||||||||||||||||||||
| Supplemental disclosure | |||||||||||||||||||||||
| Non-cash purchases of investments | $ | ( | $ | ( | $ | ( | |||||||||||||||||
| Non-cash sales of investments | $ | $ | $ | ||||||||||||||||||||
| Local and excise taxes paid | $ | $ | $ | ||||||||||||||||||||
| Interest paid during the period | $ | $ | $ | ||||||||||||||||||||
See notes to consolidated financial statements.
75
FS KKR Capital Corp.
Consolidated Statements of Cash Flows (continued)
(in millions)
_____________
(1)For the year ended December 31, 2021, amount excludes $7,227 of cost of investments acquired from the 2021 Merger.
(2)For the year ended December 31, 2021, amount excludes $11 of unrealized depreciation on unfunded commitments acquired from the 2021 Merger.
(3)For the year ended December 31, 2021, amount excludes $3,794 of debt assumed from the 2021 Merger. See Note 9 for a discussion of the Company’s financing arrangements.
Supplemental disclosure of non-cash operating and financing activities:
In connection with the 2021 Merger, the Company issued common stock of $3,650 and acquired investments at cost of $7,227 and other assets of $221 and assumed debt of $3,794 and other liabilities of $297 during the year ended December 31, 2021.
See notes to consolidated financial statements.
76
FS KKR Capital Corp.
Consolidated Schedule of Investments
As of December 31, 2023
(in millions, 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— | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 3Pillar Global Inc | (v) | Software & Services | SF+ | 11/23/26 | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
| 3Pillar Global Inc | (i)(k)(v) | Software & Services | SF+ | 11/23/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| 3Pillar Global Inc | (x) | Software & Services | SF+ | 11/23/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| 48Forty Solutions LLC | (f)(k)(t)(v) | Commercial & Professional Services | SF+ | 11/30/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| 48Forty Solutions LLC | (v) | Commercial & Professional Services | SF+ | 11/30/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| 48Forty Solutions LLC | (x) | Commercial & Professional Services | SF+ | 11/30/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| 5 Arch Income Fund 2 LLC | (q)(r)(w)(y)(z) | Financial Services | 3/31/24 | |||||||||||||||||||||||||||||||||||||||||||||||
| Aareon AG | (v)(w) | Software & Services | E+ | 8/19/30 | € | |||||||||||||||||||||||||||||||||||||||||||||
| Accuride Corp | (aa)(k) | Capital Goods | SF+ | 5/18/26 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Advanced Dermatology & Cosmetic Surgery | (m)(t)(v) | Health Care Equipment & Services | SF+ | 5/7/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Advanced Dermatology & Cosmetic Surgery | (v) | Health Care Equipment & Services | SF+ | 5/7/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Advanced Dermatology & Cosmetic Surgery | (x) | Health Care Equipment & Services | SF+ | 5/7/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Advania Sverige AB | (v)(w) | Software & Services | SR+ | 4/28/28 | SEK | |||||||||||||||||||||||||||||||||||||||||||||
| Advania Sverige AB | (v)(w) | Software & Services | R+ | 4/28/28 | ISK | |||||||||||||||||||||||||||||||||||||||||||||
| Affordable Care Inc | (ac)(v) | Health Care Equipment & Services | SF+ | 8/2/27 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Affordable Care Inc | (ac)(m)(v) | Health Care Equipment & Services | SF+ | 8/2/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Affordable Care Inc | (ac)(v) | Health Care Equipment & Services | SF+ | 8/2/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Affordable Care Inc | (ac)(x) | Health Care Equipment & Services | SF+ | 8/2/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Affordable Care Inc | (ac)(x) | Health Care Equipment & Services | SF+ | 8/2/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Alacrity Solutions Group LLC | (v) | Insurance | SF+ | 12/22/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Alacrity Solutions Group LLC | (m) | Insurance | SF+ | 12/22/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Alacrity Solutions Group LLC | (x) | Insurance | SF+ | 12/22/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Alera Group Intermediate Holdings Inc | (m)(v) | Insurance | SF+ | 10/2/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Alera Group Intermediate Holdings Inc | (x) | Insurance | SF+ | 10/2/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| American Vision Partners | (v) | Health Care Equipment & Services | SF+ | 9/30/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| American Vision Partners | (i)(v) | Health Care Equipment & Services | SF+ | 9/30/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| American Vision Partners | (x) | Health Care Equipment & Services | SF+ | 9/30/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Amerivet Partners Management Inc | (v) | Health Care Equipment & Services | SF+ | 2/25/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Amerivet Partners Management Inc | (x) | Health Care Equipment & Services | SF+ | 2/25/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Apex Group Limited | (aa)(m)(w) | Financial Services | SF+ | 7/27/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Apex Group Limited | (aa)(v)(w) | Financial Services | E+ | 7/27/28 | € | |||||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
77
FS KKR Capital Corp.
Consolidated Schedule of Investments (continued)
As of December 31, 2023
(in millions, except share amounts)
Portfolio Company(a) | Footnotes | Industry | Rate(b) | Floor | Maturity | Principal Amount(c) | Amortized Cost | Fair Value(d) | ||||||||||||||||||||||||||||||||||||||||||
| Apex Service Partners LLC | (v) | Commercial & Professional Services | SF+ | 10/24/29 | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
| Apex Service Partners LLC | (v) | Commercial & Professional Services | SF+ | 10/24/30 | ||||||||||||||||||||||||||||||||||||||||||||||
| Apex Service Partners LLC | (x) | Commercial & Professional Services | SF+ | 10/24/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| Apex Service Partners LLC | (x) | Commercial & Professional Services | SF+ | 10/24/30 | ||||||||||||||||||||||||||||||||||||||||||||||
| Arcfield Acquisition Corp | (f)(i)(t)(v) | Capital Goods | SF+ | 8/4/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| Arcfield Acquisition Corp | (x) | Capital Goods | SF+ | 8/4/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Arcos LLC/VA | (m) | Software & Services | SF+ | 4/20/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Arcos LLC/VA | (x) | Software & Services | SF+ | 4/20/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Ardonagh Group Ltd | (v)(w) | Insurance | SA+ | 7/14/26 | £ | |||||||||||||||||||||||||||||||||||||||||||||
| Ardonagh Group Ltd | (v)(w) | Insurance | E+ | 7/14/26 | € | |||||||||||||||||||||||||||||||||||||||||||||
| Ardonagh Group Ltd | (v)(w) | Insurance | SF+ | 7/14/26 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Ardonagh Group Ltd | (w)(x) | Insurance | SF+ | 7/14/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| ATX Networks Corp | (ad)(s)(v)(w) | Capital Goods | SF+ | 9/1/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| ATX Networks Corp | (ad)(w)(x) | Capital Goods | SF+ | 9/1/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Barbri Inc | (f)(k)(m)(t)(v) | Consumer Services | SF+ | 4/28/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| BDO USA PA | (v) | Commercial & Professional Services | SF+ | 8/31/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Belk Inc | (aa)(ac)(v) | Consumer Discretionary Distribution & Retail | P+ | 7/31/25 | ||||||||||||||||||||||||||||||||||||||||||||||
| Belk Inc | (aa)(ac)(v)(y)(z) | Consumer Discretionary Distribution & Retail | 7/31/25 | |||||||||||||||||||||||||||||||||||||||||||||||
| BGB Group LLC | (f)(i)(k)(m)(t) | Media & Entertainment | SF+ | 8/16/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| BGB Group LLC | (x) | Media & Entertainment | SF+ | 8/16/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Bloom Fresh International Limited | (v)(w) | Food, Beverage & Tobacco | E+ | 8/9/30 | € | |||||||||||||||||||||||||||||||||||||||||||||
| Bowery Farming Inc | (v)(y)(z) | Food, Beverage & Tobacco | SF+ | 9/10/26 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Caldic BV | (aa)(m)(w) | Consumer Discretionary Distribution & Retail | SF+ | 2/26/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| Caldic BV | (aa)(v)(w) | Consumer Discretionary Distribution & Retail | E+ | 2/26/29 | € | |||||||||||||||||||||||||||||||||||||||||||||
| Careismatic Brands Inc | (v) | Health Care Equipment & Services | SF+ | 3/9/25 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Careismatic Brands Inc | (x) | Health Care Equipment & Services | SF+ | 3/9/25 | ||||||||||||||||||||||||||||||||||||||||||||||
| CFC Underwriting Ltd | (w)(x) | Insurance | SA+ | 5/16/29 | £ | |||||||||||||||||||||||||||||||||||||||||||||
| Circana Group (f.k.a. NPD Group) | (v) | Consumer Services | SF+ | 12/1/27 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Circana Group (f.k.a. NPD Group) | (m)(v) | Consumer Services | SF+ | 12/1/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Circana Group (f.k.a. NPD Group) | (x) | Consumer Services | SF+ | 12/1/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Civica Group Ltd | (v)(w) | Software & Services | SA+ | 8/30/30 | £ | |||||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
78
FS KKR Capital Corp.
Consolidated Schedule of Investments (continued)
As of December 31, 2023
(in millions, except share amounts)
Portfolio Company(a) | Footnotes | Industry | Rate(b) | Floor | Maturity | Principal Amount(c) | Amortized Cost | Fair Value(d) | ||||||||||||||||||||||||||||||||||||||||||
| Civica Group Ltd | (v)(w) | Software & Services | BW+ | 8/30/30 | A$ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
| Civica Group Ltd | (w)(x) | Software & Services | SA+ | 8/30/30 | £ | |||||||||||||||||||||||||||||||||||||||||||||
| Clarience Technologies LLC | (f)(i)(k)(m)(s)(v) | Capital Goods | SF+ | 12/14/26 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Clarience Technologies LLC | (x) | Capital Goods | SF+ | 12/13/24 | ||||||||||||||||||||||||||||||||||||||||||||||
| Community Brands Inc | (v) | Software & Services | SF+ | 2/24/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Community Brands Inc | (x) | Software & Services | SF+ | 2/24/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Community Brands Inc | (x) | Software & Services | SF+ | 2/24/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Constellis Holdings LLC | (ac)(v) | Capital Goods | SF+ | 9/27/25 | ||||||||||||||||||||||||||||||||||||||||||||||
| Corsearch Intermediate Inc | (m)(v) | Software & Services | SF+ | 4/19/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| CSafe Global | (v) | Transportation | SF+ | 12/23/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| CSafe Global | (f)(i)(k)(m)(t)(v) | Transportation | SF+ | 12/23/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| CSafe Global | (v) | Transportation | SF+ | 12/23/27 | £ | |||||||||||||||||||||||||||||||||||||||||||||
| CSafe Global | (m)(v) | Transportation | SF+ | 8/13/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| CSafe Global | (x) | Transportation | SF+ | 12/23/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Dental Care Alliance Inc | (k)(m)(t)(v) | Health Care Equipment & Services | SF+ | 4/3/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Dental Care Alliance Inc | (v) | Health Care Equipment & Services | SF+ | 4/3/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| DOC Generici Srl | (v)(w) | Pharmaceuticals, Biotechnology & Life Sciences | E+ | 10/27/28 | € | |||||||||||||||||||||||||||||||||||||||||||||
| DOC Generici Srl | (w)(x) | Pharmaceuticals, Biotechnology & Life Sciences | E+ | 10/28/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| DOXA Insurance Holdings LLC | (v) | Insurance | SF+ | 12/31/30 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| DOXA Insurance Holdings LLC | (x) | Insurance | SF+ | 12/20/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| DOXA Insurance Holdings LLC | (x) | Insurance | SF+ | 12/31/30 | ||||||||||||||||||||||||||||||||||||||||||||||
| Element Materials Technology Group US Holdings Inc | (aa)(m)(w) | Commercial & Professional Services | SF+ | 7/6/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| Element Materials Technology Group US Holdings Inc | (aa)(v)(w) | Commercial & Professional Services | E+ | 7/6/29 | € | |||||||||||||||||||||||||||||||||||||||||||||
| Encora Digital LLC | (v) | Commercial & Professional Services | SF+ | 12/20/28 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Encora Digital LLC | (v) | Commercial & Professional Services | SF+ | 12/20/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Envirotainer Ltd | (w)(x) | Transportation | E+ | 7/30/29 | € | |||||||||||||||||||||||||||||||||||||||||||||
| Excelitas Technologies Corp | (v) | Technology Hardware & Equipment | SF+ | 8/12/28 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Excelitas Technologies Corp | (v) | Technology Hardware & Equipment | SF+ | 8/12/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| Excelitas Technologies Corp | (x) | Technology Hardware & Equipment | SF+ | 8/12/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Excelitas Technologies Corp | (x) | Technology Hardware & Equipment | SF+ | 8/12/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| Follett Software Co | (f)(k)(t) | Software & Services | SF+ | 8/31/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Follett Software Co | (x) | Software & Services | SF+ | 8/31/27 | ||||||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
79
FS KKR Capital Corp.
Consolidated Schedule of Investments (continued)
As of December 31, 2023
(in millions, except share amounts)
Portfolio Company(a) | Footnotes | Industry | Rate(b) | Floor | Maturity | Principal Amount(c) | Amortized Cost | Fair Value(d) | ||||||||||||||||||||||||||||||||||||||||||
| Foundation Consumer Brands LLC | (f)(m)(v) | Pharmaceuticals, Biotechnology & Life Sciences | SF+ | 2/12/27 | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
| Foundation Consumer Brands LLC | (x) | Pharmaceuticals, Biotechnology & Life Sciences | SF+ | 2/12/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Foundation Risk Partners Corp | (m)(v) | Insurance | SF+ | 10/29/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Foundation Risk Partners Corp | (x) | Insurance | SF+ | 10/29/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Foundation Risk Partners Corp | (x) | Insurance | SF+ | 10/29/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Galaxy Universal LLC | (ac)(v) | Consumer Durables & Apparel | SF+ | 11/12/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Galaxy Universal LLC | (ac)(v) | Consumer Durables & Apparel | SF+ | 11/30/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Galway Partners Holdings LLC | (k)(m)(t)(v) | Insurance | SF+ | 9/29/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Galway Partners Holdings LLC | (x) | Insurance | SF+ | 9/30/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| General Datatech LP | (f)(k)(m)(t)(v) | Software & Services | SF+ | 6/18/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Gigamon Inc | (i)(v) | Software & Services | SF+ | 3/9/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| Gigamon Inc | (x) | Software & Services | SF+ | 3/10/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Gracent LLC | (ad)(v) | Health Care Equipment & Services | SF+ | 2/28/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Greystone Equity Member Corp | (v)(w) | Financial Services | SF+ | 4/1/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Heniff Transportation Systems LLC | (v) | Transportation | SF+ | 12/3/24 | ||||||||||||||||||||||||||||||||||||||||||||||
| Heniff Transportation Systems LLC | (f)(k)(m)(v) | Transportation | SF+ | 12/3/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Heniff Transportation Systems LLC | (x) | Transportation | SF+ | 12/3/24 | ||||||||||||||||||||||||||||||||||||||||||||||
| Hibu Inc | (f)(k)(m)(t)(v) | Commercial & Professional Services | SF+ | 5/4/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Higginbotham Insurance Agency Inc | (v) | Insurance | SF+ | 11/24/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Higginbotham Insurance Agency Inc | (v) | Insurance | SF+ | 11/24/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Highgate Hotels Inc | (v) | Consumer Services | SF+ | 11/5/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| Highgate Hotels Inc | (x) | Consumer Services | SF+ | 11/5/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| HKA | (m)(v)(w) | Commercial & Professional Services | SF+ | 8/9/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| HM Dunn Co Inc | (ad)(v) | Capital Goods | SF+ | 6/30/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| HM Dunn Co Inc | (ad)(v) | Capital Goods | SF+ | 6/30/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| HM Dunn Co Inc | (ad)(x) | Capital Goods | SF+ | 6/30/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Individual FoodService | (v) | Capital Goods | SF+ | 10/31/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| Individual FoodService | (x) | Capital Goods | SF+ | 10/31/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| Individual FoodService | (x) | Capital Goods | SF+ | 10/31/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| Industria Chimica Emiliana Srl | (v)(w) | Pharmaceuticals, Biotechnology & Life Sciences | E+ | 9/27/26 | € | |||||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
80
FS KKR Capital Corp.
Consolidated Schedule of Investments (continued)
As of December 31, 2023
(in millions, except share amounts)
Portfolio Company(a) | Footnotes | Industry | Rate(b) | Floor | Maturity | Principal Amount(c) | Amortized Cost | Fair Value(d) | ||||||||||||||||||||||||||||||||||||||||||
| Industria Chimica Emiliana Srl | (v)(w) | Pharmaceuticals, Biotechnology & Life Sciences | E+ | 9/27/26 | € | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
| Industry City TI Lessor LP | (s)(v) | Consumer Services | 6/30/26 | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| iNova Pharmaceuticals (Australia) Pty Limited | (v)(w) | Pharmaceuticals, Biotechnology & Life Sciences | B+ | 10/30/28 | A$ | |||||||||||||||||||||||||||||||||||||||||||||
| iNova Pharmaceuticals (Australia) Pty Limited | (w)(x) | Pharmaceuticals, Biotechnology & Life Sciences | B+ | 10/30/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Insight Global LLC | (i)(v) | Commercial & Professional Services | SF+ | 9/22/28 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Insight Global LLC | (x) | Commercial & Professional Services | SF+ | 9/22/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Insight Global LLC | (x) | Commercial & Professional Services | SF+ | 9/22/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Integrity Marketing Group LLC | (v) | Insurance | SF+ | 8/27/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Integrity Marketing Group LLC | (v) | Insurance | SF+ | 8/27/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Integrity Marketing Group LLC | (x) | Insurance | SF+ | 8/27/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Integrity Marketing Group LLC | (x) | Insurance | SF+ | 8/27/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| J S Held LLC | (f)(i)(v) | Insurance | SF+ | 7/1/25 | ||||||||||||||||||||||||||||||||||||||||||||||
| J S Held LLC | (v) | Insurance | SF+ | 7/1/25 | ||||||||||||||||||||||||||||||||||||||||||||||
| J S Held LLC | (f)(v) | Insurance | SF+ | 7/1/25 | ||||||||||||||||||||||||||||||||||||||||||||||
| J S Held LLC | (x) | Insurance | SF+ | 7/1/25 | ||||||||||||||||||||||||||||||||||||||||||||||
| J S Held LLC | (x) | Insurance | SF+ | 7/1/25 | ||||||||||||||||||||||||||||||||||||||||||||||
| Karman Space Inc | (v) | Capital Goods | SF+ | 12/21/25 | ||||||||||||||||||||||||||||||||||||||||||||||
| Karman Space Inc | (v) | Capital Goods | SF+ | 12/21/25 | ||||||||||||||||||||||||||||||||||||||||||||||
| Karman Space Inc | (v) | Capital Goods | SF+ | 12/21/25 | ||||||||||||||||||||||||||||||||||||||||||||||
| Kellermeyer Bergensons Services LLC | (m)(s)(v) | Commercial & Professional Services | SF+ | 11/7/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Kellermeyer Bergensons Services LLC | (m)(s)(v)(y)(z) | Commercial & Professional Services | SF+ | 11/7/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Laboratoires Vivacy SAS | (v)(w) | Pharmaceuticals, Biotechnology & Life Sciences | E+ | 9/30/30 | € | |||||||||||||||||||||||||||||||||||||||||||||
| Laboratoires Vivacy SAS | (w)(x) | Pharmaceuticals, Biotechnology & Life Sciences | E+ | 9/30/30 | ||||||||||||||||||||||||||||||||||||||||||||||
| Lakefield Veterinary Group | (v) | Health Care Equipment & Services | SF+ | 11/23/28 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Lakefield Veterinary Group | (f)(i)(m)(v) | Health Care Equipment & Services | SF+ | 11/23/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Lakeview Farms Inc | (k)(m) | Food, Beverage & Tobacco | SF+ | 6/10/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Lakeview Farms Inc | (m)(v) | Food, Beverage & Tobacco | SF+ | 6/10/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Lakeview Farms Inc | (x) | Food, Beverage & Tobacco | SF+ | 6/10/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Lazer Logistics Inc | (v) | Transportation | SF+ | 5/6/30 | ||||||||||||||||||||||||||||||||||||||||||||||
| Lazer Logistics Inc | (f)(v) | Transportation | SF+ | 5/6/30 | ||||||||||||||||||||||||||||||||||||||||||||||
| Lazer Logistics Inc | (x) | Transportation | SF+ | 5/4/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| Lazer Logistics Inc | (x) | Transportation | SF+ | 5/6/30 | ||||||||||||||||||||||||||||||||||||||||||||||
| Lexitas Inc | (v) | Commercial & Professional Services | SF+ | 5/18/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| Lexitas Inc | (i)(k)(m)(v) | Commercial & Professional Services | SF+ | 5/18/29 | ||||||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
81
FS KKR Capital Corp.
Consolidated Schedule of Investments (continued)
As of December 31, 2023
(in millions, except share amounts)
Portfolio Company(a) | Footnotes | Industry | Rate(b) | Floor | Maturity | Principal Amount(c) | Amortized Cost | Fair Value(d) | ||||||||||||||||||||||||||||||||||||||||||
| Lexitas Inc | (x) | Commercial & Professional Services | SF+ | 5/18/29 | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
| Lionbridge Technologies Inc | (f)(i)(k)(s)(t)(v) | Media & Entertainment | SF+ | 12/29/25 | ||||||||||||||||||||||||||||||||||||||||||||||
| Lipari Foods LLC | (f)(i)(m)(v) | Consumer Staples Distribution & Retail | SF+ | 10/31/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Lipari Foods LLC | (x) | Consumer Staples Distribution & Retail | SF+ | 10/31/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Lloyd's Register Quality Assurance Ltd | (v)(w) | Consumer Services | SA+ | 12/2/28 | £ | |||||||||||||||||||||||||||||||||||||||||||||
| Lloyd's Register Quality Assurance Ltd | (w)(x) | Consumer Services | SA+ | 12/2/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Magna Legal Services LLC | (m)(v) | Commercial & Professional Services | SF+ | 11/22/29 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Magna Legal Services LLC | (v) | Commercial & Professional Services | SF+ | 11/22/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| Magna Legal Services LLC | (v) | Commercial & Professional Services | SF+ | 11/21/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| Magna Legal Services LLC | (x) | Commercial & Professional Services | SF+ | 11/22/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Magna Legal Services LLC | (x) | Commercial & Professional Services | SF+ | 11/21/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| MB2 Dental Solutions LLC | (k)(m)(t)(v) | Health Care Equipment & Services | SF+ | 1/29/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Medallia Inc | (m)(v) | Software & Services | SF+ | 10/29/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Med-Metrix | (i)(m)(t)(v) | Software & Services | SF+ | 9/15/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Med-Metrix | (x) | Software & Services | SF+ | 9/15/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Med-Metrix | (x) | Software & Services | SF+ | 9/15/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Miami Beach Medical Group LLC | (m)(v)(y)(z) | Health Care Equipment & Services | SF+ | 12/14/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Miami Beach Medical Group LLC | (v)(y)(z) | Health Care Equipment & Services | SF+ | 12/14/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Misys Ltd | (v)(w) | Software & Services | SF+ | 9/13/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| Misys Ltd | (w)(x) | Software & Services | SF+ | 9/13/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| Motion Recruitment Partners LLC | (f)(i)(t)(v) | Commercial & Professional Services | SF+ | 12/22/25 | ||||||||||||||||||||||||||||||||||||||||||||||
| NBG Home | (v)(y) | Consumer Durables & Apparel | 3/31/24 | |||||||||||||||||||||||||||||||||||||||||||||||
| NBG Home | (v)(y)(z) | Consumer Durables & Apparel | SF+ | 3/31/24 | ||||||||||||||||||||||||||||||||||||||||||||||
| NBG Home | (v)(y)(z) | Consumer Durables & Apparel | L+ | 4/26/24 | ||||||||||||||||||||||||||||||||||||||||||||||
| NCI Inc | (ad)(v) | Software & Services | SF+ | 8/15/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Net Documents | (v) | Software & Services | SF+ | 7/2/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Net Documents | (v) | Software & Services | SF+ | 7/2/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Net Documents | (x) | Software & Services | SF+ | 7/2/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| New Era Technology Inc | (i)(k) | Software & Services | SF+ | 10/31/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| New Era Technology Inc | (x) | Software & Services | SF+ | 10/31/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| NovaTaste Austria GmbH | (v)(w) | Food, Beverage & Tobacco | E+ | 5/30/30 | € | |||||||||||||||||||||||||||||||||||||||||||||
| NovaTaste Austria GmbH | (w)(x) | Food, Beverage & Tobacco | E+ | 5/30/30 | ||||||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
82
FS KKR Capital Corp.
Consolidated Schedule of Investments (continued)
As of December 31, 2023
(in millions, except share amounts)
Portfolio Company(a) | Footnotes | Industry | Rate(b) | Floor | Maturity | Principal Amount(c) | Amortized Cost | Fair Value(d) | ||||||||||||||||||||||||||||||||||||||||||
| Novotech Pty Ltd | (w)(x) | Health Care Equipment & Services | SF+ | 1/13/28 | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
| Omnimax International Inc | (f)(i)(k)(m)(v) | Capital Goods | SF+ | 10/8/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| One Call Care Management Inc | (aa)(ac)(v) | Health Care Equipment & Services | SF+ | 4/22/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Oxford Global Resources LLC | (f)(k)(m)(t)(v) | Commercial & Professional Services | SF+ | 8/17/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Oxford Global Resources LLC | (x) | Commercial & Professional Services | SF+ | 8/17/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Oxford Global Resources LLC | (x) | Commercial & Professional Services | SF+ | 8/17/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Parts Town LLC | (m)(v) | Consumer Discretionary Distribution & Retail | SF+ | 11/1/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| PartsSource Inc | (v) | Health Care Equipment & Services | SF+ | 8/21/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| PartsSource Inc | (v) | Health Care Equipment & Services | SF+ | 8/23/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| PartsSource Inc | (x) | Health Care Equipment & Services | SF+ | 8/21/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| PartsSource Inc | (x) | Health Care Equipment & Services | SF+ | 8/23/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Performance Health Holdings Inc | (f)(i)(m)(v) | Health Care Equipment & Services | SF+ | 7/12/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Production Resource Group LLC | (ad)(v) | Media & Entertainment | SF+ | 8/21/24 | ||||||||||||||||||||||||||||||||||||||||||||||
| Production Resource Group LLC | (ad)(v) | Media & Entertainment | SF+ | 8/21/24 | ||||||||||||||||||||||||||||||||||||||||||||||
| Production Resource Group LLC | (ad)(v) | Media & Entertainment | SF+ | 8/21/24 | ||||||||||||||||||||||||||||||||||||||||||||||
| PSKW LLC (dba ConnectiveRx) | (i)(k)(m)(s)(t)(v) | Health Care Equipment & Services | SF+ | 3/9/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Pure Fishing Inc | (v) | Consumer Durables & Apparel | SF+ | 12/22/25 | ||||||||||||||||||||||||||||||||||||||||||||||
| Radwell International LLC/PA | (v) | Capital Goods | SF+ | 4/1/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Radwell International LLC/PA | (m) | Capital Goods | SF+ | 4/1/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| Radwell International LLC/PA | (i)(k) | Capital Goods | SF+ | 4/1/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| Radwell International LLC/PA | (x) | Capital Goods | SF+ | 4/1/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Reliant Rehab Hospital Cincinnati LLC | (s)(v)(y)(z) | Health Care Equipment & Services | SF+ | 2/28/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Reliant Rehab Hospital Cincinnati LLC | (s)(v) | Health Care Equipment & Services | SF+ | 3/2/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Revere Superior Holdings Inc | (m)(v) | Software & Services | SF+ | 9/30/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Revere Superior Holdings Inc | (x) | Software & Services | SF+ | 9/30/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Rise Baking Company | (k)(m)(v) | Food, Beverage & Tobacco | SF+ | 8/13/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Rise Baking Company | (x) | Food, Beverage & Tobacco | SF+ | 8/13/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| RSC Insurance Brokerage Inc | (i)(k)(v) | Insurance | SF+ | 11/1/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| RSC Insurance Brokerage Inc | (x) | Insurance | SF+ | 11/1/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| Safe-Guard Products International LLC | (f) | Financial Services | SF+ | 1/27/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| SAMBA Safety Inc | (m) | Software & Services | SF+ | 9/1/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| SAMBA Safety Inc | (v) | Software & Services | SF+ | 9/1/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| SAMBA Safety Inc | (x) | Software & Services | SF+ | 9/1/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| SavATree LLC | (v) | Consumer Services | SF+ | 10/12/28 | ||||||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
83
FS KKR Capital Corp.
Consolidated Schedule of Investments (continued)
As of December 31, 2023
(in millions, except share amounts)
Portfolio Company(a) | Footnotes | Industry | Rate(b) | Floor | Maturity | Principal Amount(c) | Amortized Cost | Fair Value(d) | ||||||||||||||||||||||||||||||||||||||||||
| SavATree LLC | (v) | Consumer Services | SF+ | 10/12/28 | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
| SavATree LLC | (x) | Consumer Services | SF+ | 10/12/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Sequel Youth & Family Services LLC | (v)(y)(z) | Health Care Equipment & Services | 2/28/25 | |||||||||||||||||||||||||||||||||||||||||||||||
| Shaw Development LLC | (v) | Capital Goods | SF+ | 10/30/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| Shaw Development LLC | (x) | Capital Goods | SF+ | 10/30/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| SitusAMC Holdings Corp | (k) | Real Estate Management & Development | SF+ | 12/22/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Solina France SASU | (m)(v)(w) | Food, Beverage & Tobacco | SF+ | 7/28/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Sorenson Communications LLC | (aa)(f)(k)(t) | Telecommunication Services | SF+ | 3/17/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Source Code LLC | (k)(t)(v) | Software & Services | SF+ | 6/30/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Spins LLC | (m)(s)(t)(v) | Software & Services | SF+ | 1/20/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Spins LLC | (x) | Software & Services | SF+ | 1/20/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Spins LLC | (x) | Software & Services | SF+ | 1/20/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Spotless Brands LLC | (v) | Consumer Services | SF+ | 7/25/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Spotless Brands LLC | (x) | Consumer Services | SF+ | 7/25/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Summit Interconnect Inc | (f)(k)(m)(t)(v) | Capital Goods | SF+ | 9/22/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Sweeping Corp of America Inc | (m)(v)(y)(z) | Commercial & Professional Services | SF+ | 11/30/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Sweeping Corp of America Inc | (v)(y)(z) | Commercial & Professional Services | SF+ | 11/30/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Sweeping Corp of America Inc | (x)(y)(z) | Commercial & Professional Services | SF+ | 11/30/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Tangoe LLC | (m)(s)(v) | Software & Services | SF+ | 11/28/25 | ||||||||||||||||||||||||||||||||||||||||||||||
| Tangoe LLC | (m)(s)(v)(y)(z) | Software & Services | 11/28/25 | |||||||||||||||||||||||||||||||||||||||||||||||
| TeamSystem SpA | (v)(w) | Software & Services | E+ | 2/15/28 | € | |||||||||||||||||||||||||||||||||||||||||||||
| Tekfor HoldCo (formerly Amtek Global Technology Pte Ltd) | (v)(w)(y) | Automobiles & Components | 4/4/24 | |||||||||||||||||||||||||||||||||||||||||||||||
| ThreeSixty Group | (f)(v) | Consumer Discretionary Distribution & Retail | SF+ | 4/30/24 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| ThreeSixty Group | (f)(v) | Consumer Discretionary Distribution & Retail | SF+ | 4/30/24 | ||||||||||||||||||||||||||||||||||||||||||||||
| TIBCO Software Inc | (aa)(v) | Software & Services | SF+ | 3/30/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| Time Manufacturing Co | (v) | Capital Goods | SF+ | 12/1/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Time Manufacturing Co | (v) | Capital Goods | SF+ | 12/1/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Time Manufacturing Co | (v) | Capital Goods | E+ | 12/1/27 | € | |||||||||||||||||||||||||||||||||||||||||||||
| Time Manufacturing Co | (x) | Capital Goods | SF+ | 12/1/27 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Transaction Services Group Ltd | (v)(w) | Software & Services | B+ | 10/14/26 | A$ | |||||||||||||||||||||||||||||||||||||||||||||
| Transaction Services Group Ltd | (f)(i)(v)(w) | Software & Services | SF+ | 10/14/26 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Trescal SA | (v)(w) | Commercial & Professional Services | E+ | 5/2/30 | € | |||||||||||||||||||||||||||||||||||||||||||||
| Trescal SA | (v)(w) | Commercial & Professional Services | SF+ | 5/2/30 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Trescal SA | (w)(x) | Commercial & Professional Services | E+ | 5/2/30 | € | |||||||||||||||||||||||||||||||||||||||||||||
| Ultra Electronics Holdings Ltd | (aa)(m)(w) | Capital Goods | SF+ | 8/6/29 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Ultra Electronics Holdings Ltd | (aa)(v)(w) | Capital Goods | E+ | 8/6/29 | € | |||||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
84
FS KKR Capital Corp.
Consolidated Schedule of Investments (continued)
As of December 31, 2023
(in millions, except share amounts)
Portfolio Company(a) | Footnotes | Industry | Rate(b) | Floor | Maturity | Principal Amount(c) | Amortized Cost | Fair Value(d) | ||||||||||||||||||||||||||||||||||||||||||
| Version1 Software Ltd | (v)(w) | Software & Services | E+ | 7/11/29 | € | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
| Version1 Software Ltd | (v)(w) | Software & Services | SA+ | 7/11/29 | £ | |||||||||||||||||||||||||||||||||||||||||||||
| Version1 Software Ltd | (w)(x) | Software & Services | E+ | 7/31/30 | € | |||||||||||||||||||||||||||||||||||||||||||||
| VetCor Professional Practices LLC | (m)(v) | Health Care Equipment & Services | SF+ | 8/31/29 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| VetCor Professional Practices LLC | (x) | Health Care Equipment & Services | SF+ | 8/31/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| VetCor Professional Practices LLC | (x) | Health Care Equipment & Services | SF+ | 8/31/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| Vytalogy Wellness LLC (fka Jarrow Formulas Inc) | (v) | Household & Personal Products | SF+ | 9/21/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Vytalogy Wellness LLC (fka Jarrow Formulas Inc) | (f)(i)(k)(m)(t)(v) | Household & Personal Products | SF+ | 11/30/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Warren Resources Inc | (ad)(v) | Energy | SF+ | 5/22/24 | ||||||||||||||||||||||||||||||||||||||||||||||
| Wealth Enhancement Group LLC | (v)(w) | Financial Services | SF+ | 10/4/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Wealth Enhancement Group LLC | (w)(x) | Financial Services | SF+ | 10/4/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Wealth Enhancement Group LLC | (w)(x) | Financial Services | SF+ | 10/29/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Wittur Holding GmbH | (v)(w) | Capital Goods | 12/31/28 | € | ||||||||||||||||||||||||||||||||||||||||||||||
| Wittur Holding GmbH | (w)(x) | Capital Goods | 12/31/28 | |||||||||||||||||||||||||||||||||||||||||||||||
| Woolpert Inc | (f)(k)(m)(t)(v) | Capital Goods | SF+ | 4/5/28 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Woolpert Inc | (x) | Capital Goods | SF+ | 4/5/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Worldwise Inc | (v) | Household & Personal Products | SF+ | 3/29/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Worldwise Inc | (v) | Household & Personal Products | SF+ | 3/29/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Worldwise Inc | (x) | Household & Personal Products | SF+ | 3/29/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Worldwise Inc | (x) | Household & Personal Products | SF+ | 3/29/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Zendesk Inc | (m)(v) | Software & Services | SF+ | 11/22/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Zendesk Inc | (x) | Software & Services | SF+ | 11/22/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Zendesk Inc | (x) | Software & Services | SF+ | 11/22/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Total Senior Secured Loans—First Lien | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Unfunded Loan Commitments | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net Senior Secured Loans—First Lien | ||||||||||||||||||||||||||||||||||||||||||||||||||
Senior Secured Loans—Second Lien— | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Apex Group Limited | (v)(w) | Financial Services | SF+ | 7/27/29 | ||||||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
85
FS KKR Capital Corp.
Consolidated Schedule of Investments (continued)
As of December 31, 2023
(in millions, except share amounts)
Portfolio Company(a) | Footnotes | Industry | Rate(b) | Floor | Maturity | Principal Amount(c) | Amortized Cost | Fair Value(d) | ||||||||||||||||||||||||||||||||||||||||||
| Belk Inc | (ac)(v)(y)(z) | Consumer Discretionary Distribution & Retail | 7/31/25 | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Caldic BV | (v)(w) | Consumer Discretionary Distribution & Retail | SF+ | 2/25/30 | ||||||||||||||||||||||||||||||||||||||||||||||
| Constellis Holdings LLC | (ac)(v) | Capital Goods | SF+ | 3/27/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Cubic Corp | (v) | Software & Services | SF+ | 5/25/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| Ellucian Inc | (v) | Software & Services | SF+ | 10/9/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Miami Beach Medical Group LLC | (v)(y) | Health Care Equipment & Services | 6/14/28 | |||||||||||||||||||||||||||||||||||||||||||||||
| OEConnection LLC | (v) | Software & Services | SF+ | 9/25/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Peraton Corp | (s)(v) | Capital Goods | SF+ | 2/1/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| Peraton Corp | (v) | Capital Goods | SF+ | 2/1/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| Quoizel, LLC | (ad)(v) | Consumer Durables & Apparel | SF+ | 7/11/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Quoizel, LLC | (ad)(v) | Consumer Durables & Apparel | SF+ | 7/19/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Solera LLC | (v) | Software & Services | SF+ | 6/4/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| Valeo Foods Group Ltd | (v)(w) | Food, Beverage & Tobacco | E+ | 10/1/29 | € | |||||||||||||||||||||||||||||||||||||||||||||
| Valeo Foods Group Ltd | (w)(x) | Food, Beverage & Tobacco | E+ | 10/1/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| Wittur Holding GmbH | (v)(w)(y)(z) | Capital Goods | E+ | 10/4/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Total Senior Secured Loans—Second Lien | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Unfunded Loan Commitments | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net Senior Secured Loans—Second Lien | ||||||||||||||||||||||||||||||||||||||||||||||||||
Other Senior Secured Debt— | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Angelica Corp | (h)(y)(z) | Health Care Equipment & Services | 12/31/24 | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| JW Aluminum Co | (aa)(ad)(s)(v) | Materials | 6/1/26 | |||||||||||||||||||||||||||||||||||||||||||||||
| One Call Care Management Inc | (ac)(v) | Health Care Equipment & Services | 11/1/28 | |||||||||||||||||||||||||||||||||||||||||||||||
| TIBCO Software Inc | (aa)(v) | Software & Services | 3/31/29 | |||||||||||||||||||||||||||||||||||||||||||||||
| Total Other Senior Secured Debt | ||||||||||||||||||||||||||||||||||||||||||||||||||
Subordinated Debt— | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Apex Service Partners LLC | (v) | Commercial & Professional Services | 4/23/31 | |||||||||||||||||||||||||||||||||||||||||||||||
| Apex Service Partners LLC | (x) | Commercial & Professional Services | 4/23/31 | |||||||||||||||||||||||||||||||||||||||||||||||
| Ardonagh Group Ltd | (aa)(v)(w) | Insurance | 1/15/27 | |||||||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
86
FS KKR Capital Corp.
Consolidated Schedule of Investments (continued)
As of December 31, 2023
(in millions, except share amounts)
Portfolio Company(a) | Footnotes | Industry | Rate(b) | Floor | Maturity | Principal Amount(c) | Amortized Cost | Fair Value(d) | ||||||||||||||||||||||||||||||||||||||||||
| ATX Networks Corp | (ad)(s)(v)(w) | Capital Goods | 9/1/28 | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Element Materials Technology Group US Holdings Inc | (v)(w) | Commercial & Professional Services | SF+ | 7/9/31 | ||||||||||||||||||||||||||||||||||||||||||||||
| Encora Digital LLC | (v) | Commercial & Professional Services | 12/13/29 | |||||||||||||||||||||||||||||||||||||||||||||||
| Miami Beach Medical Group LLC | (v) | Health Care Equipment & Services | SF+ | 5/24/24 | ||||||||||||||||||||||||||||||||||||||||||||||
| Miami Beach Medical Group LLC | (x) | Health Care Equipment & Services | SF+ | 5/24/24 | ||||||||||||||||||||||||||||||||||||||||||||||
| Sorenson Communications LLC | (j)(u)(v)(y) | Telecommunication Services | 4/1/30 | |||||||||||||||||||||||||||||||||||||||||||||||
| Sorenson Communications LLC | (j)(u)(v)(y) | Telecommunication Services | 4/1/30 | |||||||||||||||||||||||||||||||||||||||||||||||
| Ultra Electronics Holdings Ltd | (v)(w) | Capital Goods | SF+ | 1/31/30 | ||||||||||||||||||||||||||||||||||||||||||||||
| Ultra Electronics Holdings Ltd | (v)(w) | Capital Goods | SF+ | 1/31/31 | ||||||||||||||||||||||||||||||||||||||||||||||
| Total Subordinated Debt | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Unfunded Loan Commitments | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net Subordinated Debt | ||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio Company(a) | Footnotes | Industry | Rate(b) | Floor | Maturity | Principal Amount(c)/ Shares | Amortized Cost | Fair Value(d) | ||||||||||||||||||||||||||||||||||||||||||
Asset Based Finance— | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 801 5th Ave, Seattle, Private Equity | (ad)(v)(w)(y) | Equity Real Estate Investment Trusts (REITs) | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| 801 5th Ave, Seattle, Structure Mezzanine | (ad)(v)(w) | Equity Real Estate Investment Trusts (REITs) | 12/19/29 | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Abacus JV, Private Equity | (ad)(v)(w) | Insurance | ||||||||||||||||||||||||||||||||||||||||||||||||
| Accelerator Investments Aggregator LP, Private Equity | (ac)(v)(w)(y) | Financial Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Altavair AirFinance, Private Equity | (ac)(v)(w) | Capital Goods | ||||||||||||||||||||||||||||||||||||||||||||||||
| Altitude II IRL WH Borrower DAC, Revolver | (v)(w) | Capital Goods | SF+ | 1/12/30 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Altitude II IRL WH Borrower DAC, Revolver | (w)(x) | Capital Goods | SF+ | 1/12/30 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Australis Maritime II, Private Equity | (ad)(v)(w)(y) | Transportation | ||||||||||||||||||||||||||||||||||||||||||||||||
| Australis Maritime, Common Stock | (ad)(v)(w) | Transportation | ||||||||||||||||||||||||||||||||||||||||||||||||
| Avenue One PropCo, Private Equity | (ad)(v)(w)(y) | Equity Real Estate Investment Trusts (REITs) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Avida Holding AB, Common Stock | (ad)(v)(w)(y) | Financial Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Avida Holding AB, Subordinated Bond | (ad)(v)(w) | Financial Services | SR+ | 1/27/34 | SEK | |||||||||||||||||||||||||||||||||||||||||||||
| Bankers Healthcare Group LLC, Term Loan | (v)(w) | Financial Services | 11/8/27 | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Bausch Health Cos Inc, Revolver | (v)(w) | Pharmaceuticals, Biotechnology & Life Sciences | SF+ | 1/28/28 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Bausch Health Cos Inc, Revolver | (w)(x) | Pharmaceuticals, Biotechnology & Life Sciences | SF+ | 1/28/28 | $ | |||||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
87
FS KKR Capital Corp.
Consolidated Schedule of Investments (continued)
As of December 31, 2023
(in millions, except share amounts)
Portfolio Company(a) | Footnotes | Industry | Rate(b) | Floor | Maturity | Principal Amount(c)/ Shares | Amortized Cost | Fair Value(d) | ||||||||||||||||||||||||||||||||||||||||||
| Byrider Finance LLC, Private Equity | (u)(v)(y) | Automobiles & Components | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Byrider Finance LLC, Term Loan | (u)(v)(y) | Automobiles & Components | 11/26/26 | |||||||||||||||||||||||||||||||||||||||||||||||
| Callodine Commercial Finance LLC, 2L Term Loan A | (v) | Financial Services | SF+ | 11/3/25 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Callodine Commercial Finance LLC, 2L Term Loan B | (v) | Financial Services | SF+ | 11/3/25 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Callodine Commercial Finance LLC, 2L Term Loan B | (x) | Financial Services | SF+ | 11/3/25 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Capital Automotive LP, Private Equity | (ad)(v)(w) | Equity Real Estate Investment Trusts (REITs) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Capital Automotive LP, Structured Mezzanine | (ad)(v)(w) | Equity Real Estate Investment Trusts (REITs) | 12/22/28 | |||||||||||||||||||||||||||||||||||||||||||||||
| Covis Finco Sarl, Revolver | (v)(w) | Pharmaceuticals, Biotechnology & Life Sciences | SF+ | 11/20/26 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Covis Finco Sarl, Revolver | (v)(w) | Pharmaceuticals, Biotechnology & Life Sciences | C+ | 11/30/26 | C$ | |||||||||||||||||||||||||||||||||||||||||||||
| Covis Finco Sarl, Revolver | (v)(w) | Pharmaceuticals, Biotechnology & Life Sciences | E+ | 11/30/26 | € | |||||||||||||||||||||||||||||||||||||||||||||
| Covis Finco Sarl, Revolver | (w)(x) | Pharmaceuticals, Biotechnology & Life Sciences | SF+ | 11/20/26 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Covis Finco Sarl, Revolver | (w)(x) | Pharmaceuticals, Biotechnology & Life Sciences | C+ | 11/30/26 | C$ | |||||||||||||||||||||||||||||||||||||||||||||
| Covis Finco Sarl, Revolver | (w)(x) | Pharmaceuticals, Biotechnology & Life Sciences | E+ | 11/30/26 | € | |||||||||||||||||||||||||||||||||||||||||||||
| Drive Revel, Private Equity | (v)(w)(y) | Financial Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Global Jet Capital LLC, Preferred Stock | (j)(u)(v)(y) | Commercial & Professional Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Global Jet Capital LLC, Preferred Stock | (j)(u)(v)(y)(z) | Commercial & Professional Services | 10/1/28 | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Global Jet Capital LLC, Structured Mezzanine | (j)(u)(v)(w) | Commercial & Professional Services | 12/4/25 | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Global Jet Capital LLC, Structured Mezzanine | (j)(u)(v)(w) | Commercial & Professional Services | 12/9/25 | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Global Jet Capital LLC, Structured Mezzanine | (j)(u)(v)(w) | Commercial & Professional Services | 1/29/26 | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Global Lending Services LLC, Private Equity | (v)(w) | Financial Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Global Lending Services LLC, Private Equity | (v)(w) | Financial Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Global Lending Services LLC, Private Equity | (v)(w) | Financial Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Home Partners JV 2, Private Equity | (ac)(v)(w)(y) | Equity Real Estate Investment Trusts (REITs) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Home Partners JV 2, Private Equity | (ac)(v)(w)(y) | Equity Real Estate Investment Trusts (REITs) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Home Partners JV 2, Structured Mezzanine | (ac)(v)(w) | Equity Real Estate Investment Trusts (REITs) | 3/20/30 | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Jet Edge International LLC, Structured Mezzanine | (v) | Transportation | 4/2/26 | $ | ||||||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
88
FS KKR Capital Corp.
Consolidated Schedule of Investments (continued)
As of December 31, 2023
(in millions, except share amounts)
Portfolio Company(a) | Footnotes | Industry | Rate(b) | Floor | Maturity | Principal Amount(c)/ Shares | Amortized Cost | Fair Value(d) | ||||||||||||||||||||||||||||||||||||||||||
| Jet Edge International LLC, Structured Mezzanine | (x) | Transportation | 4/2/26 | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Kilter Finance, Preferred Stock | (ad)(v)(w) | Insurance | ||||||||||||||||||||||||||||||||||||||||||||||||
| Kilter Finance, Private Equity | (ad)(v)(w)(y) | Insurance | ||||||||||||||||||||||||||||||||||||||||||||||||
| KKR Altitude II Offshore Aggregator LP, Partnership Interest | (ad)(v)(w) | Capital Goods | ||||||||||||||||||||||||||||||||||||||||||||||||
| KKR Central Park Leasing Aggregator L.P., Partnership Interest | (ad)(v)(w)(y)(z) | Capital Goods | 5/31/26 | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| KKR Chord IP Aggregator LP, Partnership Interest | (ad)(v)(w) | Media & Entertainment | ||||||||||||||||||||||||||||||||||||||||||||||||
| KKR Residential Opportunities I LLC, Private Equity | (v) | Real Estate Management & Development | ||||||||||||||||||||||||||||||||||||||||||||||||
| KKR Rocket Loans Aggregator LLC, Partnership Interest | (ad)(v)(w)(y) | Financial Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| KKR Zeno Aggregator LP (K2 Aviation), Partnership Interest | (ad)(v)(w)(y) | Capital Goods | ||||||||||||||||||||||||||||||||||||||||||||||||
| My Community Homes PropCo 2, Private Equity | (ad)(v)(w)(y) | Equity Real Estate Investment Trusts (REITs) | ||||||||||||||||||||||||||||||||||||||||||||||||
| NewStar Clarendon 2014-1A Class D | (v)(w) | Financial Services | 1/25/27 | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Opendoor Labs Inc, Structured Mezzanine | (v)(w) | Real Estate Management & Development | 4/1/26 | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Optio Invest, Private Equity | (v)(w)(y) | Financial Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| PayPal Europe Sarl et Cie SCA, Private Equity | (v)(w)(y) | Financial Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Prime ST LLC, Private Equity | (ad)(v)(w)(y) | Equity Real Estate Investment Trusts (REITs) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Prime ST LLC, Structured Mezzanine | (ad)(v)(w) | Equity Real Estate Investment Trusts (REITs) | 3/12/30 | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Roemanu LLC (FKA Toorak Capital Partners LLC), Private Equity | (ad)(v) | Financial Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Saluda Grade Alternative Mortgage Trust 2022-BC2, Structured Mezzanine | (v)(w) | Real Estate Management & Development | 7/25/30 | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Star Mountain Diversified Credit Income Fund III, LP, Private Equity | (o)(w) | Financial Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| SunPower Financial, Private Equity | (v)(w)(y) | Financial Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Synovus Financial Corp, Private Equity | (v)(w) | Banks | ||||||||||||||||||||||||||||||||||||||||||||||||
| TalkTalk Telecom Group Ltd, Revolver | (v)(w) | Commercial & Professional Services | SA+ | 9/5/26 | £ | |||||||||||||||||||||||||||||||||||||||||||||
| TalkTalk Telecom Group Ltd, Revolver | (w)(x) | Commercial & Professional Services | SA+ | 9/5/26 | £ | |||||||||||||||||||||||||||||||||||||||||||||
| TDC LLP, Preferred Equity | (ad)(v)(w) | Financial Services | £ | |||||||||||||||||||||||||||||||||||||||||||||||
| TDC LLP, Private Equity | (ad)(v)(w) | Financial Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Vehicle Secured Funding Trust, Private Equity | (v)(w)(y) | Financial Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Weber-Stephen Products LLC, Revolver | (v)(w) | Consumer Discretionary Distribution & Retail | SF+ | 12/19/26 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Weber-Stephen Products LLC, Revolver | (w)(x) | Consumer Discretionary Distribution & Retail | SF+ | 12/19/26 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Total Asset Based Finance | ||||||||||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
89
FS KKR Capital Corp.
Consolidated Schedule of Investments (continued)
As of December 31, 2023
(in millions, except share amounts)
Portfolio Company(a) | Footnotes | Industry | Rate(b) | Floor | Maturity | Principal Amount(c)/ Shares | Amortized Cost | Fair Value(d) | ||||||||||||||||||||||||||||||||||||||||||
| Unfunded Asset Based Finance Commitments | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net Asset Based Finance | ||||||||||||||||||||||||||||||||||||||||||||||||||
Credit Opportunities Partners JV, LLC— | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Credit Opportunities Partners JV, LLC | (ad)(v)(w) | Credit Opportunities Partners JV, LLC | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total Credit Opportunities Partners JV, LLC | ||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio Company(a) | Footnotes | Industry | Rate(b) | Floor | Maturity | Number of Shares | Amortized Cost | Fair Value(d) | ||||||||||||||||||||||||||||||||||||||||||
Equity/Other— | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Abaco Energy Technologies LLC, Common Stock | (v)(y) | Energy | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Abaco Energy Technologies LLC, Preferred Stock | (v)(y) | Energy | ||||||||||||||||||||||||||||||||||||||||||||||||
| Affordable Care Inc, Preferred Stock | (ac)(v) | Health Care Equipment & Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| American Vision Partners, Private Equity | (v)(y) | Health Care Equipment & Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Amerivet Partners Management Inc, Preferred Stock | (v) | Health Care Equipment & Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Arcos LLC/VA, Preferred Stock | (v) | Software & Services | SF+ | 4/30/31 | ||||||||||||||||||||||||||||||||||||||||||||||
| Arena Energy LP, Warrants | (v) | Energy | ||||||||||||||||||||||||||||||||||||||||||||||||
| Ascent Resources Utica Holdings LLC / ARU Finance Corp | (p)(y) | Energy | ||||||||||||||||||||||||||||||||||||||||||||||||
| Ascent Resources Utica Holdings LLC / ARU Finance Corp, Common Stock | (p)(y) | Energy | ||||||||||||||||||||||||||||||||||||||||||||||||
| athenahealth Inc, Preferred Stock | (ac)(v) | Health Care Equipment & Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| ATX Networks Corp, Class B-1 Common Stock | (ad)(v)(w)(y) | Capital Goods | ||||||||||||||||||||||||||||||||||||||||||||||||
| ATX Networks Corp, Class B-2 Common Stock | (ad)(v)(w)(y) | Capital Goods | ||||||||||||||||||||||||||||||||||||||||||||||||
| ATX Networks Corp, Common Stock | (ad)(s)(v)(w)(y) | Capital Goods | ||||||||||||||||||||||||||||||||||||||||||||||||
| Belk Inc, Common Stock | (ac)(v)(y) | Consumer Discretionary Distribution & Retail | ||||||||||||||||||||||||||||||||||||||||||||||||
| Borden (New Dairy Opco), Common Stock | (ac)(h)(n)(y) | Food, Beverage & Tobacco | ||||||||||||||||||||||||||||||||||||||||||||||||
| Bowery Farming Inc, Common Stock | (v)(y) | Food, Beverage & Tobacco | ||||||||||||||||||||||||||||||||||||||||||||||||
| Bowery Farming Inc, Warrants | (v)(y) | Food, Beverage & Tobacco | 9/10/28 | |||||||||||||||||||||||||||||||||||||||||||||||
| Bowery Farming Inc, Warrants | (v)(y) | Food, Beverage & Tobacco | 9/10/28 | |||||||||||||||||||||||||||||||||||||||||||||||
| CDS US Intermediate Holdings Inc, Warrant | (v)(w)(y) | Media & Entertainment | ||||||||||||||||||||||||||||||||||||||||||||||||
| Cengage Learning, Inc, Common Stock | (v)(y) | Media & Entertainment | ||||||||||||||||||||||||||||||||||||||||||||||||
| Constellis Holdings LLC, Private Equity | (ac)(f)(v)(y) | Capital Goods | ||||||||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
90
FS KKR Capital Corp.
Consolidated Schedule of Investments (continued)
As of December 31, 2023
(in millions, except share amounts)
Portfolio Company(a) | Footnotes | Industry | Rate(b) | Floor | Maturity | Number of Shares | Amortized Cost | Fair Value(d) | ||||||||||||||||||||||||||||||||||||||||||
| CTI Foods Holding Co LLC, Common Stock | (v)(y) | Food, Beverage & Tobacco | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Cubic Corp, Preferred Stock | (v) | Software & Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Fox Head Inc, Common Stock | (j)(v)(y) | Consumer Durables & Apparel | ||||||||||||||||||||||||||||||||||||||||||||||||
| Fronton BV, Common Stock | (ac)(o)(y) | Consumer Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Galaxy Universal LLC, Common Stock | (ac)(n)(y) | Consumer Durables & Apparel | ||||||||||||||||||||||||||||||||||||||||||||||||
| Galaxy Universal LLC, Preferred Stock | (ac)(n) | Consumer Durables & Apparel | ||||||||||||||||||||||||||||||||||||||||||||||||
| Galaxy Universal LLC, Trade Claim | (ac)(v)(y) | Consumer Durables & Apparel | ||||||||||||||||||||||||||||||||||||||||||||||||
| Gracent LLC, Class A Common Stock | (ad)(n)(y) | Health Care Equipment & Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Gracent LLC, Preferred Equity | (ad)(n)(y) | Health Care Equipment & Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Gracent LLC, Preferred Stock A | (ad)(n)(y) | Health Care Equipment & Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Gracent LLC, Preferred Stock B | (ad)(n)(y) | Health Care Equipment & Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Harvey Industries Inc, Common Stock | (v)(y) | Capital Goods | ||||||||||||||||||||||||||||||||||||||||||||||||
| HM Dunn Co Inc, Preferred Stock, Series A | (ad)(s)(v)(y) | Capital Goods | ||||||||||||||||||||||||||||||||||||||||||||||||
| HM Dunn Co Inc, Preferred Stock, Series B | (ad)(s)(v)(y) | Capital Goods | ||||||||||||||||||||||||||||||||||||||||||||||||
| Imagine Communications Corp, Common Stock | (v)(y) | Media & Entertainment | ||||||||||||||||||||||||||||||||||||||||||||||||
| Jones Apparel Holdings, Inc., Common Stock | (v)(y) | Consumer Durables & Apparel | ||||||||||||||||||||||||||||||||||||||||||||||||
| JW Aluminum Co, Common Stock | (ad)(j)(u)(v)(y) | Materials | ||||||||||||||||||||||||||||||||||||||||||||||||
| JW Aluminum Co, Preferred Stock | (ad)(j)(u)(v)(y)(z) | Materials | 2/15/28 | |||||||||||||||||||||||||||||||||||||||||||||||
| Lipari Foods LLC, Common Stock | (v)(y) | Consumer Staples Distribution & Retail | ||||||||||||||||||||||||||||||||||||||||||||||||
| Magna Legal Services LLC, Common Stock | (h)(y) | Commercial & Professional Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Maverick Natural Resources LLC, Common Stock | (n)(o) | Energy | ||||||||||||||||||||||||||||||||||||||||||||||||
| Med-Metrix, Common Stock | (h)(y) | Software & Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Med-Metrix, Preferred Stock | (h) | Software & Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Misys Ltd, Preferred Stock | (v)(w) | Software & Services | L+ | |||||||||||||||||||||||||||||||||||||||||||||||
| NCI Inc, Class A-1 Common Stock | (ad)(v)(y) | Software & Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| NCI Inc, Class B-1 Common Stock | (ad)(v)(y) | Software & Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| NCI Inc, Class C Common Stock | (ad)(v)(y) | Software & Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| NCI Inc, Class I-1 Common Stock | (ad)(v)(y) | Software & Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Nine West Holdings Inc, Common Stock | (v)(y) | Consumer Durables & Apparel | ||||||||||||||||||||||||||||||||||||||||||||||||
| One Call Care Management Inc, Common Stock | (ac)(v)(y) | Health Care Equipment & Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| One Call Care Management Inc, Preferred Stock A | (ac)(v)(y) | Health Care Equipment & Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| One Call Care Management Inc, Preferred Stock B | (ac)(v) | Health Care Equipment & Services | 10/25/29 | |||||||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
91
FS KKR Capital Corp.
Consolidated Schedule of Investments (continued)
As of December 31, 2023
(in millions, except share amounts)
Portfolio Company(a) | Footnotes | Industry | Rate(b) | Floor | Maturity | Number of Shares | Amortized Cost | Fair Value(d) | ||||||||||||||||||||||||||||||||||||||||||
| Petroplex Acidizing Inc, Trade Claim | (v)(y) | Energy | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Polyconcept North America Inc, Class A - 1 Units | (v)(y) | Household & Personal Products | ||||||||||||||||||||||||||||||||||||||||||||||||
| PRG III LLC, Preferred Stock, Series A PIK | (ad)(v)(y) | Media & Entertainment | 8/21/24 | |||||||||||||||||||||||||||||||||||||||||||||||
| PRG III LLC, Preferred Stock, Series B PIK | (ad)(v)(y) | Media & Entertainment | 8/21/24 | |||||||||||||||||||||||||||||||||||||||||||||||
| Proserv Acquisition LLC, Class A Common Units | (ac)(v)(w)(y) | Energy | ||||||||||||||||||||||||||||||||||||||||||||||||
| Proserv Acquisition LLC, Class A Preferred Units | (ac)(v)(w)(y) | Energy | ||||||||||||||||||||||||||||||||||||||||||||||||
| Quoizel, LLC, Common Stock | (ad)(v)(y) | Consumer Durables & Apparel | ||||||||||||||||||||||||||||||||||||||||||||||||
| Quorum Health Corp, Private Equity | (ad)(v)(y) | Health Care Equipment & Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Quorum Health Corp, Trade Claim | (ad)(v)(y) | Health Care Equipment & Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Quorum Health Corp, Trust Initial Funding Units | (ad)(v)(y) | Health Care Equipment & Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Saturn Oil & Gas Inc, Common Stock | (aa)(j)(u)(v)(w)(y) | Energy | ||||||||||||||||||||||||||||||||||||||||||||||||
| Sorenson Communications LLC, Common Stock | (j)(u)(v) | Telecommunication Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Stuart Weitzman Inc, Common Stock | (v)(y) | Consumer Durables & Apparel | ||||||||||||||||||||||||||||||||||||||||||||||||
| Swift Worldwide Resources Holdco Ltd, Common Stock | (v)(y) | Energy | ||||||||||||||||||||||||||||||||||||||||||||||||
| ThermaSys Corp, Common Stock | (ac)(u)(v)(y) | Capital Goods | ||||||||||||||||||||||||||||||||||||||||||||||||
| TIBCO Software Inc, Preferred Stock | (v) | Software & Services | SF+ | |||||||||||||||||||||||||||||||||||||||||||||||
| Ultra Electronics Holdings PLC, Private Equity | (v)(w)(y) | Capital Goods | ||||||||||||||||||||||||||||||||||||||||||||||||
| Ultra Electronics Holdings PLC, Private Equity | (v)(w)(y) | Capital Goods | ||||||||||||||||||||||||||||||||||||||||||||||||
| Warren Resources Inc, Common Stock | (ad)(v)(y) | Energy | ||||||||||||||||||||||||||||||||||||||||||||||||
| Worldwise Inc, Class A Private Equity | (v)(y) | Household & Personal Products | ||||||||||||||||||||||||||||||||||||||||||||||||
| Worldwise Inc, Class B Private Equity | (v)(y) | Household & Personal Products | ||||||||||||||||||||||||||||||||||||||||||||||||
| Worldwise Inc, Preferred Equity | (v) | Household & Personal Products | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total Equity/Other | ||||||||||||||||||||||||||||||||||||||||||||||||||
TOTAL INVESTMENTS— | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
LIABILITIES IN EXCESS OF OTHER ASSETS—( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| NET ASSETS—100% | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
92
FS KKR Capital Corp.
Consolidated Schedule of Investments (continued)
As of December 31, 2023
(in millions, except share amounts)
Foreign currency forward contracts
| Foreign Currency | Settlement Date | Counterparty | Amount and Transaction | US$ Value at Settlement Date | US$ Value at December 31, 2023 | Unrealized Appreciation (Depreciation) | ||||||||||||||||||||||||||||||||||||||||||||
| AUD | 10/21/2024 | JP Morgan Chase Bank | A$ | Sold | $ | $ | $ | ( | ||||||||||||||||||||||||||||||||||||||||||
| AUD | 10/21/2024 | JP Morgan Chase Bank | A$ | Sold | ||||||||||||||||||||||||||||||||||||||||||||||
| AUD | 10/21/2024 | JP Morgan Chase Bank | A$ | Sold | ( | |||||||||||||||||||||||||||||||||||||||||||||
| CAD | 11/18/2024 | JP Morgan Chase Bank | C$ | Sold | ||||||||||||||||||||||||||||||||||||||||||||||
| GBP | 11/25/2024 | JP Morgan Chase Bank | £ | Sold | ( | |||||||||||||||||||||||||||||||||||||||||||||
| GBP | 11/25/2024 | JP Morgan Chase Bank | £ | Sold | ( | |||||||||||||||||||||||||||||||||||||||||||||
| GBP | 11/25/2024 | JP Morgan Chase Bank | £ | Sold | ( | |||||||||||||||||||||||||||||||||||||||||||||
| GBP | 11/25/2024 | JP Morgan Chase Bank | £ | Sold | ( | |||||||||||||||||||||||||||||||||||||||||||||
| GBP | 11/25/2024 | JP Morgan Chase Bank | £ | Sold | ( | |||||||||||||||||||||||||||||||||||||||||||||
| GBP | 1/20/2026 | JP Morgan Chase Bank | £ | Sold | ( | |||||||||||||||||||||||||||||||||||||||||||||
| GBP | 3/31/2026 | JP Morgan Chase Bank | £ | Sold | ( | |||||||||||||||||||||||||||||||||||||||||||||
| GBP | 4/2/2026 | JP Morgan Chase Bank | £ | Sold | ( | |||||||||||||||||||||||||||||||||||||||||||||
| SEK | 5/10/2024 | JP Morgan Chase Bank | SEK | Sold | ||||||||||||||||||||||||||||||||||||||||||||||
| SEK | 5/10/2024 | JP Morgan Chase Bank | SEK | Sold | ||||||||||||||||||||||||||||||||||||||||||||||
| SEK | 5/10/2024 | JP Morgan Chase Bank | SEK | Sold | ||||||||||||||||||||||||||||||||||||||||||||||
| SEK | 8/8/2025 | JP Morgan Chase Bank | SEK | Sold | ||||||||||||||||||||||||||||||||||||||||||||||
| SEK | 8/8/2025 | JP Morgan Chase Bank | SEK | Sold | ||||||||||||||||||||||||||||||||||||||||||||||
| SEK | 4/14/2027 | JP Morgan Chase Bank | SEK | Sold | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
_______________
(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, 2023, the three-month London Interbank Offered Rate, or LIBOR or “L”, was 5.59%, the Euro Interbank Offered Rate, or EURIBOR or "E", was 3.91%, Canadian Dollar Offer Rate, or CDOR or "C", was 5.45%, the Australian Bank Bill Swap Bid Rate, or BBSY or "B", was 4.41%, the Reykjavik Interbank Offered Rate, or REIBOR or "R", was 9.91%, the Stockholm Interbank Offered Rate, or STIBOR or "SR", was 4.05%, the Sterling Interbank Offered Rate, or SONIA or "SA", was 5.21%, the Secured Overnight Financing Rate, or SOFR or "SF", was 5.33%, the U.S. Prime Lending Rate, or Prime or "P", was 8.50%, and the Australian Bank Bill Swap Rate, or BBSW or "BW", was 4.36%. PIK means paid-in-kind. PIK income accruals may be adjusted based on the performance of the underlying investment. Variable rate securities with no floor rate use the respective benchmark rate in all cases.
(c)Denominated in U.S. dollars unless otherwise noted.
(d)See Note 8 for additional information regarding the fair value of the Company's financial instruments.
(e)Listed investments may be treated as debt for GAAP or tax purposes.
(f)Security or portion thereof held within Ambler Funding LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with Ally Bank (see Note 9) .
(g)Security or portion thereof was held within CCT Dublin Funding Limited
(h)Security held within CCT Holdings II, LLC, a wholly-owned subsidiary of the Company.
(i)Security or portion thereof was held within CCT Tokyo Funding LLC and was pledged as collateral supporting the amounts outstanding under the revolving credit facility with Sumitomo Mitsui Banking Corporation (see Note 9).
(j)Security or portion thereof held within Cobbs Creek LLC and is pledged as collateral supporting the amounts outstanding under the senior secured revolving credit facility (see Note 9).
(k)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 9).
See notes to consolidated financial statements.
93
FS KKR Capital Corp.
Consolidated Schedule of Investments (continued)
As of December 31, 2023
(in millions, except share amounts)
(l)Not used.
(m)Security or portion thereof was held within FSK CLO as of December 31, 2023.
(n)Security held within FSIC II Investments, Inc., a wholly-owned subsidiary of the Company.
(o)Security held within FSIC Investments, Inc., a wholly-owned subsidiary of the Company.
(p)Security held within IC American Energy Investments, Inc., a wholly-owned subsidiary of the Company.
(q)Security held within IC Arches Investments LLC, a wholly-owned subsidiary of the Company.
(r)Security held within IC II Arches Investments, LLC, a wholly-owned subsidiary of the Company.
(s)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 9).
(t)Security or portion thereof held within Meadowbrook Run LLC and is pledged as collateral supporting the amounts outstanding under a revolving credit facility with Morgan Stanley Senior Funding, Inc. (see Note 9).
(u)Security or portion thereof held within Race Street Funding LLC. Security is available as collateral supporting the amounts outstanding under the Senior Secured Revolving Credit Facility (see Note 9).
(v)Security or portion thereof is pledged as collateral supporting the amounts outstanding under the Senior Secured Revolving Credit Facility (see Note 9).
(w)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, 2023, 73.1% of the Company’s total assets represented qualifying assets.
(x)Security is an unfunded commitment. Reflects the stated spread at the time of commitment, but may not be the actual rate received upon funding.
(y)Security is non-income producing.
(z)Asset is on non-accrual status.
(aa)Security is classified as Level 1 or Level 2 in the Company's fair value hierarchy (see Note 8).
(ab)Position or portion thereof unsettled as of unsettled as of December 31, 2023.
(ac)Under the Investment Company Act of 1940, as amended, 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, 2023, 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 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, 2023:
| Portfolio Company | Fair Value at December 31, 2022 | Gross Additions(1) | Gross Reductions(2) | Net Realized Gain (Loss) | Net Change in Unrealized Appreciation (Depreciation) | Fair Value at December 31, 2023 | Interest Income(3) | PIK Income(3) | Fee Income(3) | Dividend and Other Income(3) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Senior Secured Loans—First Lien | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Affordable Care Inc | $ | $ | $ | ( | $ | ( | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Affordable Care Inc | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Belk Inc | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Belk Inc | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Constellis Holdings LLC | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Galaxy Universal LLC | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Galaxy Universal LLC | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Galaxy Universal LLC | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
One Call Care Management Inc(4) | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Sungard Availability Services Capital Inc | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Sungard Availability Services Capital Inc | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ThermaSys Corp | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Senior Secured Loans—Second Lien | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
94
FS KKR Capital Corp.
Consolidated Schedule of Investments (continued)
As of December 31, 2023
(in millions, except share amounts)
| Portfolio Company | Fair Value at December 31, 2022 | Gross Additions(1) | Gross Reductions(2) | Net Realized Gain (Loss) | Net Change in Unrealized Appreciation (Depreciation) | Fair Value at December 31, 2023 | Interest Income(3) | PIK Income(3) | Fee Income(3) | Dividend and Other Income(3) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Belk Inc | $ | $ | $ | $ | $ | ( | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Constellis Holdings LLC | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Sungard Availability Services Capital Inc | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other Senior Secured Debt | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
One Call Care Management Inc(4) | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Asset Based Finance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Altavair AirFinance, Private Equity(4) | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accelerator Investments Aggregator LP, Private Equity4) | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Home Partners JV 2, Structured Mezzanine | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Home Partners JV 2, Private Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Home Partners JV 2, Private Equity | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity/Other | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Affordable Care Inc, Preferred Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| athenahealth Inc, Preferred Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Belk Inc, Common Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Borden (New Dairy Opco), Common Stock | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Constellis Holdings LLC, Private Equity | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fronton BV, Common Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Galaxy Universal LLC, Common Stock(4) | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Galaxy Universal LLC, Trade Claim(4) | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Galaxy Universal LLC, Preferred Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
One Call Care Management Inc, Preferred Stock A(4) | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
One Call Care Management Inc, Common Stock(4) | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
One Call Care Management Inc, Preferred Stock B(4) | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Proserv Acquisition LLC, Class A Common Units | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Proserv Acquisition LLC, Class A Preferred Units | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ThermaSys Corp, Common Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ThermaSys Corp, Preferred Stock | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | ( | $ | ( | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||
______________
(1)Gross additions include increases in the cost basis of investments resulting from new portfolio investments, PIK interest, the amortization of unearned income, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company into this category from a different category.
(2)Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company out of this category into a different category.
(3)Interest, PIK, fee and dividend and other income presented for the full year ended December 31, 2023.
See notes to consolidated financial statements.
95
FS KKR Capital Corp.
Consolidated Schedule of Investments (continued)
As of December 31, 2023
(in millions, except share amounts)
(4)The Company held this investment as of December 31, 2022 but it was not deemed to be an “affiliated person” of the portfolio company as of December 31, 2022. Transfers in or out have been presented at amortized cost.
(ad)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 December 31, 2023, the Company held investments in portfolio companies of which it is deemed to be an “affiliated person” and deemed to “control”. During the year ended December 31, 2023, the Company disposed of investments in portfolio companies of which it was 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 year ended December 31, 2023:
| Portfolio Company | Fair Value at December 31, 2022 | Gross Additions(1) | Gross Reductions(2) | Net Realized Gain (Loss) | Net Change in Unrealized Appreciation (Depreciation) | Fair Value at December 31, 2023 | Interest Income(3) | PIK Income(3) | Fee Income(3) | Dividend and Other Income(3) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Senior Secured Loans—First Lien | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Tekfor HoldCo (formerly Amtek Global Technology Pte Ltd) | $ | $ | $ | ( | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||
| ATX Networks Corp | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gracent LLC | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| HM Dunn Co Inc | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| HM Dunn Co Inc | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NCI Inc | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Production Resource Group LLC | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Production Resource Group LLC | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Production Resource Group LLC | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Production Resource Group LLC | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Warren Resources Inc | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Senior Secured Loans—Second Lien | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Quoizel, LLC | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Quoizel, LLC | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other Senior Secured Debt | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| JW Aluminum Co | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Subordinated Debt | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ATX Networks Corp | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Hilding Anders | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Hilding Anders | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Hilding Anders | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Asset Based Finance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 801 5th Ave, Seattle, Structure Mezzanine | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 801 5th Ave, Seattle, Private Equity | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Abacus JV, Private Equity(4) | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Avenue One PropCo, Private Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Australis Maritime, Common Stock(4) | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
96
FS KKR Capital Corp.
Consolidated Schedule of Investments (continued)
As of December 31, 2023
(in millions, except share amounts)
| Portfolio Company | Fair Value at December 31, 2022 | Gross Additions(1) | Gross Reductions(2) | Net Realized Gain (Loss) | Net Change in Unrealized Appreciation (Depreciation) | Fair Value at December 31, 2023 | Interest Income(3) | PIK Income(3) | Fee Income(3) | Dividend and Other Income(3) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Australis Maritime II, Private Equity | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Avida Holding AB, Common Stock | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Avida Holding AB, Subordinated Bond | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Capital Automotive LP, Private Equity(4) | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Capital Automotive LP, Structured Mezzanine(4) | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Kilter Finance, Preferred Stock | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Kilter Finance, Private Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| KKR Altitude II Offshore Aggregator LP, Partnership Interest | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
KKR Central Park Leasing Aggregator L.P., Partnership Interest(4) | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
KKR Chord IP Aggregator LP, Partnership Interest(4) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| KKR Rocket Loans Aggregator LLC, Partnership Interest | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
KKR Zeno Aggregator LP (K2 Aviation), Partnership Interest(4) | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| My Community Homes PropCo 2, Private Equity | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Prime ST LLC, Private Equity | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Prime ST LLC, Structured Mezzanine | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Roemanu LLC (FKA Toorak Capital Partners LLC), Private Equity | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| TDC LLP, Preferred Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| TDC LLP, Preferred Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Credit Opportunities Partners JV, LLC | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Credit Opportunities Partners JV, LLC | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity/Other | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amtek Global Technology Pte Ltd, Common Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amtek Global Technology Pte Ltd, Ordinary Shares | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amtek Global Technology Pte Ltd, Private Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ATX Networks Corp, Common Stock | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ATX Networks Corp, Class B-1 Common Stock | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ATX Networks Corp, Class B-2 Common Stock | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gracent LLC, Preferred Stock A | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gracent LLC, Preferred Stock B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
97
FS KKR Capital Corp.
Consolidated Schedule of Investments (continued)
As of December 31, 2023
(in millions, except share amounts)
| Portfolio Company | Fair Value at December 31, 2022 | Gross Additions(1) | Gross Reductions(2) | Net Realized Gain (Loss) | Net Change in Unrealized Appreciation (Depreciation) | Fair Value at December 31, 2023 | Interest Income(3) | PIK Income(3) | Fee Income(3) | Dividend and Other Income(3) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gracent LLC, Class A Common Stock | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gracent LLC, Preferred Equity | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Hilding Anders, Class A Common Stock | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Hilding Anders, Class B Common Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Hilding Anders, Class C Common Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Hilding Anders, Equity Options | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| HM Dunn Co Inc, Preferred Stock, Series A | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| HM Dunn Co Inc, Preferred Stock, Series B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| JW Aluminum Co, Common Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| JW Aluminum Co, Preferred Stock | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NCI Inc, Class A-1 Common Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NCI Inc, Class B-1 Common Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NCI Inc, Class C Common Stock | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NCI Inc, Class I-1 Common Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PRG III LLC, Preferred Stock, Series A PIK | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PRG III LLC, Preferred Stock, Series B PIK | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Quoizel, LLC, Common Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quorum Health Corp, Trade Claim(4) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quorum Health Corp, Trust Initial Funding Units(4) | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Quorum Health Corp, Private Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Warren Resources Inc, Common Stock | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | ( | $ | ( | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||
______________
(1)Gross additions include increases in the cost basis of investments resulting from new portfolio investments, PIK interest, the amortization of unearned income, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company into this category from a different category.
(2)Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company out of this category into a different category.
(3)Interest, PIK, fee and dividend and other income presented for the full year ended December 31, 2023.
(4)The Company held this investment as of December 31, 2022 but it was not deemed to be an “control” of the portfolio company as of December 31, 2022. Transfers in or out have been presented at amortized cost.
See notes to consolidated financial statements.
98
FS KKR Capital Corp.
Consolidated Schedule of Investments (continued)
As of December 31, 2022
(in millions, 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— | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 3Pillar Global Inc | (i)(k)(l)(v) | Software & Services | L+ | 11/23/27 | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
| 3Pillar Global Inc | (x) | Software & Services | L+ | 11/23/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| 3Pillar Global Inc | (x) | Software & Services | L+ | 11/23/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| 48Forty Solutions LLC | (f)(k)(l)(t)(v) | Commercial & Professional Services | SF+ | 11/30/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| 48Forty Solutions LLC | (x) | Commercial & Professional Services | SF+ | 11/30/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| 5 Arch Income Fund 2 LLC | (q)(r)(w)(y)(z) | Diversified Financials | 11/18/23 | |||||||||||||||||||||||||||||||||||||||||||||||
| Accuride Corp | (aa)(l) | Capital Goods | L+ | 11/17/23 | ||||||||||||||||||||||||||||||||||||||||||||||
| Advanced Dermatology & Cosmetic Surgery | (m)(t)(v) | Health Care Equipment & Services | L+ | 5/7/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Advanced Dermatology & Cosmetic Surgery | (x) | Health Care Equipment & Services | L+ | 5/7/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Advanced Dermatology & Cosmetic Surgery | (x) | Health Care Equipment & Services | L+ | 5/7/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Advania Sverige AB | (v)(w) | Software & Services | SR+ | 4/28/28 | SEK | |||||||||||||||||||||||||||||||||||||||||||||
| Advania Sverige AB | (v)(w) | Software & Services | R+ | 4/28/28 | ISK | |||||||||||||||||||||||||||||||||||||||||||||
| Affordable Care Inc | (ac)(m)(v) | Health Care Equipment & Services | L+ | 8/2/28 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Affordable Care Inc | (ac)(v) | Health Care Equipment & Services | L+ | 8/2/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Affordable Care Inc | (ac)(x) | Health Care Equipment & Services | L+ | 8/2/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Affordable Care Inc | (ac)(x) | Health Care Equipment & Services | L+ | 8/2/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Alacrity Solutions Group LLC | (v) | Insurance | L+ | 12/22/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Alacrity Solutions Group LLC | (x) | Insurance | L+ | 12/22/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Alera Group Intermediate Holdings Inc | (m) | Insurance | SF+ | 10/2/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Alera Group Intermediate Holdings Inc | (m)(v) | Insurance | SF+ | 10/2/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| American Vision Partners | (i)(v) | Health Care Equipment & Services | L+ | 9/30/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| American Vision Partners | (x) | Health Care Equipment & Services | L+ | 9/30/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Amerivet Partners Management Inc | (v) | Health Care Equipment & Services | SF+ | 2/25/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Amerivet Partners Management Inc | (v) | Health Care Equipment & Services | SF+ | 2/25/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Amerivet Partners Management Inc | (x) | Health Care Equipment & Services | SF+ | 2/25/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Amerivet Partners Management Inc | (x) | Health Care Equipment & Services | SF+ | 2/25/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Apex Group Limited | (aa)(v)(w) | Diversified Financials | L+ | 7/27/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Apex Group Limited | (aa)(v)(w) | Diversified Financials | E+ | 7/27/28 | € | |||||||||||||||||||||||||||||||||||||||||||||
| Arcfield Acquisition Corp | (i)(t) | Capital Goods | L+ | 3/10/28 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Arcfield Acquisition Corp | (x) | Capital Goods | L+ | 3/10/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Arcos LLC/VA | (m) | Software & Services | L+ | 3/31/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Arcos LLC/VA | (x) | Software & Services | L+ | 4/20/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Ardonagh Group Ltd | (v)(w) | Insurance | SA+ | 7/14/26 | £ | |||||||||||||||||||||||||||||||||||||||||||||
| Ardonagh Group Ltd | (v)(w) | Insurance | E+ | 7/14/26 | € | |||||||||||||||||||||||||||||||||||||||||||||
| Arrotex Australia Group Pty Ltd | (v)(w) | Pharmaceuticals, Biotechnology & Life Sciences | B+ | 7/10/24 | A$ | |||||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
99
FS KKR Capital Corp.
Consolidated Schedule of Investments (continued)
As of December 31, 2022
(in millions, except share amounts)
Portfolio Company(a) | Footnotes | Industry | Rate(b) | Floor | Maturity | Principal Amount(c) | Amortized Cost | Fair Value(d) | ||||||||||||||||||||||||||||||||||||||||||
| Arrotex Australia Group Pty Ltd | (v)(w) | Pharmaceuticals, Biotechnology & Life Sciences | B+ | 7/10/24 | A$ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
| ATX Networks Corp | (ad)(s)(v)(w) | Capital Goods | L+ | 9/1/26 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| AxiomSL Ltd | (f)(m)(t)(v) | Software & Services | L+ | 12/3/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| AxiomSL Ltd | (x) | Software & Services | L+ | 12/3/25 | ||||||||||||||||||||||||||||||||||||||||||||||
| AxiomSL Ltd | (x) | Software & Services | L+ | 12/3/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Barbri Inc | (f)(k)(l)(m)(t) | Consumer Services | L+ | 4/28/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Barbri Inc | (k)(l)(v) | Consumer Services | L+ | 4/28/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Barbri Inc | (x) | Consumer Services | L+ | 4/28/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Belk Inc | (aa)(ac)(v) | Retailing | L+ | 7/31/25 | ||||||||||||||||||||||||||||||||||||||||||||||
| Belk Inc | (aa)(ac)(v)(y)(z) | Retailing | 7/31/25 | |||||||||||||||||||||||||||||||||||||||||||||||
| BGB Group LLC | (f)(i)(k)(l)(m)(t) | Media & Entertainment | L+ | 8/16/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| BGB Group LLC | (x) | Media & Entertainment | L+ | 8/16/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Bowery Farming Inc | (v) | Food, Beverage & Tobacco | L+ | 4/30/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Caldic BV | (aa)(v)(w) | Retailing | E+ | 2/4/29 | € | |||||||||||||||||||||||||||||||||||||||||||||
| Caldic BV | (aa)(v)(w) | Retailing | SF+ | 2/26/29 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| CFC Underwriting Ltd | (w)(x) | Insurance | SA+ | 5/16/29 | £ | |||||||||||||||||||||||||||||||||||||||||||||
| Cimarron Energy Inc | (v)(y)(z) | Energy | L+ | 12/31/24 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Clarience Technologies LLC | (f)(i)(k)(m)(s)(v) | Capital Goods | SF+ | 12/14/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Clarience Technologies LLC | (x) | Capital Goods | SF+ | 12/13/24 | ||||||||||||||||||||||||||||||||||||||||||||||
| Community Brands Inc | (v) | Software & Services | SF+ | 2/24/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Community Brands Inc | (x) | Software & Services | SF+ | 2/24/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Community Brands Inc | (x) | Software & Services | SF+ | 2/24/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Constellis Holdings LLC | (ac)(v) | Capital Goods | L+ | 3/27/24 | ||||||||||||||||||||||||||||||||||||||||||||||
| Corsearch Intermediate Inc | (m)(v) | Software & Services | L+ | 4/19/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Corsearch Intermediate Inc | (x) | Software & Services | L+ | 4/19/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| CSafe Global | (f)(i)(k)(l)(m)(t)(v) | Capital Goods | L+ | 12/23/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| CSafe Global | (v) | Capital Goods | L+ | 12/23/27 | £ | |||||||||||||||||||||||||||||||||||||||||||||
| CSafe Global | (v) | Capital Goods | L+ | 8/13/28 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| CSafe Global | (x) | Capital Goods | L+ | 12/23/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Dental Care Alliance Inc | (f)(k)(m)(t)(v) | Health Care Equipment & Services | SF+ | 4/3/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Dental Care Alliance Inc | (x) | Health Care Equipment & Services | SF+ | 4/3/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| DOC Generici Srl | (v)(w) | Pharmaceuticals, Biotechnology & Life Sciences | E+ | 10/27/28 | € | |||||||||||||||||||||||||||||||||||||||||||||
| DOC Generici Srl | (w)(x) | Pharmaceuticals, Biotechnology & Life Sciences | E+ | 10/28/28 | ||||||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
100
FS KKR Capital Corp.
Consolidated Schedule of Investments (continued)
As of December 31, 2022
(in millions, except share amounts)
Portfolio Company(a) | Footnotes | Industry | Rate(b) | Floor | Maturity | Principal Amount(c) | Amortized Cost | Fair Value(d) | ||||||||||||||||||||||||||||||||||||||||||
| Element Materials Technology Group US Holdings Inc | (aa)(v)(w) | Commercial & Professional Services | E+ | 7/6/29 | € | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
| Element Materials Technology Group US Holdings Inc | (aa)(v)(w) | Commercial & Professional Services | SF+ | 6/22/29 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Encora Digital Inc | (v) | Software & Services | L+ | 12/20/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Encora Digital Inc | (x) | Software & Services | L+ | 12/20/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Envirotainer Ltd | (w)(x) | Transportation | E+ | 7/30/29 | € | |||||||||||||||||||||||||||||||||||||||||||||
| Excelitas Technologies Corp | (v) | Technology Hardware & Equipment | SF+ | 8/12/28 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Excelitas Technologies Corp | (x) | Technology Hardware & Equipment | SF+ | 8/12/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Excelitas Technologies Corp | (x) | Technology Hardware & Equipment | SF+ | 8/12/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| Follett Software Co | (f)(k)(l)(t) | Software & Services | L+ | 8/31/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Follett Software Co | (x) | Software & Services | L+ | 8/31/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Foundation Consumer Brands LLC | (f)(m)(v) | Pharmaceuticals, Biotechnology & Life Sciences | L+ | 2/12/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Foundation Consumer Brands LLC | (x) | Pharmaceuticals, Biotechnology & Life Sciences | L+ | 2/12/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Foundation Risk Partners Corp | (v) | Insurance | SF+ | 10/29/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Foundation Risk Partners Corp | (m)(v) | Insurance | SF+ | 10/29/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Foundation Risk Partners Corp | (x) | Insurance | SF+ | 10/29/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Galaxy Universal LLC | (v) | Consumer Durables & Apparel | SF+ | 6/24/23 | ||||||||||||||||||||||||||||||||||||||||||||||
| Galaxy Universal LLC | (v) | Consumer Durables & Apparel | SF+ | 11/12/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Galaxy Universal LLC | (v) | Consumer Durables & Apparel | SF+500 | 11/12/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Galway Partners Holdings LLC | (k)(l)(m)(t)(v) | Insurance | L+ | 9/29/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Galway Partners Holdings LLC | (x) | Insurance | L+ | 9/30/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Galway Partners Holdings LLC | (x) | Insurance | L+ | 9/29/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| General Datatech LP | (f)(k)(l)(m)(t)(v) | Software & Services | L+ | 6/18/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Gigamon Inc | (v) | Software & Services | SF+ | 3/9/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| Gigamon Inc | (x) | Software & Services | SF+ | 3/10/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Gracent LLC | (v) | Health Care Equipment & Services | SF+ | 2/28/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Gracent LLC | (v)(y)(z) | Health Care Equipment & Services | 2/28/27 | |||||||||||||||||||||||||||||||||||||||||||||||
| Greystone Equity Member Corp | (v)(w) | Diversified Financials | L+ | 4/1/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Heniff Transportation Systems LLC | (f)(i)(k)(l)(m)(v) | Transportation | SF+ | 12/3/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Heniff Transportation Systems LLC | (v) | Transportation | SF+ | 12/3/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Heniff Transportation Systems LLC | (x) | Transportation | SF+ | 12/3/24 | ||||||||||||||||||||||||||||||||||||||||||||||
| Hibu Inc | (f)(k)(l)(m)(t)(v) | Commercial & Professional Services | SF+ | 5/4/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Higginbotham Insurance Agency Inc | (v) | Insurance | L+ | 11/25/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Higginbotham Insurance Agency Inc | (v) | Insurance | L+ | 11/25/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Higginbotham Insurance Agency Inc | (x) | Insurance | L+ | 11/25/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| HKA | (v)(w) | Commercial & Professional Services | SF+ | 8/9/29 | ||||||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
101
FS KKR Capital Corp.
Consolidated Schedule of Investments (continued)
As of December 31, 2022
(in millions, except share amounts)
Portfolio Company(a) | Footnotes | Industry | Rate(b) | Floor | Maturity | Principal Amount(c) | Amortized Cost | Fair Value(d) | ||||||||||||||||||||||||||||||||||||||||||
| HKA | (w)(x) | Commercial & Professional Services | SF+ | 8/9/29 | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
| HM Dunn Co Inc | (ad)(v) | Capital Goods | L+ | 6/30/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| HM Dunn Co Inc | (ad)(x) | Capital Goods | L+ | 6/30/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Individual FoodService | (m)(s) | Capital Goods | SF+ | 11/22/25 | ||||||||||||||||||||||||||||||||||||||||||||||
| Individual FoodService | (v) | Capital Goods | SF+ | 11/22/25 | ||||||||||||||||||||||||||||||||||||||||||||||
| Individual FoodService | (m)(v) | Capital Goods | SF+ | 11/22/25 | ||||||||||||||||||||||||||||||||||||||||||||||
| Individual FoodService | (v) | Capital Goods | SF+ | 11/22/25 | ||||||||||||||||||||||||||||||||||||||||||||||
| Individual FoodService | (v) | Capital Goods | SF+ | 11/22/25 | ||||||||||||||||||||||||||||||||||||||||||||||
| Individual FoodService | (x) | Capital Goods | SF+ | 11/22/24 | ||||||||||||||||||||||||||||||||||||||||||||||
| Individual FoodService | (x) | Capital Goods | SF+ | 11/22/25 | ||||||||||||||||||||||||||||||||||||||||||||||
| Industria Chimica Emiliana Srl | (v)(w) | Pharmaceuticals, Biotechnology & Life Sciences | E+ | 9/27/26 | € | |||||||||||||||||||||||||||||||||||||||||||||
| Industry City TI Lessor LP | (s)(v) | Consumer Services | 6/30/26 | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| iNova Pharmaceuticals (Australia) Pty Limited | (w)(x) | Pharmaceuticals, Biotechnology & Life Sciences | B+ | 10/30/28 | A$ | |||||||||||||||||||||||||||||||||||||||||||||
| Insight Global LLC | (v) | Commercial & Professional Services | L+ | 9/22/27 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Insight Global LLC | (i)(v) | Commercial & Professional Services | L+ | 9/22/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Insight Global LLC | (x) | Commercial & Professional Services | L+ | 9/22/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Insight Global LLC | (x) | Commercial & Professional Services | L+ | 9/22/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Integrity Marketing Group LLC | (v) | Insurance | L+ | 8/27/25 | ||||||||||||||||||||||||||||||||||||||||||||||
| J S Held LLC | (f)(i)(m)(s)(v) | Insurance | L+ | 7/1/25 | ||||||||||||||||||||||||||||||||||||||||||||||
| J S Held LLC | (v) | Insurance | L+ | 7/1/25 | ||||||||||||||||||||||||||||||||||||||||||||||
| J S Held LLC | (v) | Insurance | L+ | 7/1/25 | ||||||||||||||||||||||||||||||||||||||||||||||
| J S Held LLC | (f)(v) | Insurance | SF+ | 7/1/25 | ||||||||||||||||||||||||||||||||||||||||||||||
| J S Held LLC | (x) | Insurance | L+ | 7/1/25 | ||||||||||||||||||||||||||||||||||||||||||||||
| J S Held LLC | (x) | Insurance | SF+ | 7/1/25 | ||||||||||||||||||||||||||||||||||||||||||||||
| Jarrow Formulas Inc | (f)(i)(k)(l)(m)(s)(t)(v) | Household & Personal Products | L+ | 11/30/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Karman Space Inc | (m)(v) | Capital Goods | L+ | 12/21/25 | ||||||||||||||||||||||||||||||||||||||||||||||
| Karman Space Inc | (v) | Capital Goods | L+ | 12/21/25 | ||||||||||||||||||||||||||||||||||||||||||||||
| Karman Space Inc | (v) | Capital Goods | L+ | 12/21/25 | ||||||||||||||||||||||||||||||||||||||||||||||
| Karman Space Inc | (x) | Capital Goods | L+ | 12/21/25 | ||||||||||||||||||||||||||||||||||||||||||||||
| Kellermeyer Bergensons Services LLC | (f)(i)(k)(l)(m)(s)(t)(v) | Commercial & Professional Services | L+ | 11/7/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Kellermeyer Bergensons Services LLC | (v) | Commercial & Professional Services | L+ | 11/7/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Kellermeyer Bergensons Services LLC | (v) | Commercial & Professional Services | L+ | 11/7/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Lakefield Veterinary Group | (f)(i)(v) | Health Care Equipment & Services | L+ | 11/23/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Lakefield Veterinary Group | (x) | Health Care Equipment & Services | L+ | 11/23/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Lakeview Farms Inc | (l)(m) | Food, Beverage & Tobacco | L+ | 6/10/27 | ||||||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
102
FS KKR Capital Corp.
Consolidated Schedule of Investments (continued)
As of December 31, 2022
(in millions, except share amounts)
Portfolio Company(a) | Footnotes | Industry | Rate(b) | Floor | Maturity | Principal Amount(c) | Amortized Cost | Fair Value(d) | ||||||||||||||||||||||||||||||||||||||||||
| Lakeview Farms Inc | (v) | Food, Beverage & Tobacco | L+ | 6/10/27 | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
| Lakeview Farms Inc | (m)(v) | Food, Beverage & Tobacco | L+ | 6/10/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Lakeview Farms Inc | (x) | Food, Beverage & Tobacco | L+ | 6/10/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Lakeview Farms Inc | (x) | Food, Beverage & Tobacco | L+ | 6/10/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Lexitas Inc | (i)(k)(l)(m)(v) | Commercial & Professional Services | SF+ | 5/18/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| Lexitas Inc | (x) | Commercial & Professional Services | SF+ | 5/18/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| Lionbridge Technologies Inc | (f)(k)(m)(s)(t)(v) | Media & Entertainment | SF+ | 12/29/25 | ||||||||||||||||||||||||||||||||||||||||||||||
| Lipari Foods LLC | (f)(i)(v) | Food & Staples Retailing | SF+ | 10/31/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Lipari Foods LLC | (x) | Food & Staples Retailing | SF+ | 10/31/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Lloyd’s Register Quality Assurance Ltd | (v)(w) | Consumer Services | SA+ | 12/2/28 | £ | |||||||||||||||||||||||||||||||||||||||||||||
| Lloyd’s Register Quality Assurance Ltd | (w)(x) | Consumer Services | SA+ | 12/2/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Magna Legal Services LLC | (v) | Commercial & Professional Services | SF+ | 11/22/29 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Magna Legal Services LLC | (x) | Commercial & Professional Services | SF+ | 11/22/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Magna Legal Services LLC | (x) | Commercial & Professional Services | SF+ | 11/22/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| Matchesfashion Ltd | (v)(w)(y)(z) | Consumer Durables & Apparel | L+ | 10/11/24 | ||||||||||||||||||||||||||||||||||||||||||||||
| MB2 Dental Solutions LLC | (k)(l)(m)(t)(v) | Health Care Equipment & Services | SF+ | 1/29/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Medallia Inc | (v) | Software & Services | L+ | 10/29/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Med-Metrix | (i)(t)(v) | Software & Services | L+ | 9/15/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Med-Metrix | (x) | Software & Services | L+ | 9/15/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Med-Metrix | (x) | Software & Services | L+ | 9/15/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Miami Beach Medical Group LLC | (m)(v) | Health Care Equipment & Services | SF+ | 12/14/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Monitronics International Inc | (aa)(f)(v) | Commercial & Professional Services | L+ | 3/29/24 | ||||||||||||||||||||||||||||||||||||||||||||||
| Monitronics International Inc | (v) | Commercial & Professional Services | L+ | 7/3/24 | ||||||||||||||||||||||||||||||||||||||||||||||
| Monitronics International Inc | (x) | Commercial & Professional Services | L+ | 7/3/24 | ||||||||||||||||||||||||||||||||||||||||||||||
| Motion Recruitment Partners LLC | (f)(i)(v) | Commercial & Professional Services | SF+ | 12/20/25 | ||||||||||||||||||||||||||||||||||||||||||||||
| Motion Recruitment Partners LLC | (m)(t)(v) | Commercial & Professional Services | SF+ | 12/22/25 | ||||||||||||||||||||||||||||||||||||||||||||||
| Motion Recruitment Partners LLC | (x) | Commercial & Professional Services | SF+ | 12/22/25 | ||||||||||||||||||||||||||||||||||||||||||||||
| NBG Home | (v)(y)(z) | Consumer Durables & Apparel | L+ | 4/26/24 | ||||||||||||||||||||||||||||||||||||||||||||||
| NCI Inc | (ad)(v) | Software & Services | L+ | 8/15/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Net Documents | (v) | Software & Services | SF+ | 6/30/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Net Documents | (x) | Software & Services | L+ | 6/30/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| New Era Technology Inc | (i)(l)(m)(t) | Software & Services | L+ | 10/31/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| New Era Technology Inc | (v) | Software & Services | L+ | 10/31/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| New Era Technology Inc | (x) | Software & Services | L+ | 10/31/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Novotech Pty Ltd | (w)(x) | Health Care Equipment & Services | SF+ | 1/13/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| NPD Group Inc/The | (v) | Consumer Services | SF+ | 12/1/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| NPD Group Inc/The | (v) | Consumer Services | SF+ | 12/1/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| NPD Group Inc/The | (x) | Consumer Services | SF+ | 12/1/27 | ||||||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
103
FS KKR Capital Corp.
Consolidated Schedule of Investments (continued)
As of December 31, 2022
(in millions, except share amounts)
Portfolio Company(a) | Footnotes | Industry | Rate(b) | Floor | Maturity | Principal Amount(c) | Amortized Cost | Fair Value(d) | ||||||||||||||||||||||||||||||||||||||||||
| Omnimax International Inc | (f)(i)(k)(l)(m)(v) | Capital Goods | SF+ | 10/8/26 | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
| One Call Care Management Inc | (aa)(v) | Health Care Equipment & Services | L+ | 4/22/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Oxford Global Resources LLC | (f)(k)(l)(m)(t)(v) | Commercial & Professional Services | SF+ | 8/17/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Oxford Global Resources LLC | (v) | Commercial & Professional Services | SF+ | 8/17/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Oxford Global Resources LLC | (x) | Commercial & Professional Services | SF+ | 8/17/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Oxford Global Resources LLC | (x) | Commercial & Professional Services | SF+ | 8/17/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Parts Town LLC | (t)(v) | Retailing | L+ | 11/1/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Parts Town LLC | (v) | Retailing | L+ | 11/1/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| PartsSource Inc | (v) | Health Care Equipment & Services | L+ | 8/23/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| PartsSource Inc | (x) | Health Care Equipment & Services | L+ | 8/21/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| PartsSource Inc | (x) | Health Care Equipment & Services | L+ | 8/23/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Performance Health Holdings Inc | (f)(i)(m)(v) | Health Care Equipment & Services | L+ | 7/12/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Production Resource Group LLC | (ad)(v) | Media & Entertainment | L+ | 8/21/24 | ||||||||||||||||||||||||||||||||||||||||||||||
| Production Resource Group LLC | (ad)(v) | Media & Entertainment | L+ | 8/21/24 | ||||||||||||||||||||||||||||||||||||||||||||||
| Production Resource Group LLC | (ad)(v) | Media & Entertainment | L+ | 8/21/24 | ||||||||||||||||||||||||||||||||||||||||||||||
| Production Resource Group LLC | (ad)(v) | Media & Entertainment | L+ | 8/21/24 | ||||||||||||||||||||||||||||||||||||||||||||||
| PSKW LLC (dba ConnectiveRx) | (i)(l)(s)(t)(v) | Health Care Equipment & Services | L+ | 3/9/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Pure Fishing Inc | (aa)(v) | Consumer Durables & Apparel | L+ | 12/22/25 | ||||||||||||||||||||||||||||||||||||||||||||||
| Radwell International LLC/PA | (v) | Capital Goods | SF+ | 4/1/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| Radwell International LLC/PA | (i)(k)(l)(t) | Capital Goods | SF+ | 4/1/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| Radwell International LLC/PA | (x) | Capital Goods | SF+ | 4/1/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Reliant Rehab Hospital Cincinnati LLC | (f)(i)(l)(m)(s)(v) | Health Care Equipment & Services | L+ | 2/28/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Revere Superior Holdings Inc | (m)(v) | Software & Services | L+ | 9/30/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Revere Superior Holdings Inc | (v) | Software & Services | L+ | 9/30/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Revere Superior Holdings Inc | (x) | Software & Services | L+ | 9/30/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Rise Baking Company | (v) | Food, Beverage & Tobacco | L+ | 8/13/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Rise Baking Company | (l)(m) | Food, Beverage & Tobacco | L+ | 8/13/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Rise Baking Company | (x) | Food, Beverage & Tobacco | L+ | 8/13/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| RSC Insurance Brokerage Inc | (i)(k)(l)(m)(s)(v) | Insurance | SF+ | 10/30/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| RSC Insurance Brokerage Inc | (x) | Insurance | SF+ | 10/30/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Safe-Guard Products International LLC | (f) | Diversified Financials | L+ | 1/27/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| SAMBA Safety Inc | (m) | Software & Services | L+ | 9/1/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| SAMBA Safety Inc | (x) | Software & Services | L+ | 9/1/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| SavATree LLC | (v) | Consumer Services | L+ | 10/12/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| SavATree LLC | (x) | Consumer Services | L+ | 10/12/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| SavATree LLC | (x) | Consumer Services | L+ | 10/12/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Sequel Youth & Family Services LLC | (v)(y)(z) | Health Care Equipment & Services | 2/28/25 | |||||||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
104
FS KKR Capital Corp.
Consolidated Schedule of Investments (continued)
As of December 31, 2022
(in millions, except share amounts)
Portfolio Company(a) | Footnotes | Industry | Rate(b) | Floor | Maturity | Principal Amount(c) | Amortized Cost | Fair Value(d) | ||||||||||||||||||||||||||||||||||||||||||
| SitusAMC Holdings Corp | (k)(l)(t) | Real Estate | L+ | 12/22/27 | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
| Solina France SASU | (m)(v)(w) | Food, Beverage & Tobacco | SF+ | 7/31/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Sorenson Communications LLC | (aa)(f)(k)(t) | Telecommunication Services | L+ | 3/17/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Source Code LLC | (k)(l)(t) | Software & Services | SF+ | 6/30/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Source Code LLC | (x) | Software & Services | SF+ | 6/30/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Spins LLC | (m)(s)(t)(v) | Software & Services | L+ | 1/20/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Spins LLC | (x) | Software & Services | L+ | 1/20/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Spins LLC | (x) | Software & Services | L+ | 1/20/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Staples Canada | (v)(w) | Retailing | C+ | 9/12/24 | C$ | |||||||||||||||||||||||||||||||||||||||||||||
| Summit Interconnect Inc | (f)(k)(l)(m)(t)(v) | Capital Goods | SF+ | 9/22/28 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Summit Interconnect Inc | (x) | Capital Goods | SF+ | 9/22/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Sungard Availability Services Capital Inc | (ac)(v) | Software & Services | L+ | 11/30/23 | ||||||||||||||||||||||||||||||||||||||||||||||
| Sungard Availability Services Capital Inc | (ac)(v)(y)(z) | Software & Services | SF+ | 7/1/24 | ||||||||||||||||||||||||||||||||||||||||||||||
| Sungard Availability Services Capital Inc | (ac)(x) | Software & Services | L+ | 11/30/23 | ||||||||||||||||||||||||||||||||||||||||||||||
| Sweeping Corp of America Inc | (m)(v) | Commercial & Professional Services | L+ | 11/30/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Sweeping Corp of America Inc | (v) | Commercial & Professional Services | L+ | 11/30/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Sweeping Corp of America Inc | (x) | Commercial & Professional Services | L+ | 11/30/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Tangoe LLC | (m)(s)(v) | Software & Services | L+ | 11/28/25 | ||||||||||||||||||||||||||||||||||||||||||||||
| Tangoe LLC | (m)(s)(v) | Software & Services | 11/28/25 | |||||||||||||||||||||||||||||||||||||||||||||||
| TeamSystem SpA | (v)(w) | Software & Services | E+ | 2/15/28 | € | |||||||||||||||||||||||||||||||||||||||||||||
| Tekfor HoldCo (formerly Amtek Global Technology Pte Ltd) | (ad)(v)(w)(y) | Automobiles & Components | ||||||||||||||||||||||||||||||||||||||||||||||||
| ThermaSys Corp | (ac)(v)(y)(z) | Capital Goods | L+ | 1/1/24 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| ThreeSixty Group | (f)(m)(v) | Retailing | SF+ | 3/1/24 | ||||||||||||||||||||||||||||||||||||||||||||||
| ThreeSixty Group | (m)(v) | Retailing | SF+ | 3/1/24 | ||||||||||||||||||||||||||||||||||||||||||||||
| TIBCO Software Inc | (aa)(v) | Software & Services | SF+ | 3/30/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| Time Manufacturing Co | (v) | Capital Goods | L+ | 12/1/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Time Manufacturing Co | (v) | Capital Goods | L+ | 12/1/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Time Manufacturing Co | (v) | Capital Goods | E+ | 12/1/27 | € | |||||||||||||||||||||||||||||||||||||||||||||
| Time Manufacturing Co | (x) | Capital Goods | L+ | 12/1/27 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Transaction Services Group Ltd | (v)(w) | Software & Services | B+ | 10/14/26 | A$ | |||||||||||||||||||||||||||||||||||||||||||||
| Transaction Services Group Ltd | (f)(v)(w) | Software & Services | L+ | 10/14/26 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Ultra Electronics Holdings PLC | (aa)(v)(w) | Capital Goods | L+ | 8/6/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| Ultra Electronics Holdings PLC | (aa)(v)(w) | Capital Goods | E+ | 8/6/29 | € | |||||||||||||||||||||||||||||||||||||||||||||
| Version1 Software Ltd | (w)(x) | Software & Services | E+ | 7/11/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| VetCor Professional Practices LLC | (v) | Health Care Equipment & Services | SF+ | 8/31/29 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| VetCor Professional Practices LLC | (v) | Health Care Equipment & Services | SF+ | 8/31/29 | ||||||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
105
FS KKR Capital Corp.
Consolidated Schedule of Investments (continued)
As of December 31, 2022
(in millions, except share amounts)
Portfolio Company(a) | Footnotes | Industry | Rate(b) | Floor | Maturity | Principal Amount(c) | Amortized Cost | Fair Value(d) | ||||||||||||||||||||||||||||||||||||||||||
| VetCor Professional Practices LLC | (x) | Health Care Equipment & Services | SF+ | 8/31/29 | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
| VetCor Professional Practices LLC | (x) | Health Care Equipment & Services | SF+ | 8/31/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| Warren Resources Inc | (ad)(v) | Energy | SF+ | 5/22/24 | ||||||||||||||||||||||||||||||||||||||||||||||
| Wealth Enhancement Group LLC | (v)(w) | Diversified Financials | SF+ | 10/4/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Wealth Enhancement Group LLC | (w)(x) | Diversified Financials | SF+ | 10/4/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Wealth Enhancement Group LLC | (w)(x) | Diversified Financials | SF+ | 10/29/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Woolpert Inc | (f)(k)(l)(m)(t) | Capital Goods | L+ | 4/5/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Woolpert Inc | (v) | Capital Goods | L+ | 4/5/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Woolpert Inc | (x) | Capital Goods | L+ | 4/5/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Worldwise Inc | (v) | Household & Personal Products | SF+ | 3/29/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Worldwise Inc | (v) | Household & Personal Products | SF+ | 3/29/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Worldwise Inc | (v) | Household & Personal Products | SF+ | 3/29/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Worldwise Inc | (x) | Household & Personal Products | SF+ | 3/29/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Worldwise Inc | (x) | Household & Personal Products | SF+ | 3/29/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Zendesk Inc | (v) | Software & Services | SF+ | 11/22/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Zendesk Inc | (x) | Software & Services | SF+ | 11/22/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Zendesk Inc | (x) | Software & Services | SF+ | 11/22/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Total Senior Secured Loans—First Lien | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Unfunded Loan Commitments | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net Senior Secured Loans—First Lien | ||||||||||||||||||||||||||||||||||||||||||||||||||
Senior Secured Loans—Second Lien— | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Advanced Lighting Technologies Inc | (v)(y)(z) | Materials | L+ | 3/16/27 | ||||||||||||||||||||||||||||||||||||||||||||||
| Ammeraal Beltech Holding BV | (f)(s)(v)(w) | Capital Goods | L+ | 9/12/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Apex Group Limited | (v)(w) | Diversified Financials | L+ | 7/27/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| Belk Inc | (ac)(v)(y)(z) | Retailing | 7/31/25 | |||||||||||||||||||||||||||||||||||||||||||||||
| Caldic BV | (v)(w) | Retailing | SF+ | 2/25/30 | ||||||||||||||||||||||||||||||||||||||||||||||
| Constellis Holdings LLC | (ac)(v) | Capital Goods | L+ | 3/27/25 | ||||||||||||||||||||||||||||||||||||||||||||||
| Cubic Corp | (v) | Software & Services | L+ | 5/25/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| Ellucian Inc | (v) | Software & Services | L+ | 10/9/28 | ||||||||||||||||||||||||||||||||||||||||||||||
| Misys Ltd | (aa)(v)(w) | Software & Services | L+ | 6/13/25 | ||||||||||||||||||||||||||||||||||||||||||||||
| NBG Home | (v)(y)(z) | Consumer Durables & Apparel | L+ | 9/30/24 | ||||||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
106
FS KKR Capital Corp.
Consolidated Schedule of Investments (continued)
As of December 31, 2022
(in millions, except share amounts)
Portfolio Company(a) | Footnotes | Industry | Rate(b) | Floor | Maturity | Principal Amount(c) | Amortized Cost | Fair Value(d) | ||||||||||||||||||||||||||||||||||||||||||
| OEConnection LLC | (f)(v) | Software & Services | SF+ | 9/25/27 | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
| Peraton Corp | (s)(v) | Capital Goods | L+ | 2/1/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| Peraton Corp | (v) | Capital Goods | L+ | 2/1/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| Pure Fishing Inc | (m)(v) | Consumer Durables & Apparel | L+ | 12/21/26 | ||||||||||||||||||||||||||||||||||||||||||||||
| Solera LLC | (aa)(v) | Software & Services | L+ | 6/4/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| Sungard Availability Services Capital Inc | (ac)(v)(y)(z) | Software & Services | SF+ | 8/1/24 | ||||||||||||||||||||||||||||||||||||||||||||||
| Valeo Foods Group Ltd | (v)(w) | Food, Beverage & Tobacco | E+ | 10/1/29 | € | |||||||||||||||||||||||||||||||||||||||||||||
| Valeo Foods Group Ltd | (w)(x) | Food, Beverage & Tobacco | E+ | 10/1/29 | ||||||||||||||||||||||||||||||||||||||||||||||
| Vantage Specialty Chemicals Inc | (aa)(v) | Materials | L+ | 10/27/25 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Wittur Holding GmbH | (v)(w) | Capital Goods | E+ | 9/23/27 | € | |||||||||||||||||||||||||||||||||||||||||||||
| Total Senior Secured Loans—Second Lien | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Unfunded Loan Commitments | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net Senior Secured Loans—Second Lien | ||||||||||||||||||||||||||||||||||||||||||||||||||
Other Senior Secured Debt— | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Angelica Corp | (h)(y)(z) | Health Care Equipment & Services | 12/29/23 | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| JW Aluminum Co | (aa)(ad)(s)(v) | Materials | 6/1/26 | |||||||||||||||||||||||||||||||||||||||||||||||
| One Call Care Management Inc | (v) | Health Care Equipment & Services | 11/1/28 | |||||||||||||||||||||||||||||||||||||||||||||||
| TIBCO Software Inc | (aa)(v) | Software & Services | 3/31/29 | |||||||||||||||||||||||||||||||||||||||||||||||
| TruckPro LLC | (aa)(v) | Capital Goods | 10/15/24 | |||||||||||||||||||||||||||||||||||||||||||||||
| Total Other Senior Secured Debt | ||||||||||||||||||||||||||||||||||||||||||||||||||
Subordinated Debt— | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Ardonagh Group Ltd | (aa)(v)(w) | Insurance | 1/15/27 | |||||||||||||||||||||||||||||||||||||||||||||||
| ATX Networks Corp | (ab)(ad)(s)(v)(w) | Capital Goods | 9/1/28 | |||||||||||||||||||||||||||||||||||||||||||||||
| Element Materials Technology Group US Holdings Inc | (v)(w) | Commercial & Professional Services | SF+ | 7/9/31 | ||||||||||||||||||||||||||||||||||||||||||||||
| Encora Digital Inc | (v) | Software & Services | 12/13/29 | |||||||||||||||||||||||||||||||||||||||||||||||
| Hilding Anders | (ad)(v)(w)(y) | Consumer Durables & Apparel | € | |||||||||||||||||||||||||||||||||||||||||||||||
| Hilding Anders | (ad)(v)(w)(y)(z) | Consumer Durables & Apparel | 11/30/25 | |||||||||||||||||||||||||||||||||||||||||||||||
| Sorenson Communications LLC | (j)(u)(v)(y) | Telecommunication Services | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Sorenson Communications LLC | (j)(u)(v)(y) | Telecommunication Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Ultra Electronics Holdings PLC | (v)(w) | Capital Goods | L+ | 1/31/30 | ||||||||||||||||||||||||||||||||||||||||||||||
| Ultra Electronics Holdings PLC | (v)(w) | Capital Goods | L+ | 47879 | ||||||||||||||||||||||||||||||||||||||||||||||
| Total Subordinated Debt | ||||||||||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
107
FS KKR Capital Corp.
Consolidated Schedule of Investments (continued)
As of December 31, 2022
(in millions, except share amounts)
Portfolio Company(a) | Footnotes | Industry | Rate(b) | Floor | Maturity | Principal Amount(c)/ Shares | Amortized Cost | Fair Value(d) | ||||||||||||||||||||||||||||||||||||||||||
Asset Based Finance— | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 801 5th Ave, Seattle, Private Equity | (ad)(v)(w)(y) | Real Estate | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| 801 5th Ave, Seattle, Structure Mezzanine | (ad)(v)(w) | Real Estate | 12/19/29 | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Abacus JV, Private Equity | (v)(w) | Insurance | ||||||||||||||||||||||||||||||||||||||||||||||||
| Accelerator Investments Aggregator LP, Private Equity | (v)(w)(y) | Diversified Financials | ||||||||||||||||||||||||||||||||||||||||||||||||
| Altavair AirFinance, Private Equity | (v)(w) | Capital Goods | ||||||||||||||||||||||||||||||||||||||||||||||||
| Australis Maritime, Common Stock | (v)(w) | Transportation | ||||||||||||||||||||||||||||||||||||||||||||||||
| Avenue One PropCo, Private Equity | (ad)(v)(w)(y) | Real Estate | ||||||||||||||||||||||||||||||||||||||||||||||||
| Avida Holding AB, Common Stock | (ad)(v)(w)(y) | Diversified Financials | ||||||||||||||||||||||||||||||||||||||||||||||||
| Bankers Healthcare Group LLC, Term Loan | (v)(w) | Diversified Financials | SF+ | 11/8/27 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Byrider Finance LLC, Private Equity | (u)(v)(y) | Automobiles & Components | ||||||||||||||||||||||||||||||||||||||||||||||||
| Byrider Finance LLC, Structured Mezzanine | (v) | Automobiles & Components | L+ | 6/3/28 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Byrider Finance LLC, Structured Mezzanine | (x) | Automobiles & Components | L+ | 6/3/28 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Byrider Finance LLC, Term Loan | (u)(v)(y) | Automobiles & Components | 11/26/26 | |||||||||||||||||||||||||||||||||||||||||||||||
| Callodine Commercial Finance LLC, 2L Term Loan A | (v) | Diversified Financials | L+ | 11/3/25 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Callodine Commercial Finance LLC, 2L Term Loan B | (v) | Diversified Financials | L+ | 11/3/25 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Callodine Commercial Finance LLC, 2L Term Loan B | (x) | Diversified Financials | L+ | 11/3/25 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Capital Automotive LP, Private Equity | (v)(w) | Real Estate | ||||||||||||||||||||||||||||||||||||||||||||||||
| Capital Automotive LP, Structured Mezzanine | (v)(w) | Real Estate | 12/22/28 | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Global Jet Capital LLC, Preferred Stock | (j)(u)(v)(y) | Commercial & Professional Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Global Jet Capital LLC, Preferred Stock | (j)(u)(v)(y)(z) | Commercial & Professional Services | 10/1/28 | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Global Jet Capital LLC, Structured Mezzanine | (j)(u)(v)(w) | Commercial & Professional Services | 12/4/25 | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Global Jet Capital LLC, Structured Mezzanine | (j)(u)(v)(w) | Commercial & Professional Services | 12/9/25 | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Global Jet Capital LLC, Structured Mezzanine | (j)(u)(v)(w) | Commercial & Professional Services | 1/29/26 | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Global Lending Services LLC, Private Equity | (v)(w) | Diversified Financials | ||||||||||||||||||||||||||||||||||||||||||||||||
| Global Lending Services LLC, Private Equity | (v)(w) | Diversified Financials | ||||||||||||||||||||||||||||||||||||||||||||||||
| Global Lending Services LLC, Private Equity | (v)(w)(y) | Diversified Financials | ||||||||||||||||||||||||||||||||||||||||||||||||
| Home Partners JV 2, Private Equity | (ac)(v)(w)(y) | Real Estate | ||||||||||||||||||||||||||||||||||||||||||||||||
| Home Partners JV 2, Private Equity | (ac)(v)(w)(y) | Real Estate | ||||||||||||||||||||||||||||||||||||||||||||||||
| Home Partners JV 2, Structured Mezzanine | (ac)(v)(w) | Real Estate | 3/20/30 | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Jet Edge International LLC, Term Loan | (v) | Transportation | 4/2/26 | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Jet Edge International LLC, Term Loan | (x) | Transportation | 4/2/26 | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Kilter Finance, Preferred Stock | (ad)(v)(w) | Insurance | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Kilter Finance, Private Equity | (ad)(v)(w)(y) | Insurance | ||||||||||||||||||||||||||||||||||||||||||||||||
| KKR Altitude II Offshore Aggregator LP, Partnership Interest | (ad)(v)(w)(y) | Capital Goods | ||||||||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
108
FS KKR Capital Corp.
Consolidated Schedule of Investments (continued)
As of December 31, 2022
(in millions, except share amounts)
Portfolio Company(a) | Footnotes | Industry | Rate(b) | Floor | Maturity | Principal Amount(c)/ Shares | Amortized Cost | Fair Value(d) | ||||||||||||||||||||||||||||||||||||||||||
| KKR Central Park Leasing Aggregator L.P., Partnership Interest | (v)(w)(y)(z) | Capital Goods | 5/31/23 | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| KKR Chord IP Aggregator LP, Partnership Interest | (v)(w) | Media & Entertainment | ||||||||||||||||||||||||||||||||||||||||||||||||
| KKR Residential Opportunities I LLC, Private Equity | (v)(y) | Real Estate | ||||||||||||||||||||||||||||||||||||||||||||||||
| KKR Rocket Loans Aggregator LLC, Partnership Interest | (ad)(v)(w) | Diversified Financials | ||||||||||||||||||||||||||||||||||||||||||||||||
| KKR Zeno Aggregator LP (K2 Aviation), Partnership Interest | (v)(w)(y) | Capital Goods | ||||||||||||||||||||||||||||||||||||||||||||||||
| Luxembourg Life Fund - Absolute Return Fund II, Structured Mezzanine | (v)(w) | Insurance | SF+ | 2/10/27 | $ | |||||||||||||||||||||||||||||||||||||||||||||
| My Community Homes PropCo 2, Private Equity | (ad)(v)(w)(y) | Real Estate | ||||||||||||||||||||||||||||||||||||||||||||||||
| NewStar Clarendon 2014-1A Class D | (v)(w) | Diversified Financials | 1/25/27 | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Opendoor Labs Inc, Structured Mezzanine | (v)(w) | Real Estate | 4/1/26 | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Pretium Partners LLC P2, Term Loan | (v)(w) | Real Estate | 12/16/29 | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Prime ST LLC, Private Equity | (ad)(v)(w)(y) | Real Estate | ||||||||||||||||||||||||||||||||||||||||||||||||
| Prime ST LLC, Structured Mezzanine | (ad)(v)(w) | Real Estate | 3/12/30 | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Roemanu LLC (FKA Toorak Capital Partners LLC), Private Equity | (ad)(v) | Real Estate | ||||||||||||||||||||||||||||||||||||||||||||||||
| Saluda Grade Alternative Mortgage Trust 2022-BC2, Structured Mezzanine | (v)(w) | Real Estate | 7/25/30 | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Saluda Grade Alternative Mortgage Trust 2022-BC2, Structured Mezzanine | (v)(w) | Real Estate | 7/25/30 | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Saluda Grade Alternative Mortgage Trust 2022-BC2, Term Loan | (v)(w) | Real Estate | 7/25/30 | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Star Mountain Diversified Credit Income Fund III, LP, Private Equity | (o)(w) | Diversified Financials | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total Asset Based Finance | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Unfunded Asset Based Finance Commitments | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net Asset Based Finance | ||||||||||||||||||||||||||||||||||||||||||||||||||
Credit Opportunities Partners JV, LLC— | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Credit Opportunities Partners JV, LLC | (ad)(v)(w) | Diversified Financials | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Total Credit Opportunities Partners JV, LLC | ||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio Company(a) | Footnotes | Industry | Rate(b) | Floor | Maturity | Number of Shares | Amortized Cost | Fair Value(d) | ||||||||||||||||||||||||||||||||||||||||||
Equity/Other— | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Abaco Energy Technologies LLC, Common Stock | (v)(y) | Energy | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Abaco Energy Technologies LLC, Preferred Stock | (v)(y) | Energy | ||||||||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
109
FS KKR Capital Corp.
Consolidated Schedule of Investments (continued)
As of December 31, 2022
(in millions, except share amounts)
Portfolio Company(a) | Footnotes | Industry | Rate(b) | Floor | Maturity | Number of Shares | Amortized Cost | Fair Value(d) | ||||||||||||||||||||||||||||||||||||||||||
| Affordable Care Inc, Preferred Stock | (ac)(v) | Health Care Equipment & Services | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| American Vision Partners, Private Equity | (v)(y) | Health Care Equipment & Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Amerivet Partners Management Inc, Preferred Stock | (v) | Health Care Equipment & Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Amtek Global Technology Pte Ltd, Common Stock | (ad)(g)(v)(w)(y) | Automobiles & Components | ||||||||||||||||||||||||||||||||||||||||||||||||
| Amtek Global Technology Pte Ltd, Ordinary Shares | (ad)(v)(w)(y) | Automobiles & Components | ||||||||||||||||||||||||||||||||||||||||||||||||
| Amtek Global Technology Pte Ltd, Private Equity | (ad)(v)(w)(y) | Automobiles & Components | ||||||||||||||||||||||||||||||||||||||||||||||||
| Angelica Corp, Limited Partnership Interest | (h)(y) | Health Care Equipment & Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Arcos LLC/VA, Preferred Stock | (v) | Software & Services | L+ | 4/30/31 | ||||||||||||||||||||||||||||||||||||||||||||||
| Arena Energy LP, Warrants | (v) | Energy | ||||||||||||||||||||||||||||||||||||||||||||||||
| Ascent Resources Utica Holdings LLC / ARU Finance Corp, Common Stock | (p)(y) | Energy | ||||||||||||||||||||||||||||||||||||||||||||||||
| Ascent Resources Utica Holdings LLC / ARU Finance Corp, Trade Claim | (p)(y) | Energy | ||||||||||||||||||||||||||||||||||||||||||||||||
| athenahealth Inc, Preferred Stock | (ac)(v) | Health Care Equipment & Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| ATX Networks Corp, Class B-1 Common Stock | (ad)(v)(w)(y) | Capital Goods | ||||||||||||||||||||||||||||||||||||||||||||||||
| ATX Networks Corp, Class B-2 Common Stock | (ad)(v)(w)(y) | Capital Goods | ||||||||||||||||||||||||||||||||||||||||||||||||
| ATX Networks Corp, Common Stock | (ab)(ad)(s)(v)(w)(y) | Capital Goods | ||||||||||||||||||||||||||||||||||||||||||||||||
| AVF Parent LLC, Trade Claim | (v)(y) | Retailing | ||||||||||||||||||||||||||||||||||||||||||||||||
| Belk Inc, Common Stock | (ac)(v)(y) | Retailing | ||||||||||||||||||||||||||||||||||||||||||||||||
| Borden (New Dairy Opco), Common Stock | (ac)(h)(n)(y) | Food, Beverage & Tobacco | ||||||||||||||||||||||||||||||||||||||||||||||||
| Bowery Farming Inc, Warrants | (v)(y) | Food, Beverage & Tobacco | 4/30/26 | |||||||||||||||||||||||||||||||||||||||||||||||
| Catalina Marketing Corp, Common Stock | (v)(y) | Media & Entertainment | ||||||||||||||||||||||||||||||||||||||||||||||||
| CDS US Intermediate Holdings Inc, Warrant | (v)(w)(y) | Media & Entertainment | ||||||||||||||||||||||||||||||||||||||||||||||||
| Cengage Learning, Inc, Common Stock | (v)(y) | Media & Entertainment | ||||||||||||||||||||||||||||||||||||||||||||||||
| Cimarron Energy Inc, Common Stock | (v)(y) | Energy | ||||||||||||||||||||||||||||||||||||||||||||||||
| Cimarron Energy Inc, Participation Option | (v)(y) | Energy | ||||||||||||||||||||||||||||||||||||||||||||||||
| Constellis Holdings LLC, Private Equity | (ac)(f)(v)(y) | Capital Goods | ||||||||||||||||||||||||||||||||||||||||||||||||
| CTI Foods Holding Co LLC, Common Stock | (v)(y) | Food, Beverage & Tobacco | ||||||||||||||||||||||||||||||||||||||||||||||||
| Cubic Corp, Preferred Stock | (v) | Software & Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Envigo Laboratories Inc, Series A Warrant | (s)(y) | Health Care Equipment & Services | 4/29/24 | |||||||||||||||||||||||||||||||||||||||||||||||
| Envigo Laboratories Inc, Series B Warrant | (s)(y) | Health Care Equipment & Services | 4/29/24 | |||||||||||||||||||||||||||||||||||||||||||||||
| Fox Head Inc, Common Stock | (j)(v) | Consumer Durables & Apparel | ||||||||||||||||||||||||||||||||||||||||||||||||
| Fronton BV, Common Stock | (ac)(o)(y) | Consumer Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Galaxy Universal LLC, Common Stock | (n)(y) | Consumer Durables & Apparel | ||||||||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
110
FS KKR Capital Corp.
Consolidated Schedule of Investments (continued)
As of December 31, 2022
(in millions, except share amounts)
Portfolio Company(a) | Footnotes | Industry | Rate(b) | Floor | Maturity | Number of Shares | Amortized Cost | Fair Value(d) | ||||||||||||||||||||||||||||||||||||||||||
| Galaxy Universal LLC, Trade Claim | (v)(y) | Consumer Durables & Apparel | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Genesys Telecommunications Laboratories Inc, Class A Shares | (v)(y) | Technology Hardware & Equipment | ||||||||||||||||||||||||||||||||||||||||||||||||
| Genesys Telecommunications Laboratories Inc, Ordinary Shares | (v)(y) | Technology Hardware & Equipment | ||||||||||||||||||||||||||||||||||||||||||||||||
| Genesys Telecommunications Laboratories Inc, Preferred Stock | (v)(y) | Technology Hardware & Equipment | ||||||||||||||||||||||||||||||||||||||||||||||||
| Gracent LLC, NP-1 Common Stock | (n)(y) | Health Care Equipment & Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Harvey Industries Inc, Common Stock | (v)(y) | Capital Goods | ||||||||||||||||||||||||||||||||||||||||||||||||
| Hilding Anders, Class A Common Stock | (ad)(v)(w)(y) | Consumer Durables & Apparel | ||||||||||||||||||||||||||||||||||||||||||||||||
| Hilding Anders, Class B Common Stock | (ad)(v)(w)(y) | Consumer Durables & Apparel | ||||||||||||||||||||||||||||||||||||||||||||||||
| Hilding Anders, Class C Common Stock | (ad)(v)(w)(y) | Consumer Durables & Apparel | ||||||||||||||||||||||||||||||||||||||||||||||||
| Hilding Anders, Equity Options | (ad)(v)(w)(y) | Consumer Durables & Apparel | 11/30/25 | |||||||||||||||||||||||||||||||||||||||||||||||
| HM Dunn Co Inc, Preferred Stock, Series A | (ad)(s)(v)(y) | Capital Goods | ||||||||||||||||||||||||||||||||||||||||||||||||
| HM Dunn Co Inc, Preferred Stock, Series B | (ad)(s)(v)(y) | Capital Goods | ||||||||||||||||||||||||||||||||||||||||||||||||
| Imagine Communications Corp, Common Stock | (v)(y) | Media & Entertainment | ||||||||||||||||||||||||||||||||||||||||||||||||
| Jones Apparel Holdings, Inc., Common Stock | (v)(y) | Consumer Durables & Apparel | ||||||||||||||||||||||||||||||||||||||||||||||||
| JW Aluminum Co, Common Stock | (ad)(j)(u)(v)(y) | Materials | ||||||||||||||||||||||||||||||||||||||||||||||||
| JW Aluminum Co, Preferred Stock | (ad)(j)(u)(v) | Materials | 2/15/28 | |||||||||||||||||||||||||||||||||||||||||||||||
| Lipari Foods LLC, Common Stock | (v)(y) | Food & Staples Retailing | ||||||||||||||||||||||||||||||||||||||||||||||||
| Magna Legal Services LLC, Common Stock | (h)(y) | Commercial & Professional Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Maverick Natural Resources LLC, Common Stock | (n)(o) | Energy | ||||||||||||||||||||||||||||||||||||||||||||||||
| MB Precision Holdings LLC, Class A - 2 Units | (n)(o)(y) | Capital Goods | ||||||||||||||||||||||||||||||||||||||||||||||||
| Med-Metrix, Common Stock | (h)(y) | Software & Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Med-Metrix, Preferred Stock | (h) | Software & Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Miami Beach Medical Group LLC, Common Stock | (v)(y) | Health Care Equipment & Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Misys Ltd, Preferred Stock | (v)(w) | Software & Services | L+ | |||||||||||||||||||||||||||||||||||||||||||||||
| NBG Home, Common Stock | (v)(y) | Consumer Durables & Apparel | ||||||||||||||||||||||||||||||||||||||||||||||||
| NCI Inc, Class A-1 Common Stock | (ad)(v)(y) | Software & Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| NCI Inc, Class B-1 Common Stock | (ad)(v)(y) | Software & Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| NCI Inc, Class C Common Stock | (ad)(v)(y) | Software & Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| NCI Inc, Class I-1 Common Stock | (ad)(v)(y) | Software & Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Nine West Holdings Inc, Common Stock | (v)(y) | Consumer Durables & Apparel | ||||||||||||||||||||||||||||||||||||||||||||||||
| One Call Care Management Inc, Common Stock | (v)(y) | Health Care Equipment & Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| One Call Care Management Inc, Preferred Stock A | (v)(y) | Health Care Equipment & Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| One Call Care Management Inc, Preferred Stock B | (v) | Health Care Equipment & Services | 10/25/29 | |||||||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
111
FS KKR Capital Corp.
Consolidated Schedule of Investments (continued)
As of December 31, 2022
(in millions, except share amounts)
Portfolio Company(a) | Footnotes | Industry | Rate(b) | Floor | Maturity | Number of Shares | Amortized Cost | Fair Value(d) | ||||||||||||||||||||||||||||||||||||||||||
| Petroplex Acidizing Inc, Trade Claim | (v)(y) | Energy | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Polyconcept North America Inc, Class A - 1 Units | (v) | Household & Personal Products | ||||||||||||||||||||||||||||||||||||||||||||||||
| PRG III LLC, Preferred Stock, Series A PIK | (ad)(v)(y) | Media & Entertainment | 8/21/24 | |||||||||||||||||||||||||||||||||||||||||||||||
| PRG III LLC, Preferred Stock, Series B PIK | (ad)(v)(y) | Media & Entertainment | 8/21/24 | |||||||||||||||||||||||||||||||||||||||||||||||
| Proserv Acquisition LLC, Class A Common Units | (ac)(v)(w)(y) | Energy | ||||||||||||||||||||||||||||||||||||||||||||||||
| Proserv Acquisition LLC, Class A Preferred Units | (ac)(v)(w)(y) | Energy | ||||||||||||||||||||||||||||||||||||||||||||||||
| Quorum Health Corp, Trade Claim | (v)(y) | Health Care Equipment & Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Quorum Health Corp, Trust Initial Funding Units | (v)(y) | Health Care Equipment & Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Ridgeback Resources Inc, Common Stock | (j)(u)(v)(w) | Energy | ||||||||||||||||||||||||||||||||||||||||||||||||
| Sequel Youth & Family Services LLC, Class R Common Stock | (n)(y) | Health Care Equipment & Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Sorenson Communications LLC, Common Stock | (j)(u)(v)(y) | Telecommunication Services | ||||||||||||||||||||||||||||||||||||||||||||||||
| Sound United LLC, Common Stock | (v)(y) | Consumer Durables & Apparel | ||||||||||||||||||||||||||||||||||||||||||||||||
| Stuart Weitzman Inc, Common Stock | (v)(y) | Consumer Durables & Apparel | ||||||||||||||||||||||||||||||||||||||||||||||||
| Swift Worldwide Resources Holdco Ltd, Common Stock | (v)(y) | Energy | ||||||||||||||||||||||||||||||||||||||||||||||||
| ThermaSys Corp, Common Stock | (ac)(u)(v)(y) | Capital Goods | ||||||||||||||||||||||||||||||||||||||||||||||||
| ThermaSys Corp, Preferred Stock | (ac)(v)(y) | Capital Goods | ||||||||||||||||||||||||||||||||||||||||||||||||
| TIBCO Software Inc, Preferred Stock | (v) | Software & Services | SF+ | |||||||||||||||||||||||||||||||||||||||||||||||
| Ultra Electronics Holdings PLC, Private Equity | (v)(w)(y) | Capital Goods | ||||||||||||||||||||||||||||||||||||||||||||||||
| Ultra Electronics Holdings PLC, Private Equity | (v)(w)(y) | Capital Goods | ||||||||||||||||||||||||||||||||||||||||||||||||
| Versatile Processing Group Inc, Class A - 2 Units | (u)(y) | Materials | ||||||||||||||||||||||||||||||||||||||||||||||||
| Warren Resources Inc, Common Stock | (ad)(v)(y) | Energy | ||||||||||||||||||||||||||||||||||||||||||||||||
| Worldwise Inc, Class A Private Equity | (v)(y) | Household & Personal Products | ||||||||||||||||||||||||||||||||||||||||||||||||
| Worldwise Inc, Class B Private Equity | (v)(y) | Household & Personal Products | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total Equity/Other | ||||||||||||||||||||||||||||||||||||||||||||||||||
TOTAL INVESTMENTS— | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||
LIABILITIES IN EXCESS OF OTHER ASSETS—( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
NET ASSETS—100% | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
112
FS KKR Capital Corp.
Consolidated Schedule of Investments (continued)
As of December 31, 2022
(in millions, except share amounts)
Foreign currency forward contracts
| Foreign Currency | Settlement Date | Counterparty | Amount and Transaction | US$ Value at Settlement Date | US$ Value at December 31, 2022 | Unrealized Appreciation (Depreciation) | ||||||||||||||||||||||||||||||||||||||||||||
| AUD | 2/14/2023 | JP Morgan Chase Bank | A$ | Sold | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
| AUD | 10/21/2024 | JP Morgan Chase Bank | A$ | Sold | ( | |||||||||||||||||||||||||||||||||||||||||||||
| CAD | 1/11/2023 | JP Morgan Chase Bank | C$ | Sold | ||||||||||||||||||||||||||||||||||||||||||||||
| CAD | 1/11/2023 | JP Morgan Chase Bank | C$ | Bought | ||||||||||||||||||||||||||||||||||||||||||||||
| CAD | 7/5/2023 | JP Morgan Chase Bank | C$ | Sold | ||||||||||||||||||||||||||||||||||||||||||||||
| CAD | 7/5/2023 | JP Morgan Chase Bank | C$ | Sold | ||||||||||||||||||||||||||||||||||||||||||||||
| CAD | 9/13/2024 | JP Morgan Chase Bank | C$ | Sold | ||||||||||||||||||||||||||||||||||||||||||||||
| CAD | 11/15/2024 | JP Morgan Chase Bank | C$ | Sold | ||||||||||||||||||||||||||||||||||||||||||||||
| CAD | 11/18/2024 | JP Morgan Chase Bank | C$ | Sold | ||||||||||||||||||||||||||||||||||||||||||||||
| EUR | 7/17/2023 | JP Morgan Chase Bank | € | Sold | ||||||||||||||||||||||||||||||||||||||||||||||
| EUR | 12/15/2023 | JP Morgan Chase Bank | € | Sold | ( | |||||||||||||||||||||||||||||||||||||||||||||
| EUR | 2/23/2024 | JP Morgan Chase Bank | € | Sold | ||||||||||||||||||||||||||||||||||||||||||||||
| EUR | 8/8/2025 | JP Morgan Chase Bank | € | Sold | ||||||||||||||||||||||||||||||||||||||||||||||
| EUR | 8/8/2025 | JP Morgan Chase Bank | € | Sold | ||||||||||||||||||||||||||||||||||||||||||||||
| GBP | 1/11/2023 | JP Morgan Chase Bank | £ | Sold | ||||||||||||||||||||||||||||||||||||||||||||||
| GBP | 1/11/2023 | JP Morgan Chase Bank | £ | Sold | ||||||||||||||||||||||||||||||||||||||||||||||
| GBP | 1/11/2023 | JP Morgan Chase Bank | £ | Sold | ||||||||||||||||||||||||||||||||||||||||||||||
| GBP | 1/11/2023 | JP Morgan Chase Bank | £ | Sold | ||||||||||||||||||||||||||||||||||||||||||||||
| GBP | 1/11/2023 | JP Morgan Chase Bank | £ | Sold | ||||||||||||||||||||||||||||||||||||||||||||||
| GBP | 10/13/2023 | JP Morgan Chase Bank | £ | Sold | ||||||||||||||||||||||||||||||||||||||||||||||
| NOK | 8/8/2025 | JP Morgan Chase Bank | NOK | Sold | ||||||||||||||||||||||||||||||||||||||||||||||
| SEK | 5/10/2024 | JP Morgan Chase Bank | SEK | Sold | ||||||||||||||||||||||||||||||||||||||||||||||
| SEK | 5/10/2024 | JP Morgan Chase Bank | SEK | Sold | ||||||||||||||||||||||||||||||||||||||||||||||
| SEK | 5/10/2024 | JP Morgan Chase Bank | SEK | Sold | ||||||||||||||||||||||||||||||||||||||||||||||
| SEK | 5/10/2024 | JP Morgan Chase Bank | SEK | Sold | ||||||||||||||||||||||||||||||||||||||||||||||
| SEK | 8/8/2025 | JP Morgan Chase Bank | SEK | Sold | ||||||||||||||||||||||||||||||||||||||||||||||
| SEK | 8/8/2025 | JP Morgan Chase Bank | SEK | Sold | ||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
_______________
(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, 2022, the three-month London Interbank Offered Rate, or LIBOR or “L”, was 4.77%, the Euro Interbank Offered Rate, or EURIBOR or “E”, was 2.13%, Canadian Dollar Offer Rate, or CDOR “C”, was 4.94%, the Bank Bill Swap Bid Rate, or BBSY or “B”, was 3.32%, the Reykjavik Interbank Offered Rate, or REIBOR or “R”, was 6.55%, the Stockholm Interbank Offered Rate, or STIBOR or “SR”, was 2.70%, the Sterling Overnight Index Average, or SONIA or “SA”, was 3.43%, the Secured Overnight Financing Rate, or SOFR or “SF”, was 4.59%, and the U.S. Prime Lending Rate, or Prime or “P”, was 7.50%. PIK means paid-in-kind. PIK income accruals may be adjusted based on the fair value of the underlying investmen t.
(c)Denominated in U.S. dollars unless otherwise noted.
See notes to consolidated financial statements.
113
FS KKR Capital Corp.
Consolidated Schedule of Investments (continued)
As of December 31, 2022
(in millions, except share amounts)
(d)Fair value determined by the Company’s board of directors (see Note 8).
(e)Listed investments may be treated as debt for GAAP or tax purposes.
(f)Security or portion thereof held within Ambler Funding LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with Ally Bank (see Note 9).
(g)Security or portion thereof was held within CCT Dublin Funding Limited
(h)Security held within CCT Holdings II, LLC, a wholly-owned subsidiary of the Company.
(i)Security or portion thereof was held within CCT Tokyo Funding LLC and was pledged as collateral supporting the amounts outstanding under the revolving credit facility with Sumitomo Mitsui Banking Corporation (see Note 9) .
(j)Security or portion thereof held within Cobbs Creek LLC and is pledged as collateral supporting the amounts outstanding under the senior secured revolving credit facility (see Note 9).
(k)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 9).
(l)Security or portion thereof held within Dunlap Funding LLC and is pledged as collateral supporting the amounts outstanding under a revolving credit facility with Deutsche Bank AG, New York Branch (see Note 9).
(m)Security or portion thereof was held within FSK CLO as of December 31, 2022.
(n)Security held within FSIC II Investments, Inc., a wholly-owned subsidiary of the Company.
(o)Security held within FSIC Investments, Inc., a wholly-owned subsidiary of the Company.
(p)Security held within IC American Energy Investments, Inc., a wholly-owned subsidiary of the Company.
(q)Security held within IC Arches Investments LLC, a wholly-owned subsidiary of the Company.
(r)Security held within IC II Arches Investments, LLC, a wholly-owned subsidiary of the Company.
(s)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 9).
(t)Security or portion thereof held within Meadowbrook Run LLC and is pledged as collateral supporting the amounts outstanding under a revolving credit facility with Morgan Stanley Senior Funding, Inc. (see Note 9).
(u)Security or portion thereof held within Race Street Funding LLC. Security is available as collateral supporting the amounts outstanding under the Senior Secured Revolving Credit Facility (see Note 9).
(v)Security or portion thereof is pledged as collateral supporting the amounts outstanding under the Senior Secured Revolving Credit Facility (see Note 9).
(w)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, 2022, 75.3% of the Company’s total assets represented qualifying assets.
(x)Security is an unfunded commitment. Reflects the stated spread at the time of commitment, but may not be the actual rate received upon funding.
(y)Security is non-income producing.
(z)Asset is on non-accrual status.
(aa)Security is classified as Level 1 or 2 in the Company's fair value hierarchy (see Note 8).
(ab)Position or portion thereof unsettled as of December 31, 2022.
(ac)Under the Investment Company Act of 1940, as amended, 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, 2022, 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 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, 2022:
| Portfolio Company | Fair Value at December 31, 2021 | Gross Additions(1) | Gross Reductions(2) | Net Realized Gain (Loss) | Net Change in Unrealized Appreciation (Depreciation) | Fair Value at December 31, 2022 | Interest Income(3) | PIK Income(3) | Fee Income(3) | Dividend and Other Income(3) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Senior Secured Loans—First Lien | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Affordable Care Inc | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Affordable Care Inc | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| athenahealth Inc | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Belk Inc | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Belk Inc | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
114
FS KKR Capital Corp.
Consolidated Schedule of Investments (continued)
As of December 31, 2022
(in millions, except share amounts)
| Portfolio Company | Fair Value at December 31, 2021 | Gross Additions(1) | Gross Reductions(2) | Net Realized Gain (Loss) | Net Change in Unrealized Appreciation (Depreciation) | Fair Value at December 31, 2022 | Interest Income(3) | PIK Income(3) | Fee Income(3) | Dividend and Other Income(3) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Borden (New Dairy Opco) | $ | $ | $ | ( | $ | $ | ( | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Borden (New Dairy Opco) | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Borden Dairy Co | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Constellis Holdings LLC | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fairway Group Holdings Corp | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Micronics Filtration Holdings Inc | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Petroplex Acidizing Inc | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sorenson Communications LLC(4) | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sungard Availability Services Capital Inc(4) | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sungard Availability Services Capital Inc(4) | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ThermaSys Corp | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Senior Secured Loans—Second Lien | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Belk Inc | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Constellis Holdings LLC | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fairway Group Holdings Corp | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sungard Availability Services Capital Inc(4) | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Subordinated Debt | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| athenahealth Inc | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Asset Based Finance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Home Partners JV, Structured Mezzanine | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Home Partners JV, Private Equity | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Home Partners JV, Common Stock | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Home Partners JV 2, Structured Mezzanine | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Home Partners JV 2, Private Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Home Partners JV 2, Private Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Jet Edge International LLC, Preferred Stock | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Jet Edge International LLC, Warrant | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Jet Edge International LLC, Term Loan | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Orchard Marine Limited, Class B Common Stock | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Orchard Marine Limited, Series A Preferred Stock | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity/Other | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Affordable Care Inc, Common Stock | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| athenahealth Inc, Preferred Stock | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Belk Inc, Common Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Borden (New Dairy Opco), Common Stock | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Constellis Holdings LLC, Private Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fairway Group Holdings Corp, Common Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
115
FS KKR Capital Corp.
Consolidated Schedule of Investments (continued)
As of December 31, 2022
(in millions, except share amounts)
| Portfolio Company | Fair Value at December 31, 2021 | Gross Additions(1) | Gross Reductions(2) | Net Realized Gain (Loss) | Net Change in Unrealized Appreciation (Depreciation) | Fair Value at December 31, 2022 | Interest Income(3) | PIK Income(3) | Fee Income(3) | Dividend and Other Income(3) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fronton BV, Common Stock | $ | $ | $ | $ | $ | ( | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Micronics Filtration Holdings Inc, Common Stock | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Micronics Filtration Holdings Inc, Preferred Stock, Series A | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Micronics Filtration Holdings Inc, Preferred Stock, Series B | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Micronics Filtration Holdings Inc, Preferred Stock, Series B PIK | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Micronics Filtration Holdings Inc, Preferred Stock, Series C PIK | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Petroplex Acidizing Inc, Preferred Stock A | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Petroplex Acidizing Inc, Warrant | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Proserv Acquisition LLC, Class A Common Units | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Proserv Acquisition LLC, Class A Preferred Units | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sorenson Communications LLC, Common Stock(4) | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sungard Availability Services Capital Inc, Common Stock(4) | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ThermaSys Corp, Common Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ThermaSys Corp, Preferred Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | ( | $ | $ | ( | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||
______________
(1)Gross additions include increases in the cost basis of investments resulting from new portfolio investments, PIK interest, the amortization of unearned income, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company into this category from a different category.
(2)Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company out of this category into a different category.
(3)Interest, PIK, fee and dividend income presented for the full year ended December 31, 2022.
(4)The Company held this investment as of December 31, 2021 but it was not deemed to be an “affiliated person” of the portfolio company as of December 31, 2021. Transfers in or out have been presented at amortized cost.
(ad)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 December 31, 2022, the Company held investments in one portfolio company of which it is deemed to be an “affiliated person” and deemed to “control”. During the year ended December 31, 2022, the Company disposed of investments in one portfolio of which it was 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 year ended December 31, 2022:
| Portfolio Company | Fair Value at December 31, 2021 | Gross Additions(1) | Gross Reductions(2) | Net Realized Gain (Loss) | Net Change in Unrealized Appreciation (Depreciation) | Fair Value at December 31, 2022 | Interest Income(3) | PIK Income(3) | Fee Income(3) | Dividend and Other Income(3) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Senior Secured Loans—First Lien | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amtek Global Technology Pte Ltd | $ | $ | $ | ( | $ | ( | $ | ( | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
| ATX Networks Corp | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| HM Dunn Co Inc | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| HM Dunn Co Inc | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NCI Inc | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
One Call Care Management Inc(5) | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
116
FS KKR Capital Corp.
Consolidated Schedule of Investments (continued)
As of December 31, 2022
(in millions, except share amounts)
| Portfolio Company | Fair Value at December 31, 2021 | Gross Additions(1) | Gross Reductions(2) | Net Realized Gain (Loss) | Net Change in Unrealized Appreciation (Depreciation) | Fair Value at December 31, 2022 | Interest Income(3) | PIK Income(3) | Fee Income(3) | Dividend and Other Income(3) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Production Resource Group LLC | $ | $ | $ | ( | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Production Resource Group LLC | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Production Resource Group LLC | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Production Resource Group LLC | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Sound United LLC | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Warren Resources Inc | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Senior Secured Loans—Second Lien | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amtek Global Technology Pte Ltd | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other Senior Secured Debt | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| JW Aluminum Co | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
One Call Care Management Inc(5) | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Subordinated Debt | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ATX Networks Corp | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Hilding Anders | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Hilding Anders | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Hilding Anders | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Asset Based Finance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 801 5th Ave, Seattle, Structure Mezzanine | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 801 5th Ave, Seattle, Private Equity | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Avenue One PropCo, Private Equity | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Avida Holding AB, Common Stock | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Kilter Finance, Preferred Stock | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Kilter Finance, Private Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| KKR Altitude II Offshore Aggregator LP, Partnership Interest | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| KKR Rocket Loans Aggregator LLC, Partnership Interest | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| My Community Homes SFR PropCo 2, Private Equity | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Prime St LLC, Private Equity | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Prime St LLC, Structured Mezzanine | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Toorak Capital Funding LLC, Membership Interest | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Roemanu LLC (FKA Toorak Capital Partners LLC), Private Equity | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Roemanu LLC (FKA Toorak Capital Partners LLC), Structured Mezzanine | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Credit Opportunities Partners JV, LLC | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Credit Opportunities Partners JV, LLC | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity/Other | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amtek Global Technology Pte Ltd, Common Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amtek Global Technology Pte Ltd, Ordinary Shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
117
FS KKR Capital Corp.
Consolidated Schedule of Investments (continued)
As of December 31, 2022
(in millions, except share amounts)
| Portfolio Company | Fair Value at December 31, 2021 | Gross Additions(1) | Gross Reductions(2) | Net Realized Gain (Loss) | Net Change in Unrealized Appreciation (Depreciation) | Fair Value at December 31, 2022 | Interest Income(3) | PIK Income(3) | Fee Income(3) | Dividend and Other Income(3) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amtek Global Technology Pte Ltd, Private Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ATX Networks Corp, Common Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ATX Networks Corp, Class B-1 Common Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ATX Networks Corp, Class B-2 Common Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Hilding Anders, Class A Common Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Hilding Anders, Class B Common Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Hilding Anders, Class C Common Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Hilding Anders, Equity Options | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| HM Dunn Co Inc, Preferred Stock, Series A | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| HM Dunn Co Inc, Preferred Stock, Series B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| JW Aluminum Co, Common Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| JW Aluminum Co, Preferred Stock | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NCI Inc, Class A-1 Common Stock(4) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NCI Inc, Class B-1 Common Stock(4) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NCI Inc, Class C Common Stock(4) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NCI Inc, Class I-1 Common Stock(4) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
One Call Care Management Inc, Common Stock(5) | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
One Call Care Management Inc, Preferred Stock A(5) | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
One Call Care Management Inc, Preferred Stock B(5) | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PRG III LLC, Preferred Stock, Series A PIK | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PRG III LLC, Preferred Stock, Series B PIK | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Sound United LLC, Common Stock | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Warren Resources Inc, Common Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | ( | $ | ( | $ | ( | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
______________
(1)Gross additions include increases in the cost basis of investments resulting from new portfolio investments, PIK interest, the amortization of unearned income, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company into this category from a different category.
(2)Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company out of this category into a different category.
(3)Interest, PIK, fee and dividend income presented for the full year ended December 31, 2022.
(4)The Company held this investment as of December 31, 2021 but it was not deemed to be in “control” of the portfolio company as of December 31, 2021. Transfers in or out have been presented at amortized cost.
(5)The Company held this investment as of December 31, 2022 but it was not deemed to be in “control” of the portfolio company as of December 31, 2022. Transfers in or out have been presented at amortized cost.
See notes to consolidated financial statements.
118
FS KKR Capital Corp.
Notes to Consolidated Financial Statements
(in millions, except share and per share amounts)
Note 1. Principal Business and Organization
FS KKR Capital Corp. (NYSE: FSK), or the Company, was incorporated under the general corporation laws of the State of Maryland on December 21, 2007 and formally commenced investment operations on January 2, 2009. 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. The Company has various wholly-owned subsidiaries, including special-purpose financing subsidiaries and subsidiaries through which it holds interests in portfolio companies. The consolidated financial statements include both the Company’s accounts and the accounts of its wholly-owned subsidiaries as of December 31, 2023. All 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. The Company’s 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 and certain asset-based financing loans of private U.S. companies. In addition, a portion of the Company’s portfolio may be comprised of equity and equity-related securities, corporate bonds, structured products, other debt securities and derivatives, including total return swaps and credit default swaps.
The Company is externally managed by FS/KKR Adviser, LLC, or the Adviser, pursuant to an investment advisory agreement, dated as of June 16, 2021, or the investment advisory agreement. Prior to entering into the investment advisory agreement, the Company was a party to an investment advisory agreement, dated as of December 20, 2018, with the Adviser, or the prior investment advisory agreement, which remained in effect until June 16, 2021.
On June 16, 2021, the Company completed its acquisition, or the 2021 Merger, of FS KKR Capital Corp. II, or FSKR, pursuant to that certain Agreement and Plan of Merger, or the 2020 Merger Agreement, dated as of November 23, 2020, by and among the Company, FSKR, Rocky Merger Sub, Inc., a former wholly-owned subsidiary of the Company, or Merger Sub, and the Adviser. See Note 13 for a discussion of the 2021 Merger.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation: The accompanying audited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. The Company is considered an investment company under GAAP and follows the accounting and reporting guidance applicable to investment companies under Financial Accounting Standards Board, or the FASB, 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. The Company has concluded that there are no subsequent events that would require adjustment or disclosure in the consolidated financial statements.
Cash and Cash Equivalents: The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. All cash balances are maintained with high credit quality financial institutions, which are members of the Federal Deposit Insurance Corporation.
Valuation of Portfolio Investments: The Company's board of directors is responsible for overseeing the valuation of the Company's portfolio investments at fair value as determined in good faith pursuant to the Adviser's valuation policy. As permitted by Rule 2a-5 of the 1940 Act, the Company's board of directors has designated the Adviser as its valuation designee with day-to-day responsibility for implementing the portfolio valuation process set forth in the Adviser's valuation policy.
Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosure, or ASC Topic 820, issued by the 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
119
FS KKR Capital Corp.
Notes to Consolidated Financial Statements (continued)
(in millions, except share and per share amounts)
Note 2. Summary of Significant Accounting Policies (continued)
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 prices in active markets for identical securities; 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.
The Adviser determines the fair value of the Company's investment portfolio each quarter. Securities that are publicly-traded with readily available market prices will be valued at the reported closing price on the valuation date. Securities that are not publicly-traded with readily available market prices will be valued at fair value as determined in good faith by the Adviser. In connection with that determination, the Adviser will prepare 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 pricing and valuation services.
With respect to investments for which market quotations are not readily available, the Company undertakes a multi-step valuation process each quarter, as described below:
•the Company’s quarterly fair valuation process begins by the Adviser facilitating the delivery of updated quarterly financial and other information relating to each investment to an independent third-party pricing or valuation service;
•the independent third-party pricing or valuation service then reviews and analyzes the information, along with relevant market and economic data, and determines proposed valuations for each portfolio company or investment according to the valuation methodologies in the Adviser's valuation policy and communicates the information to the Adviser in the form of a valuation range for Level 2 and Level 3 assets;
•the Adviser then reviews the preliminary valuation information for each portfolio company or investment and provides feedback about the accuracy, completeness and timeliness of the valuation-related inputs considered by the independent third-party pricing or valuation service and any suggested revisions thereto prior to the independent third-party pricing or valuation service finalizing its valuation range;
•the Adviser then provides the valuation committee with its valuation determinations and valuation-related information for each portfolio company or investment, along with any applicable supporting materials; and other information that is relevant to the fair valuation process as required by the Adviser's board reporting obligations;
•the valuation committee meets with the Adviser to receive the relevant quarterly reporting from the Adviser and to discuss any questions from the valuation committee in connection with the valuation committee's role in overseeing the fair valuation process; and
•following the completion of its fair value oversight activities, the valuation committee (with the assistance of the Adviser) provides the Company's board of directors with a report regarding the quarterly valuation process.
In circumstances where the Adviser deems appropriate, the Adviser’s internal valuation team values certain investments. When performing the internal valuations, the Adviser utilizes similar valuation techniques as an independent third-party pricing service would use. Such valuations are approved by an internal valuation committee of the Adviser, as well as the valuation committee of the Board, as described above.
Determination of fair value involves subjective judgments and estimates. Accordingly, these notes to the Company’s audited consolidated financial statements refer to the uncertainty with respect to the possible effect of such valuations and any change in such valuations on the Company’s consolidated financial statements. In making its determination of fair value, the Adviser may use any independent third-party pricing or valuation services for which it has performed the appropriate level of due diligence. However, the Adviser 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 sourced by the Adviser or provided by any independent third-party valuation or pricing service that the Adviser deems to be reliable in determining fair value under the circumstances. Below is a description of factors that the Adviser and any independent third-party valuation services may consider when determining the fair value of the Company’s investments.
The valuation methods utilized for each portfolio company may vary depending on industry and company-specific considerations. Typically, the first step is to make an assessment as to the enterprise value of the portfolio company's business in order to establish whether the portfolio company's enterprise value is greater than the amount of its debt as of the valuation date. This
120
FS KKR Capital Corp.
Notes to Consolidated Financial Statements (continued)
(in millions, except share and per share amounts)
Note 2. Summary of Significant Accounting Policies (continued)
analysis helps to determine a risk profile for the applicable portfolio company and its related investments, and the appropriate valuation methodology to utilize as part of the security valuation analysis. The enterprise valuation may be determined using a market or income approach.
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, the Adviser may incorporate these factors into discounted cash flow models to arrive at fair value. Various methods may be used to determine the appropriate discount rate in a discounted cash flow model.
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 the Company’s 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.
The Company’s equity interests in portfolio companies for which there is no liquid public market are valued at fair value. Generally, the value of the Company’s equity interests in public companies for which market quotations are readily available is based upon the most recent closing public market price.
When the Company receives 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. The Adviser subsequently values these warrants or other equity securities received at their fair value.
The Company values certain investments at their net asset value in accordance with practical expedient under ASC Topic 820.
Derivative Instruments: The Company’s derivative instruments include foreign currency forward contracts and cross currency swaps. The Company recognizes all derivative instruments as assets or liabilities at fair value in its consolidated financial statements. Derivative contracts entered into by the Company are not designated as hedging instruments, and as a result, the Company presents changes in fair value through net change in unrealized appreciation (depreciation) on derivative instruments in the consolidated statements of operations. Realized gains and losses of the derivative instruments are included in net realized gains (losses) on derivative instruments in the consolidated statements of operations.
Revenue Recognition: Security transactions are accounted for on the trade date. The Company records interest income on an accrual basis to the extent that it expects to collect such amounts. The Company records dividend income on the ex-dividend date. Distributions received from limited liability company (“LLC”) and limited partnership (“LP”) investments are evaluated to determine if the distribution should be recorded as dividend income or a return of capital. The Company does not accrue as a receivable interest or dividends on loans and securities if it has reason to doubt its ability to collect such income. The Company's policy is to place investments on non-accrual status when there is reasonable doubt that interest income will be collected. The Company considers 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 the Company will receive any previously accrued interest, then the accrued interest 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 the Company's judgment.
Loan origination fees, original issue discount and market discount are capitalized and the Company amortizes 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. The Company records prepayment premiums on loans and securities as fee income when it receives such amounts.
For the years ended December 31, 2023, 2022 and 2021, the Company recognized $20 , $38 and $55 , respectively, in structuring fee revenue and included such revenue in the fee income line item on its consolidated statement of operations.
121
FS KKR Capital Corp.
Notes to Consolidated Financial Statements (continued)
(in millions, except share and per share amounts)
Note 2. Summary of Significant Accounting Policies (continued)
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. The Company measures 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 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.
Capital Gains Incentive Fee: Pursuant to the terms of the investment advisory 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 agreement). This fee equals 20.0 % of the Company’s incentive fee capital gains, which shall equal the realized capital gains of Corporate Capital Trust, Inc., or CCT, (as predecessor-by-merger to the Company), FSKR (as predecessor-by-merger to the Company) and the Company (without duplication) on a cumulative basis from inception, calculated as of the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation (without duplication) on a cumulative basis, less the aggregate amount of any capital gain incentive fees previously paid by CCT, FSKR and the Company. 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 the Adviser if the Company’s entire portfolio was liquidated at its fair value as of the balance sheet date even though the Adviser 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 terms of the investment advisory agreement, the Adviser may also be entitled to receive a subordinated incentive fee on income. The subordinated incentive fee on income under the investment advisory agreement, which is calculated and payable quarterly in arrears, equals 17.5 % 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 the value of the Company’s net assets, equal to 1.75 % per quarter, or an annualized hurdle rate of 7.0 %. As a result, the Adviser will not earn this incentive fee for any quarter until the Company’s pre-incentive fee net investment income for such quarter exceeds the hurdle rate of 1.75 %. Once the Company’s pre-incentive fee net investment income in any quarter exceeds the hurdle rate, the Adviser 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 2.12 %, or 8.48 % annually, of net assets. Thereafter, the Adviser will be entitled to receive 17.5 % of pre-incentive fee net investment income. See Note 4 for a discussion of the subordinated incentive fee on income under the prior investment advisory agreement.
The Company evaluates its 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 the Company’s 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. The Company recognizes interest and penalties, if any, related to unrecognized tax liabilities as income tax expense in its consolidated statements of operations. During the years ended December 31, 2023, 2022 and 2021, the Company did not incur any interest or penalties.
122
FS KKR Capital Corp.
Notes to Consolidated Financial Statements (continued)
(in millions, except share and per share amounts)
Note 2. Summary of Significant Accounting Policies (continued)
The Company has analyzed the tax positions taken on federal and state income tax returns for all open tax years, and has concluded that no provision for income tax for uncertain tax positions is required in the Company’s financial statements. The Company’s federal and state income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.
Distributions: Distributions to the Company’s stockholders are recorded as of the record date. Subject to the discretion of the Company’s board of directors and applicable legal restrictions, the Company intends to declare and pay such distributions on a quarterly basis. Net realized capital gains, if any, are distributed or deemed distributed at least annually.
Reclassifications: Certain amounts in the consolidated financial statements as of and for the years ended December 31, 2022 and 2021 have been reclassified to conform to the classifications used to prepare the consolidated financial statements for the year ended December 31, 2023.
Recent Accounting Pronouncements: In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”),” which clarifies guidance for fair value measurement of an equity security subject to a contractual sale restriction and establishes new disclosure requirements for such equity securities. ASU 2022-03 is effective for fiscal years beginning after December 15, 2023 and for interim periods within those fiscal years, with early adoption permitted. The Company has concluded that this guidance will not have a material impact on its consolidated financial statements.
123
FS KKR Capital Corp.
Notes to Consolidated Financial Statements (continued)
(in millions, except share and per share amounts)
Note 3. Share Transactions
Below is a summary of transactions with respect to shares of the Company’s common stock during the years ended December 31, 2023, 2022 and 2021:
| Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||
| 2023 | 2022 | 2021 | ||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||
| Share Repurchase Program | ( | $ | ( | ( | $ | ( | ( | $ | ( | |||||||||||||||||||||||||||||
Issuance of Common Stock(1) | ||||||||||||||||||||||||||||||||||||||
| Net Proceeds from Share Transactions | ( | $ | ( | ( | $ | ( | $ | |||||||||||||||||||||||||||||||
____________
(1)Issuance of common stock for the 2021 Merger. Shares were issued at fair value of FSK common stock at the merger date.
During the year ended December 31, 2023, the administrator for the Company's distribution reinvestment plan, or DRP, purchased 3,130,194 shares of common stock in the open market at an average price per share of $18.88 (totaling $59 ) pursuant to the DRP, and distributed such shares to participants in the DRP. During the year ended December 31, 2022, the administrator for the DRP purchased 2,564,024 shares of common stock in the open market at an average price per share of $20.68 (totaling $53 ) pursuant to the DRP, and distributed such shares to participants in the DRP. During the period from January 1, 2024 to January 31, 2024, the administrator for the DRP purchased 727,220 shares of common stock in the open market at an average price per share of $20.79 (totaling $15 ) pursuant to the DRP, and distributed such shares to participants in the DRP. For additional information regarding the terms of the DRP, see Note 5.
Acquisition of FSKR
In accordance with the terms of the 2020 Merger Agreement, at the time of the transactions contemplated by the 2020 Merger Agreement, each outstanding share of FSKR common stock was converted into the right to receive 0.9498 shares of the Company’s common stock. As a result, the Company issued an aggregate of approximately 161,374,028 shares of its common stock to former FSKR stockholders during the year ended December 31, 2021.
Share Repurchase Program
On October 31, 2022, the Company’s board of directors approved a renewal of the previously approved stock repurchase program. The program provided for aggregate purchases of the Company's common stock in an amount up to $54 , which was the aggregate amount remaining of the $100 amount originally approved by the board of directors.
During the year ended December 31, 2023, the Company repurchased 1,665,317 shares of common stock pursuant to the share repurchase program at an average price per share (inclusive of commissions paid) of $18.89 (totaling $32 ). The program has concluded since the aggregate repurchase amount that was approved by the Company’s board of directors has been expended.
Note 4. Related Party Transactions
Compensation of the Investment Adviser
Pursuant to the investment advisory agreement, the Adviser is entitled to a base management fee calculated at an annual rate of 1.50 % of the average weekly value of the Company’s gross assets excluding cash and cash equivalents (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. Effective June 15, 2019, in connection with stockholder approval of the modification of the asset coverage requirement applicable to senior securities from 200 % to 150 %, the Adviser reduced (by permanent waiver) the annual base management fee payable under the investment advisory agreement from 1.5 % to 1.0 % on all assets financed using leverage over 1.0x debt-to-equity. The base management fee is payable quarterly in arrears. All or any part of the base management fee not taken as to any quarter will be deferred without interest and may be taken in such other quarter as the Adviser determines. The prior investment advisory agreement had substantially similar terms as the investment advisory agreement, except that the investment advisory agreement amended the prior investment advisory agreement to (i) reduce the Company’s income incentive fee rate from 20 % to 17.5 %; and (ii) remove the total return lookback provision applicable to the subordinated incentive fee on income from the prior investment advisory agreement. Under the prior investment advisory agreement, the subordinated incentive fee on income was subject to a cap equal to (i) 20.0 % of the “per share pre-incentive fee return” for the then-current and eleven preceding calendar quarters minus the cumulative “per share incentive fees” accrued and/or payable for the eleven preceding calendar quarters multiplied by (ii) the weighted average
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FS KKR Capital Corp.
Notes to Consolidated Financial Statements (continued)
(in millions, except share and per share amounts)
Note 4. Related Party Transactions (continued)
number of shares outstanding during the calendar quarter (or any portion thereof) for which the subordinated incentive fee on income was being calculated. The definitions of “per share pre-incentive fee return” and “per share incentive fees” under the prior investment advisory agreement took into account the historic per share pre-incentive fee return of both the Company and CCT, together with the historic per share incentive fees paid by both the Company and CCT. For the purpose of calculating the “per share pre-incentive fee return,” any unrealized appreciation or depreciation recognized as a result of the purchase accounting for the Company’s acquisition of CCT was excluded. See Note 2 for a discussion of the capital gains and subordinated income incentive fees that the Adviser may be entitled to under the investment advisory agreement.
In connection with the entry into the investment advisory agreement, the Adviser has agreed to waive income incentive fees in the amount of $15 per quarter for the first six full fiscal quarters of operations following the closing of the 2021 Merger, commencing on July 1, 2021, for a total waiver of $90 . The fee waiver expired on December 31, 2022. In addition, the Adviser has agreed to exclude from the calculation of the subordinated incentive fee on income and the incentive fee on capital gains any changes to the fair value recorded for the assets and liabilities of FSKR resulting solely from the new cost basis of the acquired FSKR investments determined in accordance with Accounting Standards Codification Topic 805-50, Business Combinations—Related Issues as a result of the 2021 Merger.
On April 9, 2018, the Company entered into an administration agreement with the Adviser, or the administration agreement. Pursuant to the administration agreement, the Adviser oversees the Company’s day-to-day operations, including the provision of general ledger accounting, fund accounting, legal services, investor relations, certain government and regulatory affairs activities, and other administrative services. The Adviser also performs, or oversees the performance of, the Company’s corporate operations and required administrative services, which includes being responsible for the financial records that the Company is required to maintain and preparing reports for the Company’s stockholders and reports filed with the SEC. In addition, the Adviser assists the Company in calculating its net asset value, overseeing the preparation and filing of tax returns and the printing and dissemination of reports to the Company’s stockholders, and generally overseeing the payment of the Company’s expenses and the performance of administrative and professional services rendered to the Company by others.
Pursuant to the administration agreement, the Company reimburses the Adviser for expenses necessary to perform services related to its administration and operations, including the Adviser’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, and KKR Credit Advisors (US), LLC, or KKR Credit, providing administrative services to the Company on behalf of the Adviser. The Company reimburses the Adviser no less than quarterly for all costs and expenses incurred by the Adviser in performing its obligations and providing personnel and facilities under the administration agreement. The Adviser allocates 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 administrative expenses among the Company and certain affiliates of the Adviser. The Company’s board of directors then assesses the reasonableness of such reimbursements for expenses allocated to it 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 the Adviser for such services as a percentage of the Company’s net assets to the same ratio as reported by other comparable BDCs.
The following table describes the fees and expenses accrued under the investment advisory agreement, the prior investment advisory agreement, and the administration agreement, as applicable, during the years ended December 31, 2023, 2022 and 2021:
| Year Ended December 31, | ||||||||||||||||||||||||||||||||
| Related Party | Source Agreement | Description | 2023 | 2022 | 2021 | |||||||||||||||||||||||||||
| The Adviser | Investment advisory agreement and prior investment advisory agreement | Base Management Fee(1) | $ | $ | $ | |||||||||||||||||||||||||||
| The Adviser | Investment advisory agreement and prior investment advisory agreement | Subordinated Incentive Fee on Income(2) | $ | $ | $ | |||||||||||||||||||||||||||
| The Adviser | Administration agreement | Administrative Services Expenses(3) | $ | $ | $ | |||||||||||||||||||||||||||
________________
(1)During the years ended December 31, 2023, 2022 and 2021, $229 , $246 , and $162 , respectively, in base management fees were paid to the Adviser. As of December 31, 2023, $56 in base management fees were payable to the Adviser.
(2)The Adviser agreed, effective July 1, 2021, to waive up to $15 per quarter of the subordinated incentive fee on income to which it is entitled to under the investment advisory agreement for the first full six quarters following the closing of the 2021 Merger. During the years ended December 31, 2022 and
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FS KKR Capital Corp.
Notes to Consolidated Financial Statements (continued)
(in millions, except share and per share amounts)
Note 4. Related Party Transactions (continued)
2021, the amount shown is net of waivers of $60 and $30 , respectively. The fee waiver expired on December 31, 2022. During the years ended December 31, 2023, 2022 and 2021, $167 , $91 and $49 , respectively, of subordinated incentive fees on income were paid to the Adviser. As of December 31, 2023, $41 in subordinated incentive fees on income were payable to the Adviser.
Potential Conflicts of Interest
The members of the senior management and investment teams of the Adviser serve or may serve as officers, directors or principals of entities that operate in the same or a related line of business as the Company does, or of investment vehicles managed by the same personnel. For example, the Adviser is the investment adviser to KKR FS Income Trust and KKR FS Income Trust Select, and the officers, managers and other personnel of the Adviser may serve in similar or other capacities for the investment advisers to future investment vehicles affiliated with FS Investments or KKR Credit. In serving in these multiple and other capacities, they may have obligations to other clients or investors in those entities, the fulfillment of which may not be in the Company’s best interests or in the best interest of the Company’s stockholders. The Company’s investment objectives may overlap with the investment objectives of such investment funds, accounts or other investment vehicles.
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, or the FS Order, 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 its former investment adviser and any future BDCs that are advised by its former investment adviser or its affiliated investment advisers. However, in connection with the investment advisory relationship with the Adviser, and in an effort to mitigate potential future conflicts of interest, the Company’s board of directors authorized and directed that the Company (i) withdraw from the FS Order, except with respect to any transaction in which the Company participated in reliance on the FS Order prior to April 9, 2018, and (ii) rely on an exemptive relief order, dated January 5, 2021, that permits the Company, subject to the satisfaction of certain conditions, to co-invest in certain privately negotiated investment transactions, including investments originated and directly negotiated by the Adviser or KKR Credit, with certain affiliates of the Adviser.
Affiliated Purchaser Program
As previously disclosed, certain affiliates of the owners of the Adviser committed $100 to a $350 investment vehicle that may invest from time to time in shares of the Company. In September 2021 and December 2021, that investment vehicle entered into a written trading plan with a third party broker in accordance with Rule 10b5-1 and Rule 10b-18 promulgated under the Exchange Act to facilitate the purchase of shares of the Company’s common stock pursuant to the terms and conditions of such plan. In September 2022 and August 2023, that investment vehicle entered into a written trading plan with a third-party broker in accordance with Rule 10b5-1 and Rule 10b-18 promulgated under the Exchange Act to facilitate the sale of shares of the Company’s common stock pursuant to the terms and conditions of such plan. The Company is not a party to any transaction with the investment vehicle.
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Notes to Consolidated Financial Statements (continued)
(in millions, except share and per share amounts)
Note 5. Distributions
The following table reflects the cash distributions per share that the Company has declared on its common stock during the years ended December 31, 2023, 2022 and 2021:
| Distribution | ||||||||||||||
| For the Year Ended December 31, | Per Share | Amount | ||||||||||||
2021 | $ | $ | ||||||||||||
2022 | $ | $ | ||||||||||||
2023 | $ | $ | ||||||||||||
On February 20, 2024, the Company's board of directors declared a regular quarterly cash distribution of $0.70 per share, which will be paid on or about April 2, 2024 to stockholders of record as of the close of business on March 13, 2024. Additionally, the Company's board of directors has declared special distributions totaling $0.10 per share to be paid in two equal installments by the second calendar quarter of 2024. The first of these two $0.05 per share special distributions will be paid on or about February 28, 2024 to stockholders of record as of the close of business on February 14, 2024. The second $0.05 per share special distribution will be paid on or about May 29, 2024 to stockholders of record as of the close of business on May 15, 2024. In addition, the Company’s board of directors previously declared special distributions totaling $0.15 per share to be paid in three equal installments by the end of 2023. The first of those $0.05 per share special distributions was paid on May 31, 2023 to stockholders of record as of the close of business on May 17, 2023. The second $0.05 per share special distribution was paid on August 30, 2023 to stockholders of record as of the close of business on August 16, 2023. The third $0.05 per share special distribution was be paid on November 29, 2023 to stockholders of record as of the close of business on November 15, 2023. 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.
Pursuant to the DRP, the Company will reinvest all cash dividends or distributions declared by the Company’s board of directors on behalf of stockholders who do not elect to receive their distributions in cash. As a result, if the Company’s board of directors declares a distribution, then stockholders who have not elected to “opt out” of the DRP will have their distributions automatically reinvested in additional shares of the Company’s common stock.
With respect to each distribution pursuant to the DRP, the Company reserves the right to either issue new shares of common stock or purchase shares of common stock in the open market in connection with implementation of the DRP. Unless the Company, in its sole discretion, otherwise directs the plan administrator, (A) if the per share market price (as defined in the DRP) is equal to or greater than the estimated net asset value per share (rounded up to the nearest whole cent) of the Company’s common stock on the payment date for the distribution, then the Company will issue shares of common stock at the greater of (i) net asset value per share of common stock or (ii) 95 % of the market price; or (B) if the market price is less than the net asset value per share, then, in the sole discretion of the Company, (i) shares of common stock will be purchased in open market transactions for the accounts of participants to the extent practicable, or (ii) the Company will issue shares of common stock at net asset value per share. Pursuant to the terms of the DRP, the number of shares of common stock to be issued to a participant will be determined by dividing the total dollar amount of the distribution payable to a participant by the price per share at which the Company issues such shares; provided, however, that shares purchased in open market transactions by the plan administrator will be allocated to a participant based on the average purchase price, excluding any brokerage charges or other charges, of all shares of common stock purchased in the open market.
If a stockholder receives distributions in the form of common stock pursuant to the DRP, such stockholder generally will be subject to the same federal, state and local tax consequences as if it elected to receive distributions in cash. If the Company’s common stock is trading at or below net asset value, a stockholder receiving distributions in the form of additional common stock will be treated as receiving a distribution in the amount of cash that they would have received if they had elected to receive the distribution in cash. If the Company’s common stock is trading above net asset value, a stockholder receiving distributions in the form of additional common stock will be treated as receiving a distribution in the amount of the fair market value of the Company’s common stock. The stockholder’s basis for determining gain or loss upon the sale of common stock received in a distribution will be equal to the total dollar amount of the distribution payable to the stockholder. Any stock received in a distribution will have a holding period for tax purposes commencing on the day following the day on which the shares of common stock are credited to the stockholder’s account.
The Company may fund its cash distributions to stockholders from any sources of funds legally available to it, including proceeds from the sale of shares 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. 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
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FS KKR Capital Corp.
Notes to Consolidated Financial Statements (continued)
(in millions, except share and per share amounts)
Note 5. Distributions (continued)
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 has paid on its common stock during the years ended December 31, 2023, 2022 and 2021:
| Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||
| 2023 | 2022 | 2021 | ||||||||||||||||||||||||||||||||||||
| Source of Distribution | Distribution Amount | Percentage | Distribution Amount | Percentage | Distribution Amount | Percentage | ||||||||||||||||||||||||||||||||
| Offering proceeds | $ | $ | $ | |||||||||||||||||||||||||||||||||||
| Borrowings | ||||||||||||||||||||||||||||||||||||||
Net investment income(1) | % | % | % | |||||||||||||||||||||||||||||||||||
Short-term capital gains proceeds from the sale of assets | ||||||||||||||||||||||||||||||||||||||
Long-term capital gains proceeds from the sale of assets | ||||||||||||||||||||||||||||||||||||||
| Non-capital gains proceeds from the sale of assets | ||||||||||||||||||||||||||||||||||||||
Distributions on account of preferred and common equity | ||||||||||||||||||||||||||||||||||||||
| Total | $ | % | $ | % | $ | % | ||||||||||||||||||||||||||||||||
________________
(1)During the years ended December 31, 2023, 2022 and 2021, 86.6 %, 85.5 % and 88.1 %, respectively, of the Company's gross investment income was attributable to cash income earned, 2.9 %, 4.5 % and 1.6 %, respectively, was attributable to non-cash accretion of discount and 10.5 %, 10.0 % and 10.3 %, respectively, was attributable to paid-in-kind, or PIK, interest.
The Company’s net investment income on a tax basis for the years ended December 31, 2023, 2022 and 2021 was $943 , $861 and $557 , respectively. As of December 31, 2023, 2022 and 2021, the Company had $600 , $446 and $284 , respectively, of undistributed net investment income and $2,068 , $2,036 and $1,705 , respectively, of accumulated capital losses on a tax basis.
The Company’s undistributed net investment income on a tax basis may be adjusted following the filing of the Company’s tax returns. The adjustment is in general due to tax-basis income received by the Company differing from GAAP-basis income on account of certain collateralized securities and interests in partnerships and the reclassification of realized gains and losses upon the sale of certain collateralized securities held in its investment portfolio during such period.
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 prepayment fees recognized upon prepayment of loans from income for GAAP purposes to realized gains or deferred to future periods for tax purposes, accounting for income from foreign investments, 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, the reversal of non-deductible excise taxes 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 years ended December 31, 2023, 2022 and 2021:
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FS KKR Capital Corp.
Notes to Consolidated Financial Statements (continued)
(in millions, except share and per share amounts)
Note 5. Distributions (continued)
| Year Ended December 31, | ||||||||||||||||||||
| 2023 | 2022 | 2021 | ||||||||||||||||||
| GAAP-basis net investment income | $ | $ | $ | |||||||||||||||||
| Income subject to tax not recorded for GAAP | ||||||||||||||||||||
| GAAP accretion from merger not recognized for tax | ( | ( | ( | |||||||||||||||||
| Excise taxes | ||||||||||||||||||||
| GAAP versus tax-basis impact of consolidation of certain subsidiaries | ||||||||||||||||||||
| Reclassification of unamortized original issue discount and prepayment fees | ( | ( | ( | |||||||||||||||||
| Other miscellaneous differences | ( | |||||||||||||||||||
| Tax-basis net investment income | $ | $ | $ | |||||||||||||||||
The Company may make certain adjustments to the classification of stockholders' equity as a result of permanent book-to-tax differences.
During the year ended December 31, 2023, the Company increased accumulated undistributed (distributions in excess of) net investment income and accumulated undistributed net realized gain (loss) on investments and gain (loss) on foreign currency by $104 and $37 , respectively, and decreased capital in excess of par value by $141 . During the year ended December 31, 2022, the Company increased accumulated undistributed (distributions in excess of) net investment income and capital in excess of par value by $47 and $8 , respectively, and decreased accumulated undistributed net realized gain (loss) on investments and gain (loss) on foreign currency by $55 .
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. The actual tax characteristics of distributions to stockholders are reported to stockholders annually on Form 1099-DIV.
As of December 31, 2023 and 2022, the components of accumulated earnings on a tax basis were as follows:
| Year Ended December 31, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| Distributable ordinary income | $ | $ | ||||||||||||
Distributable realized gains (accumulated capital losses)(1) | ( | ( | ||||||||||||
| Other temporary differences | ||||||||||||||
Net unrealized appreciation (depreciation)(2) | ( | ( | ||||||||||||
| Total | $ | ( | $ | ( | ||||||||||
________________
(1)Net capital losses may be carried forward indefinitely, and their character is retained as short-term or long-term losses. As of December 31, 2023, the Company had capital loss carryforwards available to offset future realized capital gains of approximately $2,068 million. The capital loss carryforward includes amounts from prior reorganizations that may be limited in their use. Any unused balances resulting from such limitations may be carried forward into future years indefinitely.
The aggregate cost of the Company’s investments for U.S. federal income tax purposes totaled $16,517 and $17,159 as of December 31, 2023 and 2022, respectively. The aggregate net unrealized appreciation (depreciation) on a tax basis was $(1,868 ) and $(1,782 ) as of December 31, 2023 and 2022, respectively. The aggregate net unrealized appreciation (depreciation) on investments on a tax basis excludes net unrealized appreciation (depreciation) from merger accounting, foreign currency forward contracts and foreign currency transactions.
As of December 31, 2023, the Company had a deferred tax liability of $7 resulting from unrealized appreciation on investments held by the Company’s wholly-owned taxable subsidiaries and a deferred tax asset of $64 resulting from a combination of unrealized depreciation on investments held by and net operating losses and other tax attributes of the Company’s wholly-owned taxable subsidiaries. As of December 31, 2023, 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 $61 . For the year ended
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FS KKR Capital Corp.
Notes to Consolidated Financial Statements (continued)
(in millions, except share and per share amounts)
Note 5. Distributions (continued)
December 31, 2023, the Company recorded a provision for taxes related to wholly-owned taxable subsidiaries of $2 related to the deferred tax liability and $1 related to current taxes.
Note 6. Investment Portfolio
The following table summarizes the composition of the Company’s investment portfolio at cost and fair value as of December 31, 2023 and 2022:
| December 31, 2023 | December 31, 2022 | |||||||||||||||||||||||||||||||||||||
Amortized Cost(1) | Fair Value | Percentage of Portfolio | Amortized Cost(1) | Fair Value | Percentage of Portfolio | |||||||||||||||||||||||||||||||||
| Senior Secured Loans—First Lien | $ | $ | % | $ | $ | % | ||||||||||||||||||||||||||||||||
| Senior Secured Loans—Second Lien | % | % | ||||||||||||||||||||||||||||||||||||
| Other Senior Secured Debt | % | % | ||||||||||||||||||||||||||||||||||||
| Subordinated Debt | % | % | ||||||||||||||||||||||||||||||||||||
| Asset Based Finance | % | % | ||||||||||||||||||||||||||||||||||||
| Credit Opportunities Partners JV, LLC | % | % | ||||||||||||||||||||||||||||||||||||
| Equity/Other | % | % | ||||||||||||||||||||||||||||||||||||
| Total | $ | $ | % | $ | $ | % | ||||||||||||||||||||||||||||||||
________________
(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 December 31, 2023, the Company held investments in twenty-seven portfolio companies of which it is deemed to “control.” As of December 31, 2023, the Company held investments in thirteen 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 (ac) and (ad) to the consolidated schedule of investments as of December 31, 2023.
As of December 31, 2022, the Company held investments in eighteen portfolio companies of which it is deemed to “control.” As of December 31, 2022, the Company held investments in ten 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 (ac) and (ad) to the consolidated schedule of investments as of December 31, 2022.
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, which require the Company to provide funding when requested by portfolio companies in accordance with the terms of the underlying agreements. As of December 31, 2023, the Company had unfunded debt investments with aggregate unfunded commitments of $995.1 , unfunded equity/other commitments of $616.4 and unfunded commitments of $560.2 to Credit Opportunities Partners JV, LLC. As of December 31, 2022, the Company had unfunded debt investments with aggregate unfunded commitments of $952.4 , unfunded equity/other commitments of $475.3 and unfunded commitments of $560.2 to Credit Opportunities Partners JV, LLC. The Company maintains sufficient cash on hand and available borrowings to fund such unfunded commitments should the need arise. For additional details regarding the Company's unfunded debt investments, see the Company's consolidated schedule of investments as of December 31, 2023 and 2022.
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 December 31, 2023 and 2022:
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FS KKR Capital Corp.
Notes to Consolidated Financial Statements (continued)
(in millions, except share and per share amounts)
Note 6. Investment Portfolio (continued)
| December 31, 2023 | December 31, 2022 | |||||||||||||||||||||||||
| Industry Classification | Fair Value | Percentage of Portfolio | Fair Value | Percentage of Portfolio | ||||||||||||||||||||||
| Automobiles & Components | $ | % | $ | % | ||||||||||||||||||||||
| Banks | % | |||||||||||||||||||||||||
| Capital Goods | % | % | ||||||||||||||||||||||||
| Commercial & Professional Services | % | % | ||||||||||||||||||||||||
| Consumer Discretionary Distribution & Retail | % | % | ||||||||||||||||||||||||
| Consumer Durables & Apparel | % | % | ||||||||||||||||||||||||
| Consumer Services | % | % | ||||||||||||||||||||||||
| Consumer Staples Distribution & Retail | % | % | ||||||||||||||||||||||||
| Credit Opportunities Partners JV, LLC | % | % | ||||||||||||||||||||||||
| Energy | % | % | ||||||||||||||||||||||||
| Equity Real Estate Investment Trusts (REITs) | % | % | ||||||||||||||||||||||||
| Financial Services | % | % | ||||||||||||||||||||||||
| Food, Beverage & Tobacco | % | % | ||||||||||||||||||||||||
| Health Care Equipment & Services | % | % | ||||||||||||||||||||||||
| Household & Personal Products | % | % | ||||||||||||||||||||||||
| Insurance | % | % | ||||||||||||||||||||||||
| Materials | % | % | ||||||||||||||||||||||||
| Media & Entertainment | % | % | ||||||||||||||||||||||||
| Pharmaceuticals, Biotechnology & Life Sciences | % | % | ||||||||||||||||||||||||
| Real Estate Management & Development | % | % | ||||||||||||||||||||||||
| Software & Services | % | % | ||||||||||||||||||||||||
| Technology Hardware & Equipment | % | % | ||||||||||||||||||||||||
| Telecommunication Services | % | % | ||||||||||||||||||||||||
| Transportation | % | % | ||||||||||||||||||||||||
| Total | $ | % | $ | % | ||||||||||||||||||||||
Credit Opportunities Partners JV, LLC
COPJV, is a joint venture between the Company and South Carolina Retirement Systems Group Trust, or SCRS. SCRS purchased its interests in COPJV from Conway Capital, LLC, an affiliate of Guggenheim Life and Annuity Company and Delaware Life Insurance Company, in June 2019, which had no impact on the significant terms governing COPJV other than an increase in the aggregate capital commitment (but not the percentage of the aggregate capital committed by each member) to COPJV. Effective as of June 18, 2021, Credit Opportunities Partners, LLC, or COP, merged with and into COPJV, with COPJV surviving the merger, or the COPJV Merger. As of June 18, 2021, COPJV assumed all of COP’s obligations under its credit facilities, and COP’s wholly- owned special purpose financing subsidiaries became wholly-owned special purpose financing subsidiaries of COPJV, in each case, as a result of the consummation of the COPJV Merger. COPJV’s second amended and restated limited liability company agreement, or the COPJV Agreement, requires the Company and SCRS to provide capital to COPJV of up to $2,440 in the aggregate where the Company and SCRS would provide 87.5 % and 12.5 %, respectively, of the committed capital. Pursuant to the terms of the COPJV Agreement, the Company and SCRS each have 50 0.25 % of COPJV’s assets under administration, calculated and payable quarterly in arrears. As of December 31, 2023, the Company and SCRS have funded approximately $1,799.8 to COPJV, of which $1,574.8 was from the Company.
During the year ended December 31, 2023, the Company sold investments with a cost of $554.6 for proceeds of $556.7 to COPJV and recognized a net realized gain (loss) of $2.1 in connection with the transactions. As of December 31, 2023, $206.5 of these sales to COPJV are included in receivable for investments sold in the consolidated statements of assets and liabilities.
131
FS KKR Capital Corp.
Notes to Consolidated Financial Statements (continued)
(in millions, except share and per share amounts)
Note 6. Investment Portfolio (continued)
Below is selected balance sheet information for COPJV as of December 31, 2023 and 2022:
| As of | ||||||||||||||
| December 31, 2023 | December 31, 2022 | |||||||||||||
| Selected Balance Sheet Information | ||||||||||||||
| Total investments, at fair value | $ | $ | ||||||||||||
| Cash and other assets | ||||||||||||||
| Total assets | ||||||||||||||
| Debt | ||||||||||||||
| Other liabilities | ||||||||||||||
| Total liabilities | ||||||||||||||
| Member's equity | $ | $ | ||||||||||||
Below is selected statement of operations information for COPJV for the years ended December 31, 2023 and 2022:
| For the Year Ended | ||||||||||||||
| December 31, 2023 | December 31, 2022 | |||||||||||||
| Selected Statement of Operation Information | ||||||||||||||
| Total investment income | $ | $ | ||||||||||||
| Expenses | ||||||||||||||
| Interest expense | ||||||||||||||
| Custodian and accounting fees | ||||||||||||||
| Administrative services | ||||||||||||||
| Professional services | ||||||||||||||
| Other | ||||||||||||||
| Total expenses | ||||||||||||||
| Net investment income | ||||||||||||||
| Net realized and unrealized losses | ( | ( | ||||||||||||
| Net increase in net assets resulting from operations | $ | $ | ||||||||||||
132
FS KKR Capital Corp.
Notes to Consolidated Financial Statements (continued)
(in millions, except share and per share amounts)
Note 7. Financial Instruments
The following is a summary of the fair value and location of the Company’s derivative instruments in the consolidated balance sheets held as of December 31, 2023 and 2022:
| Derivative Instrument | Statement Location | December 31, 2023 | December 31, 2022 | |||||||||||||||||
| Foreign currency forward contracts | Unrealized appreciation on foreign currency forward contracts | $ | $ | |||||||||||||||||
| Foreign currency forward contracts | Unrealized depreciation on foreign currency forward contracts | ( | ( | |||||||||||||||||
| Total | $ | $ | ||||||||||||||||||
Net realized and unrealized gains and losses on derivative instruments recorded by the Company for the years ended December 31, 2023 and 2022 are in the following locations in the consolidated statements of operations:
| Derivative Instrument | Statement Location | December 31, 2023 | December 31, 2022 | |||||||||||||||||
| Foreign currency forward contracts | Net realized gain (loss) on foreign currency forward contracts | $ | $ | |||||||||||||||||
| Foreign currency forward contracts | Net change in unrealized appreciation (depreciation) on foreign currency forward contracts | ( | ||||||||||||||||||
| Total | $ | ( | $ | |||||||||||||||||
Offsetting of Derivative Instruments
The Company has derivative instruments that are subject to master netting agreements. These agreements include provisions to offset positions with the same counterparty in the event of default by one of the parties. The Company’s unrealized appreciation and depreciation on derivative instruments are reported as gross assets and liabilities, respectively, in the consolidated balance sheets. The following tables present the Company’s assets and liabilities related to derivatives by counterparty, net of amounts available for offset under a master netting arrangement and net of any collateral received or pledged by the Company for such assets and liabilities as of December 31, 2023 and 2022:
| December 31, 2023 | ||||||||||||||||||||||||||||||||
| Counterparty | Derivative Assets Subject to Master Netting Agreement | Derivatives Available for Offset | Non-cash Collateral Received(1) | Cash Collateral Received(1) | Net Amount of Derivative Assets(2) | |||||||||||||||||||||||||||
| JP Morgan Chase Bank | $ | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||
| Total | $ | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||
| Counterparty | Derivative Liabilities Subject to Master Netting Agreement | Derivatives Available for Offset | Non-cash Collateral Received(1) | Cash Collateral Received(1) | Net Amount of Derivative Liabilities(3) | |||||||||||||||||||||||||||
| JP Morgan Chase Bank | $ | ( | $ | $ | $ | $ | ||||||||||||||||||||||||||
| Total | $ | ( | $ | $ | $ | $ | ||||||||||||||||||||||||||
| December 31, 2022 | ||||||||||||||||||||||||||||||||
| Counterparty | Derivative Assets Subject to Master Netting Agreement | Derivatives Available for Offset | Non-cash Collateral Received(1) | Cash Collateral Received(1) | Net Amount of Derivative Assets(2) | |||||||||||||||||||||||||||
| JP Morgan Chase Bank | $ | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||
| Total | $ | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||
| Counterparty | Derivative Liabilities Subject to Master Netting Agreement | Derivatives Available for Offset | Non-cash Collateral Received(1) | Cash Collateral Received(1) | Net Amount of Derivative Liabilities(3) | |||||||||||||||||||||||||||
| JP Morgan Chase Bank | $ | ( | $ | $ | $ | $ | ||||||||||||||||||||||||||
| Total | $ | ( | $ | $ | $ | $ | ||||||||||||||||||||||||||
___________
133
FS KKR Capital Corp.
Notes to Consolidated Financial Statements (continued)
(in millions, except share and per share amounts)
Note 7. Financial Instruments (continued)
(1)In some instances, the actual amount of the collateral received and/or pledged may be more than the amount shown due to overcollateralization.
(2)Net amount of derivative assets represents the net amount due from the counterparty to the Company.
(3)Net amount of derivative liabilities represents the net amount due from the Company to the counterparty.
Foreign Currency Forward Contracts and Cross Currency Swaps:
The Company may enter into foreign currency forward contracts and cross currency swaps from time to time to facilitate settlement of purchases and sales of investments denominated in foreign currencies and to economically hedge the impact that an adverse change in foreign exchange rates would have on the value of the Company’s investments denominated in foreign currencies. A foreign currency forward contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. These contracts are marked-to-market by recognizing the difference between the contract forward exchange rate and the forward market exchange rate on the last day of the period presented as unrealized appreciation or depreciation. Realized gains or losses are recognized when forward contracts are settled. Risks arise as a result of the potential inability of the counterparties to meet the terms of their contracts. The Company attempts to limit counterparty risk by only dealing with well-known counterparties.
Cross currency swaps are interest rate swaps in which interest cash flows are exchanged between two parties based on the notional amounts of two different currencies. These swaps are marked-to-market by recognizing the difference between the present value of cash flows of each leg of the swaps as unrealized appreciation or depreciation. Realized gain or loss is recognized when periodic payments are received or paid and the swaps are terminated. The entire notional value of a cross currency swap is subject to the risk that the counterparty to the swap will default on its contractual delivery obligations. The Company attempts to limit counterparty risk by only dealing with well-known counterparties. The Company utilizes cross currency swaps from time to time in order to hedge a portion of its investments in foreign currency.
The average notional balance for the foreign currency forward contracts during the year ended December 31, 2023 and 2022 was $206.1 and $240.7 , respectively. See consolidated schedules of investments for the Company's open foreign currency forward contracts.
Note 8. 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 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.
134
FS KKR Capital Corp.
Notes to Consolidated Financial Statements (continued)
(in millions, except share and per share amounts)
Note 8. Fair Value of Financial Instruments (continued)
As of December 31, 2023 and 2022, the Company’s investments were categorized as follows in the fair value hierarchy:
| Valuation Inputs | December 31, 2023 | December 31, 2022 | ||||||||||||
| Level 1—Price quotations in active markets | $ | $ | ||||||||||||
| Level 2—Significant other observable inputs | ||||||||||||||
| Level 3—Significant unobservable inputs | ||||||||||||||
Investments measured at net asset value(1) | ||||||||||||||
| $ | $ | |||||||||||||
___________
(1)Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets.
In addition, the Company had foreign currency forward contracts, as described in Note 7, which were categorized as Level 2 in the fair value hierarchy as of December 31, 2023 and 2022.
The Company's board of directors is responsible for overseeing the valuation of the Company's portfolio investments at fair value as determined in good faith pursuant to the Adviser's valuation policy. The Company's board of directors has designated the Adviser with day-to-day responsibility for implementing the portfolio valuation process set forth in the Adviser's valuation policy.
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 repayments 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 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 Adviser determines that the cost of such investment is the best indication of its fair value. Such investments described above are typically classified as Level 3 within the fair value hierarchy. Investments that are traded on an active public market are valued at their closing price as of the date of the financial statements and are classified as Level 1 within the fair value hierarchy. Except as described above, the Adviser typically values the Company's 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 and are typically classified as Level 2 within the fair value hierarchy.
The Adviser periodically benchmarks the bid and ask prices it receives from the third-party pricing services and/or dealers and independent valuation firms, 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 Adviser believes that these prices are reliable indicators of fair value. The Adviser reviewed and approved the valuation determinations made with respect to these investments in a manner consistent with the Adviser’s valuation policy.
135
FS KKR Capital Corp.
Notes to Consolidated Financial Statements (continued)
(in millions, except share and per share amounts)
Note 8. Fair Value of Financial Instruments (continued)
The following is a reconciliation for the years ended December 31, 2023 and 2022 of investments for which significant unobservable inputs (Level 3) were used in determining fair value:
| For the Year Ended December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||
Senior Secured Loans—First Lien | Senior Secured Loans—Second Lien | Other Senior Secured Debt | Subordinated Debt | Asset Based Finance | Equity/Other | Total | ||||||||||||||||||||||||||||||||||||||
| Fair value at beginning of period | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
| Accretion of discount (amortization of premium) | ||||||||||||||||||||||||||||||||||||||||||||
| Net realized gain (loss) | ( | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||
| Net change in unrealized appreciation (depreciation) | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
| Purchases | ||||||||||||||||||||||||||||||||||||||||||||
| Paid-in-kind interest | ||||||||||||||||||||||||||||||||||||||||||||
| Sales and repayments | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Transfers into Level 3 | ||||||||||||||||||||||||||||||||||||||||||||
| Transfers out of Level 3 | ||||||||||||||||||||||||||||||||||||||||||||
| Fair value at end of period | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
| 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 | $ | ( | $ | ( | $ | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||
| For the Year Ended December 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||
Senior Secured Loans—First Lien | Senior Secured Loans—Second Lien | Other Senior Secured Debt | Subordinated Debt | Asset Based Finance | Equity/Other | Total | ||||||||||||||||||||||||||||||||||||||
| Fair value at beginning of period | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
Accretion of discount (amortization of premium) | ||||||||||||||||||||||||||||||||||||||||||||
| Net realized gain (loss) | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
Net change in unrealized appreciation (depreciation) | ( | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||
| Purchases | ||||||||||||||||||||||||||||||||||||||||||||
| Paid-in-kind interest | ||||||||||||||||||||||||||||||||||||||||||||
| Sales and repayments | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Transfers into Level 3 | ||||||||||||||||||||||||||||||||||||||||||||
| Transfers out of Level 3 | ||||||||||||||||||||||||||||||||||||||||||||
| Fair value at end of period | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
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 | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||
136
FS KKR Capital Corp.
Notes to Consolidated Financial Statements (continued)
(in millions, except share and per share amounts)
Note 8. Fair Value of Financial Instruments (continued)
The valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements as of December 31, 2023 and 2022 were as follows:
| Type of Investment | Fair Value at December 31, 2023 | Valuation Technique(1) | Unobservable Input | Range | Impact to Valuation from an Increase in Input(2) | |||||||||||||||||||||||||||
| Senior Debt | $ | Discounted Cash Flow | Discount Rate | Decrease | ||||||||||||||||||||||||||||
| Waterfall | EBITDA Multiple | Increase | ||||||||||||||||||||||||||||||
| Cost | ||||||||||||||||||||||||||||||||
Other(3) | ||||||||||||||||||||||||||||||||
| Subordinated Debt | Discounted Cash Flow | Discount Rate | Decrease | |||||||||||||||||||||||||||||
| Waterfall | EBITDA Multiple | Increase | ||||||||||||||||||||||||||||||
| Asset Based Finance | Discounted Cash Flow | Discount Rate | Decrease | |||||||||||||||||||||||||||||
| Waterfall | EBITDA Multiple | Increase | ||||||||||||||||||||||||||||||
| Cost | ||||||||||||||||||||||||||||||||
Other(3) | ||||||||||||||||||||||||||||||||
| Indicative Dealer Quotes | Increase | |||||||||||||||||||||||||||||||
| Equity/Other | Waterfall | EBITDA Multiple | Increase | |||||||||||||||||||||||||||||
| Discounted Cash Flow | Discount Rate | Decrease | ||||||||||||||||||||||||||||||
Other(3) | ||||||||||||||||||||||||||||||||
| Option Pricing Model | Equity Illiquidity Discount | Decrease | ||||||||||||||||||||||||||||||
| Total | $ | |||||||||||||||||||||||||||||||
| Type of Investment | Fair Value at December 31, 2022 | Valuation Technique(1) | Unobservable Input | Range | Impact to Valuation from an Increase in Input(2) | |||||||||||||||||||||||||||
Senior Debt | $ | Discounted Cash Flow | Discount Rate | Decrease | ||||||||||||||||||||||||||||
| Waterfall | EBITDA Multiple | Increase | ||||||||||||||||||||||||||||||
| Cost | ||||||||||||||||||||||||||||||||
Other(3) | ||||||||||||||||||||||||||||||||
Subordinated Debt | Discounted Cash Flow | Discount Rate | Decrease | |||||||||||||||||||||||||||||
| Waterfall | EBITDA Multiple | Increase | ||||||||||||||||||||||||||||||
| Asset Based Finance | Discounted Cash Flow | Discount Rate | Decrease | |||||||||||||||||||||||||||||
| Waterfall | EBITDA Multiple | Increase | ||||||||||||||||||||||||||||||
| Cost | ||||||||||||||||||||||||||||||||
Other(3) | ||||||||||||||||||||||||||||||||
| Indicative Dealer Quotes | Increase | |||||||||||||||||||||||||||||||
| Equity/Other | Waterfall | EBITDA Multiple | Increase | |||||||||||||||||||||||||||||
| Discounted Cash Flow | Discount Rate | Decrease | ||||||||||||||||||||||||||||||
| Cost | ||||||||||||||||||||||||||||||||
Other(3) | ||||||||||||||||||||||||||||||||
| Option Pricing Model | Equity Illiquidity Discount | Decrease | ||||||||||||||||||||||||||||||
| Total | $ | |||||||||||||||||||||||||||||||
_______________
(1)Investments using a market quotes valuation technique were primarily 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. Investments valued using an EBITDA multiple or a revenue multiple pursuant to the market comparables valuation technique may be conducted using an enterprise valuation waterfall analysis.
(2)Represents the directional change in the fair value of the Level 3 investments that would result from an increase to the corresponding unobservable input. A decrease to the input would have the opposite effect. Significant changes in these inputs in isolation could result in significantly higher or lower fair value measurements.
(3)Fair value based on expected outcome of proposed corporate transactions and/or other factors.
137
FS KKR Capital Corp.
Notes to Consolidated Financial Statements (continued)
(in millions, except share and per share amounts)
Note 9. Financing Arrangements
Prior to June 14, 2019, in accordance with the 1940 Act, the Company was allowed to borrow amounts such that its asset coverage, calculated pursuant to the 1940 Act, was at least 200% after such borrowing. Effective June 15, 2019, the Company’s asset coverage requirement applicable to senior securities was reduced from 200% to 150%. As of December 31, 2023, the aggregate amount outstanding of senior securities issued by the Company was $8,223 . As of December 31, 2023, the Company’s asset coverage was 183 %.
The following tables present summary information with respect to the Company’s outstanding financing arrangements as of December 31, 2023 and 2022:
___________
| As of December 31, 2023 | ||||||||||||||||||||||||||||||||
| Arrangement | Type of Arrangement | Rate | Amount Outstanding | Amount Available | Maturity Date | |||||||||||||||||||||||||||
Ambler Credit Facility(2)(9) | Revolving Credit Facility | SOFR+ | $ | $ | May 22, 2027 | |||||||||||||||||||||||||||
CCT Tokyo Funding Credit Facility(2) | Revolving Credit Facility | SOFR+ | June 2, 2026 | |||||||||||||||||||||||||||||
Darby Creek Credit Facility(2)(9) | Revolving Credit Facility | SOFR+ | February 26, 2027 | |||||||||||||||||||||||||||||
Meadowbrook Run Credit Facility(2)(9) | Revolving Credit Facility | SOFR+ | November 22, 2026 | |||||||||||||||||||||||||||||
Senior Secured Revolving Credit Facility(2) | Revolving Credit Facility | SOFR+ | October 31, 2028 | |||||||||||||||||||||||||||||
| Unsecured Notes | — | July 15, 2024 | ||||||||||||||||||||||||||||||
| Unsecured Notes | — | October 12, 2024 | ||||||||||||||||||||||||||||||
| Unsecured Notes | — | February 1, 2025 | ||||||||||||||||||||||||||||||
| Unsecured Notes | — | February 14, 2025 | ||||||||||||||||||||||||||||||
| Unsecured Notes | — | May 15, 2025 | ||||||||||||||||||||||||||||||
| Unsecured Notes | — | January 15, 2026 | ||||||||||||||||||||||||||||||
| Unsecured Notes | — | January 15, 2027 | ||||||||||||||||||||||||||||||
| Unsecured Notes | — | July 15, 2027 | ||||||||||||||||||||||||||||||
| Unsecured Notes | — | October 12, 2028 | ||||||||||||||||||||||||||||||
| Unsecured Notes | — | January 15, 2029 | ||||||||||||||||||||||||||||||
CLO-1 Notes(2)(8) | Collateralized Loan Obligation | SOFR+ | — | January 15, 2031 | ||||||||||||||||||||||||||||
| Total | $ | $ | ||||||||||||||||||||||||||||||
(1)The benchmark rate is subject to a 0
(2)The carrying amount outstanding under the facility approximates its fair value.
(3)As of December 31, 2023, there was $196 term loan outstanding at SOFR+1.90 % and $98 revolving commitment outstanding at SOFR+2.05 %.
(4)The spread over the benchmark rate is determined by reference to the ratio of the value of the borrowing base to the aggregate amount of certain outstanding indebtedness of the Company. In addition to the spread over the benchmark rate, a credit spread adjustment of 0.10 % and 0.0326 % is applicable to borrowings in U.S. dollars and pounds sterling, respectively.
(5)Amount includes borrowing in Euros, Canadian dollars, pounds sterling and Australian dollars. Euro balance outstanding of €356 has been converted to U.S. dollars at an exchange rate of €1.00 to $1.11 as of December 31, 2023 to reflect total amount outstanding in U.S. dollars. Canadian dollar balance outstanding of CAD4 has been converted to U.S dollars at an exchange rate of CAD1.00 to $0.76 as of December 31, 2023 to reflect total amount outstanding in U.S. dollars. Pounds sterling balance outstanding of £88 has been converted to U.S dollars at an exchange rate of £1.00 to $1.27 as of December 31, 2023 to reflect total amount outstanding in U.S. dollars. Australian dollar balance outstanding of AUD38 has been converted to U.S dollars at an exchange rate of AUD1.00 to $0.68 as of December 31, 2023 to reflect total amount outstanding in U.S. dollars.
(6)The amount available for borrowing under the Senior Secured Revolving Credit Facility is reduced by any standby letters of credit issued under the Senior Secured Revolving Credit Facility. As of December 31, 2023, $18 of such letters of credit have been issued.
(7)As of December 31, 2023, the fair value of the 4.625 % notes, the 1.650 % notes, the 4.125 % notes, the 4.250 % notes, the 8.625 % notes, the 3.400 % notes, the 2.625 % notes, the 3.250 % notes, the 3.125 % notes and the 7.875 % notes was approximately $397 , $483 , $458 , $463 , $255 , $947 , $359 , $455 , $654 and $424 respectively. These valuations are considered Level 2 valuations within the fair value hierarchy.
(8)As of December 31, 2023, there were $273.6 of Class A-1R notes outstanding at SOFR+1.85 %, $20.5 of Class A-2R notes outstanding at SOFR+2.25 %, $32.4 of Class B-1R notes outstanding at SOFR+2.60 % and $17.4 of Class B-2R notes outstanding at 3.011 %.
(9)As of June 16, 2021, the Company assumed all of FSKR’s obligations under its notes and credit facilities, and FSKR’s wholly-owned special purpose financing subsidiaries became wholly-owned special purpose financing subsidiaries of the Company, in each case, as a result of the consummation of the 2021 Merger.
138
FS KKR Capital Corp.
Notes to Consolidated Financial Statements (continued)
(in millions, except share and per share amounts)
Note 9. Financing Arrangements (continued)
As of December 31, 2022 | ||||||||||||||||||||||||||||||||
| Arrangement | Type of Arrangement | Rate | Amount Outstanding | Amount Available | Maturity Date | |||||||||||||||||||||||||||
Ambler Credit Facility(2)(9) | Revolving Credit Facility | SOFR+ | $ | $ | November 22, 2025 | |||||||||||||||||||||||||||
Burholme Prime Brokerage Facility(2)(9) | Prime Brokerage Facility | L+ | June 28, 2023 | |||||||||||||||||||||||||||||
CCT Tokyo Funding Credit Facility(2) | Revolving Credit Facility | SOFR+ | June 2, 2026 | |||||||||||||||||||||||||||||
Darby Creek Credit Facility(2)(9) | Revolving Credit Facility | L+ | February 26, 2025 | |||||||||||||||||||||||||||||
Dunlap Credit Facility(2)(9) | Revolving Credit Facility | L+ | February 26, 2025 | |||||||||||||||||||||||||||||
Meadowbrook Run Credit Facility(2)(9) | Revolving Credit Facility | SOFR+ | November 22, 2024 | |||||||||||||||||||||||||||||
Senior Secured Revolving Credit Facility(2) | Revolving Credit Facility | SOFR+ | May 17, 2027 | |||||||||||||||||||||||||||||
| Unsecured Notes | — | July 15, 2024 | ||||||||||||||||||||||||||||||
| Unsecured Notes | — | October 12, 2024 | ||||||||||||||||||||||||||||||
| Unsecured Notes | — | February 1, 2025 | ||||||||||||||||||||||||||||||
| Unsecured Notes | — | February 14, 2025 | ||||||||||||||||||||||||||||||
| Unsecured Notes | — | May 15, 2025 | ||||||||||||||||||||||||||||||
| Unsecured Notes | — | January 15, 2026 | ||||||||||||||||||||||||||||||
| Unsecured Notes | — | January 15, 2027 | ||||||||||||||||||||||||||||||
| Unsecured Notes | — | July 15, 2027 | ||||||||||||||||||||||||||||||
| Unsecured Notes | — | October 12, 2028 | ||||||||||||||||||||||||||||||
CLO-1 Notes(2)(8) | Collateralized Loan Obligation | L+ | — | January 15, 2031 | ||||||||||||||||||||||||||||
| Total | $ | $ | ||||||||||||||||||||||||||||||
(1)The benchmark rate is subject to a 0
(2)The carrying amount outstanding under the facility approximates its fair value.
(3)As of December 31, 2022, there was $200 term loan outstanding at SOFR+1.90 % and $85 revolving commitment outstanding at SOFR+2.05 %.
(4)The spread over the benchmark rate is determined by reference to the ratio of the value of the borrowing base to the aggregate amount of certain outstanding indebtedness of the Company. In addition to the spread over the benchmark rate, a credit spread adjustment of 0.10 % and 0.0326 % is applicable to borrowings in U.S. dollars and pounds sterling, respectively.
(5)Amount includes borrowing in Euros, Canadian dollars, pounds sterling and Australian dollars. Euro balance outstanding of €260 has been converted to U.S. dollars at an exchange rate of €1.00 to $1.07 as of December 31, 2022 to reflect total amount outstanding in U.S. dollars. Canadian dollar balance outstanding of CAD32 has been converted to U.S dollars at an exchange rate of CAD1.00 to $0.74 as of December 31, 2022 to reflect total amount outstanding in U.S. dollars. Pounds sterling balance outstanding of £39 has been converted to U.S dollars at an exchange rate of £1.00 to $1.21 as of December 31, 2022 to reflect total amount outstanding in U.S. dollars. Australian dollar balance outstanding of AUD112 has been converted to U.S dollars at an exchange rate of AUD1.00 to $0.68 as of December 31, 2022 to reflect total amount outstanding in U.S. dollars.
(6)The amount available for borrowing under the Senior Secured Revolving Credit Facility is reduced by any standby letters of credit issued under the Senior Secured Revolving Credit Facility. As of December 31, 2022, $12 of such letters of credit have been issued.
(7)As of December 31, 2022, the fair value of the 4.625 % notes, the 1.650 % notes, the 4.125 % notes, the 4.250 % notes, the 8.625 % notes, the 3.400 % notes, the 2.625 % notes, the 3.250 % notes and the 3.125 % notes was approximately $388 , $452 , $442 , $446 , $255 , $888 , $334 $421 and $606 , respectively. These valuations are considered Level 2 valuations within the fair value hierarchy.
(8)As of December 31, 2022, there were $281.4 of Class A-1R notes outstanding at L+1.85 %, $20.5 of Class A-2R notes outstanding at L+2.25 %, $32.4 of Class B-1R notes outstanding at L+2.60 % and $17.4 of Class B-2R notes outstanding at 3.011 %.
(9)As of June 16, 2021, the Company assumed all of FSKR’s obligations under its notes and credit facilities, and FSKR’s wholly-owned special purpose financing subsidiaries became wholly-owned special purpose financing subsidiaries of the Company, in each case, as a result of the consummation of the 2021 Merger.
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FS KKR Capital Corp.
Notes to Consolidated Financial Statements (continued)
(in millions, except share and per share amounts)
Note 9. Financing Arrangements (continued)
For the years ended December 31, 2023, 2022 and 2021, the components of total interest expense for the Company's financing arrangements were as follows:
| Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2023 | 2022 | 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Arrangement(1) | Direct Interest Expense | Amortization of Deferred Financing Costs and Discount / Premium | Total Interest Expense | Direct Interest Expense | Amortization of Deferred Financing Costs and Discount / Premium | Total Interest Expense | Direct Interest Expense | Amortization of Deferred Financing Costs and Discount / Premium | Total Interest Expense | |||||||||||||||||||||||||||||||||||||||||||||||
Ambler Credit Facility(2) | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
Burholme Prime Brokerage Facility(2) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CCT Tokyo Funding Credit Facility(2) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Darby Creek Credit Facility(2) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dunlap Credit Facility(2) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Juniata River Credit Facility(2) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Locust Street Funding Credit Facility(2) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Meadowbrook Run Credit Facility(2) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Senior Secured Revolving Credit Facility(2) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4.750% Notes due 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5.000% Notes due 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4.625% Notes due 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1.650% Notes due 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4.125% Notes due 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4.250% Notes due 2025 | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
8.625% Notes due 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
3.400% Notes due 2026 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2.625% Notes due 2027 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
3.250% Notes due 2027 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
3.125% Notes due 2028 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7.875% Note due 2029 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CLO-1 Notes | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
___________
(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 includes the effect of non-usage fees.
The Company’s average borrowings and weighted average interest rate, including the effect of non-usage fees, for the year ended December 31, 2023 were $8,528 and 5.29 %, respectively. As of December 31, 2023, the Company’s weighted average effective interest rate on borrowings, including the effect of non-usage fees, was 5.42 %.
The Company’s average borrowings and weighted average interest rate, including the effect of non-usage fees, for the year ended December 31, 2022 were $9,449 and 3.72 %, respectively. As of December 31, 2022, the Company’s weighted average effective interest rate on borrowings, including the effect of non-usage fees, was 4.78 %.
Under its financing arrangements, the Company has made certain representations and warranties and is required to comply with various covenants, reporting requirements and other customary requirements for similar financing arrangements. The Company was in compliance with all covenants required by its financing arrangements as of December 31, 2023 and December 31, 2022.
140
FS KKR Capital Corp.
Notes to Consolidated Financial Statements (continued)
(in millions, except share and per share amounts)
Note 9. Financing Arrangements (continued)
Ambler Credit Facility
On November 22, 2019, Ambler Funding LLC, or Ambler Funding, a wholly-owned special-purpose financing subsidiary of the Company, entered into a revolving credit facility, or, as amended, the Ambler Credit Facility, with Ally Bank, as administrative agent and arranger, Wells Fargo, as collateral administrator and collateral custodian, and the lenders from time to time party thereto. The Ambler Credit Facility provides for borrowings in U.S. dollars in an initial aggregate principal amount of up to $200 on a committed basis.
Ambler Funding may elect at one or more times, subject to certain conditions, including the consent of Ally Bank, to increase the maximum committed amount up to $250 . The end of the reinvestment period and the maturity date for the Ambler Credit Facility are May 22, 2025 and May 22, 2027, respectively. Borrowings under the Ambler Credit Facility are subject to compliance with a borrowing base test.
Under the Ambler Credit Facility, borrowings bear interest at the rate of Daily 1M SOFR plus 2.75 % per annum. Interest is payable quarterly in arrears. After an initial 3-month ramp-up period, Ambler Funding is subject to a quarterly non-usage fee ranging from 0.50 % to 0.75 % per annum on the average daily unborrowed portion of the committed facility amount.
Under the Ambler Credit Facility, Ambler Funding has made certain representations and warranties and must comply with various covenants, reporting requirements and other requirements customary for facilities of this type. In addition, after an initial specified period, Ambler Funding must maintain an adjusted interest coverage ratio of at least 150 %, measured as of the end of each fiscal month. The Ambler Credit Facility contains events of default customary for similar financing transactions. Upon the occurrence and during the continuation of an event of default, Ally Bank may declare the outstanding advances and all other obligations under the Ambler Credit Facility immediately due and payable.
Ambler Funding’s obligations under the Ambler Credit Facility are secured by a first priority security interest in substantially all of the assets of Ambler Funding, including its portfolio of assets; and a pledge by the Company of the equity of Ambler Funding. The obligations of Ambler Funding under the Ambler Credit Facility are non-recourse to the Company, and the Company’s exposure under the Ambler Credit Facility is limited to the value of its investment in Ambler Funding and the equity of Ambler Funding.
Burholme Prime Brokerage Facility
On October 17, 2014, Burholme Funding LLC, or Burholme Funding, a wholly-owned financing subsidiary of the Company, entered into a committed facility arrangement, or as subsequently amended, the Burholme Prime Brokerage Facility, with BNP Paribas Prime Brokerage International, Ltd., or BNPP.
On June 8, 2023, Burholme Funding terminated the committed facility arrangement with BNP Paribas Prime Brokerage International, Ltd.
CCT Tokyo Funding Credit Facility
On December 2, 2015, CCT Tokyo Funding LLC, or CCT Tokyo Funding, a wholly owned special purpose financing subsidiary of the Company, entered into a revolving credit facility, or as amended the CCT Tokyo Funding Credit Facility, pursuant to a loan and servicing agreement with Sumitomo Mitsui Banking Corporation, or SMBC, as the administrative agent, collateral agent, and lender, and the Company, which succeeded CCT as the servicer and transferor.
The CCT Tokyo Funding Credit Facility provides for borrowings in an aggregate principal amount up to $300 , including a $200 funded term loan and a $100 M committed revolving credit facility. The end of the reinvestment period and the maturity date for the CCT Tokyo Funding Credit Facility are December 1, 2023 and June 2, 2026, respectively. CCT Tokyo Funding may elect to extend both the reinvestment period and maturity date by up to an additional one year to December 1, 2024 and June 2, 2027, respectively, subject to satisfaction of certain conditions. Advances under the CCT Tokyo Funding Credit Facility are subject to a borrowing base test.
Advances outstanding under the CCT Tokyo Funding Credit Facility bear interest at a rate equal to (i) for loans for which CCT Tokyo Funding elects the base rate option, the higher of (A) the “Prime Rate” (as publicly announced by SMBC), (B) the sum of (x) federal funds effective rate plus (y) 0.50 %, (C) three-month term SOFR plus 1 % per annum, and (D) 0 % plus an applicable margin of (x) 0.90 % per annum in the case of term loan advances and (y) 1.05 % per annum in the case of revolving advances, or (ii) for loans for which CCT Tokyo Funding elects the term SOFR option, the greater of (a) three-month term SOFR and (b) 0 %, plus an applicable margin of (x) 1.90 % in the case of term loan advances and (y) 2.05 % in the case of revolving advances. Effective November 14, 2022,
141
FS KKR Capital Corp.
Notes to Consolidated Financial Statements (continued)
(in millions, except share and per share amounts)
Note 9. Financing Arrangements (continued)
through the end of the reinvestment period, CCT Tokyo Funding pays a non-usage fee of 0.50 % per annum (based on the immediately preceding quarter's average usage) on the unused portion of the revolving credit facility.
In connection with the CCT Tokyo Funding Credit Facility, CCT Tokyo Funding has made certain representations and warranties and is required to comply with various covenants, reporting requirements and other customary requirements for similar facilities. The CCT Tokyo Funding Credit Facility contains customary events of default for similar financing transactions. Upon the occurrence and during the continuance of an event of default, the administrative agent may declare the outstanding advances and all other obligations under the CCT Tokyo Funding Credit Facility immediately due and payable.
CCT Tokyo Funding’s obligations to SMBC under the CCT Tokyo Funding Credit Facility are secured by a first priority security interest in substantially all of the assets of CCT Tokyo Funding, including its portfolio of assets. The obligations of CCT Tokyo Funding under the CCT Tokyo Credit Facility are non-recourse to the Company.
Darby Creek Credit Facility
On February 20, 2014, Darby Creek LLC, or Darby Creek, a wholly-owned special-purpose financing subsidiary of the Company, entered into a revolving credit facility, or as subsequently amended, the Darby Creek Credit 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, as collateral agent and collateral custodian. The Darby Creek Credit Facility provides for borrowings in U.S. dollars and certain agreed upon foreign currencies in an aggregate principal amount up to $750 on a committed basis. The end of the reinvestment period and the maturity date for the Darby Creek Credit Facility are February 26, 2025 and February 26, 2027, respectively. Borrowings under the Darby Creek Credit Facility are subject to compliance with a borrowing base test.
Under the Darby Creek Credit Facility, borrowings bear interest at the rate of SOFR (or the relevant reference rate for any foreign currency borrowings) plus, during the reinvestment period, 2.65 % per annum, and after the reinvestment period, 2.90 % per annum. Interest is payable quarterly in arrears. During the reinvestment period, Darby Creek is subject to a non-usage fee of 0.375 % per annum on the average daily unused portion of the committed facility amount. In addition, Darby Creek is subject to (i) a make-whole fee on a quarterly basis effectively equal to a specified portion of the spread that would have been payable if the full amount available under the Darby Creek Credit Facility had been borrowed, less the non-usage fee accrued during such quarter and (ii) administration fees.
Under the Darby Creek Credit Facility, Darby Creek has made certain representations and warranties and must comply with various covenants, reporting requirements and other requirements customary for facilities of this type. In addition, Darby Creek must maintain a specified minimum equity threshold. The Darby Creek Credit Facility contains events of default customary for similar financing transactions. Upon the occurrence and during the continuation of an event of default, Deutsche Bank may declare the outstanding advances and all other obligations under the Darby Creek Credit Facility immediately due and payable.
Darby Creek’s obligations under the Darby Creek Credit 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 Credit Facility are non-recourse to the Company and the Company’s exposure under the Darby Creek Credit Facility is limited to the value of its investment in Darby Creek.
Dunlap Credit Facility
On December 2, 2014, Dunlap Funding LLC, or Dunlap Funding, a wholly-owned special-purpose financing subsidiary of the Company, entered into a revolving credit facility, or as subsequently amended, the Dunlap Credit Facility, with Deutsche Bank, as administrative agent, each of the lenders from time to time party thereto, and Wells Fargo, as collateral agent and collateral custodian.
On April 27, 2023 Dunlap Funding merged with and into Darby Creek, or the Darby Creek Merger, pursuant to an Agreement and Plan of Merger, with Darby Creek surviving the Merger.
Upon consummation of the Darby Creek Merger, the Dunlap Credit Facility was terminated and all outstanding borrowings were assumed into the Darby Creek Credit Facility.
142
FS KKR Capital Corp.
Notes to Consolidated Financial Statements (continued)
(in millions, except share and per share amounts)
Note 9. Financing Arrangements (continued)
Meadowbrook Run Credit Facility
On November 22, 2019, Meadowbrook Run LLC, or Meadowbrook Run, a wholly-owned special-purpose financing subsidiary of the Company, entered into a revolving credit facility, or the Meadowbrook Run Credit Facility, with Morgan Stanley Senior Funding, Inc., or Morgan Stanley, as administrative agent, Wells Fargo, as collateral agent, account bank and collateral custodian, and the lenders from time to time party thereto. The Meadowbrook Run Credit Facility provides for borrowings in U.S. dollars and certain agreed upon foreign currencies in an initial aggregate principal amount up to $300 on a committed basis. Meadowbrook Run may elect at one or more times, subject to certain conditions, including the consent of Morgan Stanley, to increase the maximum committed amount up to $400 . The end of the reinvestment period and the maturity date for the Meadowbrook Run Credit Facility are November 22, 2024 and November 22, 2026, respectively. Borrowings under the Meadowbrook Run Credit Facility are subject to compliance with a borrowing base test.
Under the Meadowbrook Run Credit Facility, borrowings bear interest at the rate of Term SOFR (or the relevant reference rate for any foreign currency borrowings) plus, during the reinvestment period, 2.70 % per annum, and after the reinvestment period, 3.20 % per annum. Interest is payable quarterly in arrears. After the initial four-month ramp-up period and prior to the end of the reinvestment period, Meadowbrook Run is required to utilize a minimum of 70 % of the committed facility amount, or the Minimum Utilization Amount. Any unborrowed amounts below the Minimum Utilization Amount accrue interest at a rate equal to the applicable margin in effect for such period. In addition, Meadowbrook Run is subject to (i) during the reinvestment period, a non-usage fee on the average daily unborrowed portion of the committed facility amount in excess of the Minimum Utilization Amount, equal to, during the ramp-up period, 0.25 % per annum, and thereafter until the end of the reinvestment period, 0.50 % per annum.
Under the Meadowbrook Run Credit Facility, Meadowbrook Run has made certain representations and warranties and must comply with various covenants, reporting requirements and other requirements customary for facilities of this type. The Meadowbrook Run Credit Facility contains events of default customary for similar financing transactions. Upon the occurrence and during the continuation of an event of default, Morgan Stanley may declare the outstanding advances and all other obligations under the Meadowbrook Run Credit Facility immediately due and payable.
Meadowbrook Run’s obligations under the Meadowbrook Run Credit Facility are secured by a first priority security interest in substantially all of the assets of Meadowbrook Run, including its portfolio of assets. The obligations of Meadowbrook Run under the Meadowbrook Run Credit Facility are non-recourse to the Company, and the Company’s exposure under the Meadowbrook Run Credit Facility is limited to the value of its investment in Meadowbrook Run.
Senior Secured Revolving Credit Facility
On August 9, 2018, the Company entered into a senior secured revolving credit facility, or as subsequently amended and restated the Senior Secured Revolving Credit Facility, with FS KKR Capital Corp. II (formerly known as FS Investment Corporation II, as a borrower in its own right and as successor by merger to FS Investment Corporation III), or FSK II, (and prior to the 2018 Merger, CCT), as borrowers, JPMorgan, as administrative agent, ING Capital LLC, or ING, as collateral agent and the lenders party thereto. The Senior Secured Revolving Credit Facility provides for the Company to succeed to all of the rights and obligations thereunder as the sole borrower upon the consummation of the 2021 Merger.
The Senior Secured Revolving Credit Facility provides for borrowings in U.S. dollars and certain agreed upon foreign currencies in an aggregate amount of up to $4,670 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 $2,335 of additional commitments.The Senior Secured Revolving Credit Facility provides for a sublimit for the issuance of letters of credit in an aggregate face amount of up to $400 (including commitments from certain lenders to issue letters of credit in an aggregate face amount of up to $175 ), in each case, subject to increase or reduction from time to time pursuant to the terms of the Senior Secured Revolving Credit Facility. As of December 31, 2023, $18 of such letters of credit have been issued.
Availability under the Senior Secured Revolving Credit Facility will terminate on October 31, 2027, or the Revolver Termination Date, and the outstanding loans under the Senior Secured Revolving Credit Facility will mature on October 31, 2028.
Borrowings under the Senior Secured Revolving Credit Facility are subject to compliance with a borrowing base test. Interest under the Senior Secured Revolving Credit Facility for (i) loans for which the Company elects the base rate option, (A) if the value of the gross borrowing base is equal to or greater than 1.60 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
143
FS KKR Capital Corp.
Notes to Consolidated Financial Statements (continued)
(in millions, except share and per share amounts)
Note 9. Financing Arrangements (continued)
plus (y) 0.5 %, and (c) term SOFR plus 1 % per annum) plus 0.75 % and, (B) if the value of the borrowing base is less than 1.60 times the Combined Debt Amount, the alternate base rate plus 0.875 %; and (ii) loans for which the Company elects the Eurocurrency option (A) if the value of the gross borrowing base is equal to or greater than 1.60 times the Combined Debt Amount, is payable at a rate equal to term SOFR plus 1.75 % and (B) if the value of the borrowing base is less than 1.60 times the Combined Debt Amount, is payable at a rate equal to term SOFR plus 1.875 %. The Company will pay a commitment fee of up to 0.375 % per annum (based on the immediately preceding quarter’s average usage) on the unused portion of its sublimit under the 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 Senior Secured Revolving Credit Facility.
In connection with the 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 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 Senior Secured Revolving Credit Facility immediately due and payable.
The Company’s obligations under the Senior Secured Revolving Credit Facility are guaranteed by certain of the Company’s subsidiaries. The Company’s obligations under the Senior Secured 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.
Unsecured Notes
On July 15, 2019, the Company issued $400 aggregate principal amount of 4.625 % notes due 2024, or the 4.625 % notes. The 4.625 % notes will mature on July 15, 2024 and may be redeemed in whole or in part at the Company’s option at any time or from time to time at the redemption prices set forth in the indenture governing the 4.625 % notes. The 4.625 % notes bear interest at a rate of 4.625 % per year, payable semi-annually.
On November 20, 2019, the Company issued $425 aggregate principal amount of 4.125 % notes due 2025, or the 4.125 % notes. On December 17, 2019, the Company issued an additional $45 aggregate principal amount of the 4.125 % notes due 2025. The 4.125 % notes will mature on February 1, 2025 and may be redeemed in whole or in part at the Company’s option at any time or from time to time at the redemption prices set forth in the indenture governing the 4.125 % notes. The 4.125 % notes bear interest at a rate of 4.125 % per year, payable semi-annually.
As of June 16, 2021, the Company assumed $475 aggregate principal amount of 4.250 % notes due 2025, or the 4.250 % notes. The 4.250 % notes will mature on February 14, 2025 and may be redeemed in whole or in part at the Company’s option at any time or from time to time at the redemption prices set forth in the indenture governing the 4.250 % notes. The 4.250 % notes bear interest at a rate of 4.250 % per year, payable semi-annually.
On April 30, 2020, the Company issued $250 aggregate principal amount of 8.625 % notes due 2025, or the 8.625 % notes. The 8.625 % notes will mature on May 15, 2025 and may be redeemed in whole or in part at the Company’s option at any time or from time to time at the redemption prices set forth in the indenture governing the 8.625 % notes. The 8.625 % notes bear interest at a rate of 8.625 % per year, payable semi-annually.
On December 10, 2020, the Company issued $1,000 aggregate principal amount of 3.400 % notes due 2026, or the 3.40 % notes. The 3.40 % notes will mature on January 15, 2026 and may be redeemed in whole or in part at the Company’s option at any time or
144
FS KKR Capital Corp.
Notes to Consolidated Financial Statements (continued)
(in millions, except share and per share amounts)
Note 9. Financing Arrangements (continued)
from time to time at the redemption prices set forth in the indenture governing the 3.40 % notes. The 3.40 % notes bear interest at a rate of 3.400 % per year, payable semi-annually.
On June 17, 2021, the Company issued $400 aggregate principal amount of 2.625 % notes due 2027, or the 2.625 % notes. The 2.625 % notes will mature on January 15, 2027 and may be redeemed in whole or in part at the Company’s option at any time or from time to time at the redemption prices set forth in the Indenture. The 2.625 % notes bear interest at a rate of 2.625 % per year, payable semi-annually.
On January 18, 2022, the Company issued $500 aggregate principal amount of 3.250 % notes due 2027, or the 3.250 % notes. The 3.250 % notes will mature on July 15, 2027 and may be redeemed in whole or in part at the Company’s option at any time or from time to time at the redemption prices set forth in the Indenture. The 3.250 % notes bear interest at a rate of 3.250 % per year, payable semi-annually.
On October 12, 2021, the Company issued $500 aggregate principal amount of its 1.650 % notes due 2024, or the 1.650 % notes and $750 aggregate principal amount of its 3.125 % notes due 2028, or the 3.125 % notes.
The 1.650 % notes will mature on October 12, 2024 and the 3.125 % notes will mature on October 12, 2028. The 1.650 % notes and the 3.125 % notes may be redeemed in whole or in part at the Company’s option at any time or from time to time at the redemption prices set forth in the Indenture. The 1.650 % notes bear interest at a rate of 1.650 % per year, and the 3.125 % notes bear interest at a rate of 3.125 % per year, payable semi-annually.
On November 21, 2023, the Company issued $400 aggregate principal amount of 7.875 % notes due 2029, or the 7.875 % notes and together with the 4.625 % notes, the 4.125 % notes, the 4.250 % notes, the 8.625 % notes, the 3.400 % notes, the 2.625 % notes, the 3.250 % notes, the 1.650 % notes and the 3.125 % notes, the Unsecured Notes.
The 7.875 % notes will mature on January 15, 2029 and may be redeemed in whole or in part at the Company’s option at any time or from time to time at the redemption prices set forth in the Indenture. The 7.875 % notes bear interest at a rate of 7.875 % per year, payable semi-annually.
On April 30, 2015, the Company issued $275 aggregate principal amount of 4.750 % notes due 2022, or the 4.750 % notes. On July 26, 2019, the Company issued an additional $175 aggregate principal amount of the 4.750 % notes due 2022. On April 15, 2022 the Company redeemed the 4.750 % notes in full for 100 % of the aggregate principal amount, plus the accrued and unpaid interest through, but excluding, April 15, 2022.
The Unsecured Notes are general unsecured obligations of the Company that rank senior in right of payment to all of the Company’s existing and future indebtedness that is expressly subordinated in right of payment to the Unsecured Notes, rank pari passu with all existing and future unsecured unsubordinated indebtedness issued by the Company, rank effectively junior to any of the Company’s secured indebtedness (including unsecured indebtedness that the Company later secures) to the extent of the value of the assets securing such indebtedness, and rank structurally junior to all existing and future indebtedness (including trade payables) incurred by the Company’s subsidiaries, financing vehicles or similar facilities.
The Unsecured Notes contains certain covenants, including covenants requiring the Company to comply with the asset coverage requirements of Section 18(a)(1)(A) as modified by Section 61(a)(1) and (2) of the Investment Company Act of 1940, as amended, whether or not it is subject to those requirements, and to provide financial information to the holders of the Unsecured Notes if the Company is no longer subject to the reporting requirements under the Securities Exchange Act of 1934, as amended. These covenants are subject to important limitations and exceptions that are described in the indenture governing the Unsecured Notes.
145
FS KKR Capital Corp.
Notes to Consolidated Financial Statements (continued)
(in millions, except share and per share amounts)
Note 9. Financing Arrangements (continued)
In addition, on the occurrence of a “change of control repurchase event,” as defined in the indenture governing the Unsecured Notes, the Company will generally be required to make an offer to purchase the outstanding Unsecured Notes at a price equal to 100 % of the principal amount of such Unsecured Notes plus accrued and unpaid interest to the repurchase date.
CLO-1 Notes
On June 25, 2019, FS KKR MM CLO 1 LLC, a Delaware limited liability company and a wholly owned and consolidated special purpose financing subsidiary of the Company, or the Issuer, completed a $378.7 term debt securitization, or the CLO Transaction. The notes offered by the Issuer in the CLO Transaction, originally and then as refinanced with the CLO Reset Notes (as described below), or the CLO-1 Notes, are secured by a diversified portfolio of the Issuer consisting primarily of middle market loans and participation interests in middle market loans and may also include some broadly syndicated loans.
On December 22, 2020, the Issuer refinanced the CLO Transaction through a private placement of $383.7 of senior secured notes consisting of: (i) $281.4 of Class A-1R Senior Secured Floating Rate Notes, which bear interest at SOFR plus 1.85 % per annum; (ii) $20.5 of Class A-2R Senior Secured Floating Rate Notes, which bear interest at SOFR plus 2.25 % per annum; (iii) $32.4 of Class B-1R Senior Secured Floating Rate Notes, which bear interest at SOFR plus 2.60 % per annum; (iv) $17.4 of Class B-2R Senior Secured Fixed Rate Notes, which bear interest at 3.011 % per annum; and (v) $32.0 of Class C-R Secured Deferrable Floating Rate Notes (the “Class C Notes”), which bear interest at SOFR plus 3.10 % per annum (collectively, the “CLO Reset Notes”). The Company holds 100% of the Class C Notes. The CLO Reset Notes are scheduled to mature on January 15, 2031 and the reinvestment period ends January 15, 2023. On the original closing date of the CLO Transaction, in consideration of the Company's transfer to the Issuer of the initial closing date loan portfolio, which included loans distributed to the Company by certain of the Company's wholly owned subsidiaries, the Issuer transferred to the Company a portion of the net cash proceeds received from the original sale of the CLO-1 Notes. To the extent that the fair market value of the initial closing date loan portfolio sold to the Issuer exceeds the cash purchase price paid by the Issuer in consideration of such loan portfolio, such excess will be deemed a capital contribution made by the Company to the Issuer in respect of the Membership Interests that the Company holds in the Issuer. The obligations of the Issuer under the CLO Transaction are non-recourse to the Company.
146
FS KKR Capital Corp.
Notes to Consolidated Financial Statements (continued)
(in millions, except share and per share amounts)
Note 10. 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. The Adviser 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.
Unfunded commitments to provide funds to portfolio companies are not recorded in the Company’s consolidated balance sheets. Since these commitments may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. The Company has sufficient liquidity to fund these commitments. As of December 31, 2023, the Company’s unfunded commitments consisted of the following:
Category / Company(1) | Commitment Amount | |||||||
| Senior Secured Loans—First Lien | ||||||||
| 3Pillar Global Inc | $ | |||||||
| 48Forty Solutions LLC | ||||||||
| Advanced Dermatology & Cosmetic Surgery | ||||||||
| Affordable Care Inc | ||||||||
| Affordable Care Inc | ||||||||
| Alacrity Solutions Group LLC | ||||||||
| Alera Group Intermediate Holdings Inc | ||||||||
| American Vision Partners | ||||||||
| Amerivet Partners Management Inc | ||||||||
| Apex Service Partners LLC | ||||||||
| Apex Service Partners LLC | ||||||||
| Arcfield Acquisition Corp | ||||||||
| Arcos LLC/VA | ||||||||
| Ardonagh Group Ltd | ||||||||
| ATX Networks Corp | ||||||||
| BGB Group LLC | ||||||||
| Careismatic Brands Inc | ||||||||
| CFC Underwriting Ltd | ||||||||
| Circana Group (f.k.a. NPD Group) | ||||||||
| Civica Group Ltd | ||||||||
| Clarience Technologies LLC | ||||||||
| Community Brands Inc | ||||||||
| Community Brands Inc | ||||||||
| CSafe Global | ||||||||
| DOC Generici Srl | ||||||||
| DOXA Insurance Holdings LLC | ||||||||
| DOXA Insurance Holdings LLC | ||||||||
| Envirotainer Ltd | ||||||||
| Excelitas Technologies Corp | ||||||||
| Excelitas Technologies Corp | ||||||||
| Follett Software Co | ||||||||
| Foundation Consumer Brands LLC | ||||||||
| Foundation Risk Partners Corp | ||||||||
147
FS KKR Capital Corp.
Notes to Consolidated Financial Statements (continued)
(in millions, except share and per share amounts)
Note 10. Commitments and Contingencies (continued)
Category / Company(1) | Commitment Amount | |||||||
| Foundation Risk Partners Corp | ||||||||
| Galway Partners Holdings LLC | ||||||||
| Gigamon Inc | ||||||||
| Heniff Transportation Systems LLC | ||||||||
| Highgate Hotels Inc | ||||||||
| HM Dunn Co Inc | ||||||||
| Individual FoodService | ||||||||
| Individual FoodService | ||||||||
| iNova Pharmaceuticals (Australia) Pty Limited | ||||||||
| Insight Global LLC | ||||||||
| Insight Global LLC | ||||||||
| Integrity Marketing Group LLC | ||||||||
| Integrity Marketing Group LLC | ||||||||
| J S Held LLC | ||||||||
| J S Held LLC | ||||||||
| Laboratoires Vivacy SAS | ||||||||
| Lakeview Farms Inc | ||||||||
| Lazer Logistics Inc | ||||||||
| Lazer Logistics Inc | ||||||||
| Lexitas Inc | ||||||||
| Lipari Foods LLC | ||||||||
| Lloyd's Register Quality Assurance Ltd | ||||||||
| Magna Legal Services LLC | ||||||||
| Magna Legal Services LLC | ||||||||
| Med-Metrix | ||||||||
| Med-Metrix | ||||||||
| Misys Ltd | ||||||||
| Net Documents | ||||||||
| New Era Technology Inc | ||||||||
| NovaTaste Austria GmbH | ||||||||
| Novotech Pty Ltd | ||||||||
| Oxford Global Resources LLC | ||||||||
| Oxford Global Resources LLC | ||||||||
| PartsSource Inc | ||||||||
| PartsSource Inc | ||||||||
| Radwell International LLC/PA | ||||||||
| Revere Superior Holdings Inc | ||||||||
| Rise Baking Company | ||||||||
| RSC Insurance Brokerage Inc | ||||||||
| SAMBA Safety Inc | ||||||||
| SavATree LLC | ||||||||
| Shaw Development LLC | ||||||||
| Spins LLC | ||||||||
| Spins LLC | ||||||||
| Spotless Brands LLC | ||||||||
148
FS KKR Capital Corp.
Notes to Consolidated Financial Statements (continued)
(in millions, except share and per share amounts)
Note 10. Commitments and Contingencies (continued)
Category / Company(1) | Commitment Amount | |||||||
| Sweeping Corp of America Inc | ||||||||
| Time Manufacturing Co | ||||||||
| Trescal SA | ||||||||
| Version1 Software Ltd | ||||||||
| VetCor Professional Practices LLC | ||||||||
| VetCor Professional Practices LLC | ||||||||
| Wealth Enhancement Group LLC | ||||||||
| Wealth Enhancement Group LLC | ||||||||
| Wittur Holding GmbH | ||||||||
| Woolpert Inc | ||||||||
| Worldwise Inc | ||||||||
| Worldwise Inc | ||||||||
| Zendesk Inc | ||||||||
| Zendesk Inc | ||||||||
| Senior Secured Loans—Second Lien | ||||||||
| Valeo Foods Group Ltd | ||||||||
| Subordinated Debt | ||||||||
| Apex Service Partners LLC | ||||||||
| Miami Beach Medical Group LLC | ||||||||
| Asset Based Finance | ||||||||
| Altitude II IRL WH Borrower DAC, Revolver | ||||||||
| Bausch Health Cos Inc | ||||||||
| Callodine Commercial Finance LLC, 2L Term Loan B | ||||||||
| Covis Finco Sarl | ||||||||
| Covis Finco Sarl | ||||||||
| Covis Finco Sarl | ||||||||
| Jet Edge International LLC, Structured Mezzanine | ||||||||
| TalkTalk Telecom Group Ltd | ||||||||
| Weber-Stephen Products LLC | ||||||||
| Total | $ | |||||||
| Unfunded equity/other commitments | $ | |||||||
_____________
(1)May be commitments to one or more entities affiliated with the named company.
As of December 31, 2023, the Company’s debt commitments are comprised of $524.4 revolving credit facilities and $470.7 delayed draw term loans, which generally are used for acquisitions or capital expenditures and are subject to certain performance tests. Such unfunded debt commitments have a fair value representing unrealized appreciation (depreciation) of $(7.7 ). The Company’s unfunded Asset Based Finance/Other commitments generally require certain conditions to be met or actual approval from the Adviser prior to funding.
The Senior Secured Revolving Credit Facility provides for the issuance of letters of credit in an initial aggregate face amount of up to $175 , subject to increase or reduction from time to time pursuant to the terms of the Senior Secured Revolving Credit Facility. As of December 31, 2023, $18 of such letters of credit have been issued.
As of December 31, 2023, the Company also has an unfunded commitment to provide $560.2 of capital to COPJV. The capital commitment can be satisfied with contributions of cash and/or investments. The capital commitments cannot be drawn without an affirmative vote by both the Company’s and SCRS’s representatives on COPJV’s board of managers.
149
FS KKR Capital Corp.
Notes to Consolidated Financial Statements (continued)
(in millions, except share and per share amounts)
Note 10. Commitments and Contingencies (continued)
While the Company does not expect to fund all of its unfunded commitments, there can be no assurance that it will not be required to do so.
In the normal course of business, the Company may enter into guarantees on behalf of portfolio companies. Under such arrangements, the Company would be required to make payments to third parties if the portfolio companies were to default on their related payment obligations. The Company has no such guarantees outstanding at December 31, 2023 and December 31, 2022.
Note 11. Senior Securities Asset Coverage
Information about the Company’s senior securities is shown in the table below for the years ended December 31, 2023, 2022, 2021, 2020 and 2019:
| Year Ended December 31, | Total Amount Outstanding Exclusive of Treasury Securities | Asset Coverage per Unit(1) | Involuntary Liquidation Preference per Unit(2) | Average Market Value per Unit(3) (Exclude Bank Loans) | ||||||||||||||||||||||
| 2019 | $ | $ | — | N/A | ||||||||||||||||||||||
| 2020 | $ | $ | — | N/A | ||||||||||||||||||||||
| 2021 | $ | $ | — | N/A | ||||||||||||||||||||||
| 2022 | $ | $ | — | N/A | ||||||||||||||||||||||
| 2023 | $ | $ | — | N/A | ||||||||||||||||||||||
_______________
(1)Asset coverage per unit is the ratio of the carrying value of the Company’s total consolidated assets, less all liabilities and indebtedness not represented by senior securities, to the aggregate amount of senior securities representing indebtedness. This asset coverage ratio is multiplied by $1,000 to determine the “Asset Coverage Per Unit”.
(2)The amount to which such class of senior security would be entitled upon the voluntary liquidation of the Company in preference to any security junior to it. The “—” in this column indicates that the SEC expressly does not require this information to be disclosed for certain types of senior securities.
(3)Not applicable because senior securities are not registered for public trading on an exchange.
150
FS KKR Capital Corp.
Notes to Consolidated Financial Statements (continued)
(in millions, except share and per share amounts)
Note 12. Financial Highlights
The following is a schedule of financial highlights of the Company for the years ended December 31, 2023, 2022, 2021, 2020 and 2019:
| Year Ended December 31, | ||||||||||||||||||||||||||||||||
| 2023 | 2022 | 2021 | 2020 | 2019 | ||||||||||||||||||||||||||||
Per Share Data:(1) | ||||||||||||||||||||||||||||||||
| Net asset value, beginning of period | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Results of operations(2) | ||||||||||||||||||||||||||||||||
| Net investment income (loss) | ||||||||||||||||||||||||||||||||
Net realized gain (loss) and unrealized appreciation (depreciation) | ( | ( | ( | ( | ||||||||||||||||||||||||||||
| Net increase (decrease) in net assets resulting from operations | ( | |||||||||||||||||||||||||||||||
Stockholder distributions(3) | ||||||||||||||||||||||||||||||||
| Distributions from net investment income | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||
| Distributions from net realized gain on investments | ||||||||||||||||||||||||||||||||
| Net decrease in net assets resulting from stockholder distributions | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||
| Capital share transactions | ||||||||||||||||||||||||||||||||
Issuance of common stock(4) | ( | |||||||||||||||||||||||||||||||
Repurchases of common stock(5) | ||||||||||||||||||||||||||||||||
Deduction of deferred costs(6) | ( | |||||||||||||||||||||||||||||||
| Net increase (decrease) in net assets resulting from capital share transactions | ( | |||||||||||||||||||||||||||||||
| Net asset value, end of period | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Per share market value, end of period | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Shares outstanding, end of period | ||||||||||||||||||||||||||||||||
Total return based on net asset value(7) | % | % | % | ( | % | % | ||||||||||||||||||||||||||
Total return based on market value(8) | % | ( | % | % | ( | % | % | |||||||||||||||||||||||||
| Ratio/Supplemental Data: | ||||||||||||||||||||||||||||||||
| Net assets, end of period | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Ratio of net investment income to average net assets(9) | % | % | % | % | % | |||||||||||||||||||||||||||
Ratio of total operating expenses to average net assets(9) | % | % | % | % | % | |||||||||||||||||||||||||||
Ratio of net operating expenses to average net assets(9) | % | % | % | % | % | |||||||||||||||||||||||||||
| Portfolio turnover | % | % | % | % | % | |||||||||||||||||||||||||||
Total amount of senior securities outstanding, exclusive of treasury securities | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Asset coverage per unit(10) | ||||||||||||||||||||||||||||||||
_______________
(1)The share information utilized to determine per share data has been retroactively adjusted to reflect a reverse stock split effective June 15, 2020, where every four shares of the Company's common stock issued and outstanding were automatically combined into one share of the Company's common stock. 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 reflect the actual amount of distributions paid per share during the applicable period.
(4)During the year ended December 31, 2021, 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 2021 Merger at the fair value of FSK’s common stock issued based on the shares outstanding resulting from the 2021 Merger.
(5)Represents the incremental impact of the Company’s respective share repurchase programs by buying shares in the open market at a price lower than net asset value per share for each of the years presented.
151
FS KKR Capital Corp.
Notes to Consolidated Financial Statements (continued)
(in millions, except share and per share amounts)
Note 12. Financial Highlights (continued)
(6)Represents the impact on NAV of merger accounting by the permanent write-off of the Company’s deferred merger costs and FSKR’s deferred costs and prepaid assets as well as the mark-to-market of FSKR’s 4.25 % Notes.
(7)The total return based on net asset value for each year presented was calculated by taking the net asset value per share as of the end of the applicable year, adding the cash distributions per share that were declared during the applicable calendar year and dividing the total by the net asset value per share at the beginning of the applicable year. Total return based on net asset value does not consider the effect of any sales commissions or charges that may be incurred in connection with the sale of shares of the Company's common stock. The historical calculation of total return based on net asset value in the table should not be considered a representation of the Company’s future total return based on net asset value, which may be greater or less than the return 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 return on the Company's investment portfolio during the applicable period and do not represent an actual return to stockholders.
(8)The total return based on market value for each period presented was calculated based on the change in market price during the applicable period, including the impact of distributions reinvested in accordance with the Company’s DRP. Total return based on market value does not consider the effect of any sales commissions or charges that may be incurred in connection with the sale of shares of the Company’s common stock. The historical calculation of total return based on market value in the table should not be considered a representation of the Company’s future total return based on market value, which may be greater or less than the return 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, general economic conditions and fluctuations in per share market value. As a result of these factors, results for any previous period should not be relied upon as being indicative of performance in future periods.
(9)Weighted average net assets during the applicable period are used for this calculation. The following is a schedule of supplemental ratios for the years ended December 31, 2023, 2022, 2021, 2020 and 2019:
| Year Ended December 31, | ||||||||||||||||||||||||||||||||
| 2023 | 2022 | 2021 | 2020 | 2019 | ||||||||||||||||||||||||||||
| Ratio of accrued capital gains incentive fees to average net assets | ||||||||||||||||||||||||||||||||
| Ratio of subordinated income incentive fees to average net assets | % | % | % | % | ||||||||||||||||||||||||||||
| Ratio of interest expense to average net assets | % | % | % | % | % | |||||||||||||||||||||||||||
| Ratio of excise taxes to average net assets | % | % | % | % | % | |||||||||||||||||||||||||||
(10)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.
Note 13. Acquisition of FSKR
On June 16, 2021, the Company completed its acquisition of FSKR, pursuant the 2020 Merger Agreement. Pursuant to the 2020 Merger Agreement, Merger Sub merged with and into FSKR, with FSKR continuing as the surviving company and as a wholly-owned subsidiary of the Company, or the First Merger, and, immediately thereafter, FSKR merged with and into the Company, with the Company continuing as the surviving company, or together with the First Merger, the 2021 Merger.
In accordance with the terms of the 2020 Merger Agreement, each outstanding share of FSKR common stock was converted into the right to receive 0.9498 shares of the Company’s common stock. This exchange ratio was determined based on the closing net asset value, or NAV, per share of $26.77 and $25.42 for the Company and FSKR, respectively, as of June 14, 2021, to ensure that the NAV of shares investors would in FSK was equal to the NAV of the shares they held in FSKR. As a result, the Company issued an aggregate of approximately 161,374,028 shares of its common stock to former FSKR stockholders.
The 2021 Merger was considered a tax-free reorganization. The 2021 Merger was accounted for in accordance with the asset acquisition method of accounting as detailed in Accounting Standards Codification 805-50, Business Combinations—Related Issues. The fair value of the consideration paid by the Company in the 2021 Merger was allocated to the assets acquired and liabilities assumed based on their relative fair values as of the date of acquisition and did not give rise to goodwill.
The following table summarized the allocation of the purchase price to the assets acquired and liabilities assumed as a result of the 2021 Merger:
152
FS KKR Capital Corp.
Notes to Consolidated Financial Statements (continued)
(in millions, except share and per share amounts)
Note 13. Acquisition of FSKR (continued)
| Common stock purchased | $ | ||||
| Total purchase price | $ | ||||
| Assets acquired, at fair value: | |||||
| Investments | $ | ||||
| Cash and cash equivalents | |||||
| Other assets | |||||
| Total assets acquired | $ | ||||
| Debt | |||||
| Distributions payable | |||||
| Other liabilities assumed | |||||
| Total purchase price | $ | ||||
The company incurred $8 of professional fees and other costs associated with the 2021 Merger. Such costs were capitalized by the Company and included in the purchase price of the 2021 Merger. Deferred costs and prepaid assets of $19 were permanently written off. Additionally, the Company marked-to-market the fair value of FSKR's 4.25 % Notes, which was $26 greater than it's carrying amount.
153
FS KKR Capital Corp.
Notes to Consolidated Financial Statements (continued)
(in millions, except share and per share amounts)
Note 14. Selected Quarterly Financial Data (Unaudited)
The following is the quarterly results of operations for the years ended December 31, 2023 and 2022. The following information reflects all normal recurring adjustments necessary for a fair presentation of the information for the periods presented. The operating results for any quarter are not necessarily indicative of results for any future period.
| Quarter Ended | ||||||||||||||||||||||||||
December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 | |||||||||||||||||||||||
| Investment income | $ | $ | $ | $ | ||||||||||||||||||||||
| Operating expenses | ||||||||||||||||||||||||||
| Net expenses and excise taxes | ||||||||||||||||||||||||||
| Net investment income | ||||||||||||||||||||||||||
| Realized and unrealized gain (loss) | ( | ( | ( | |||||||||||||||||||||||
Net increase (decrease) in net assets resulting from operations | $ | $ | $ | $ | ||||||||||||||||||||||
| Per share information-basic and diluted | ||||||||||||||||||||||||||
| Net investment income | $ | $ | $ | $ | ||||||||||||||||||||||
Net increase (decrease) in net assets resulting from operations | $ | $ | $ | $ | ||||||||||||||||||||||
| Weighted average shares outstanding | ||||||||||||||||||||||||||
| Quarter Ended | ||||||||||||||||||||||||||
December 31, 2022 | September 30, 2022 | June 30, 2022 | March 31, 2022 | |||||||||||||||||||||||
| Investment income | $ | $ | $ | $ | ||||||||||||||||||||||
| Operating expenses | ||||||||||||||||||||||||||
| Net expenses and excise taxes | ||||||||||||||||||||||||||
| Net investment income | ||||||||||||||||||||||||||
| Realized and unrealized gain (loss) | ( | ( | ( | |||||||||||||||||||||||
Net increase (decrease) in net assets resulting from operations | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||
| Per share information-basic and diluted | ||||||||||||||||||||||||||
| Net investment income | $ | $ | $ | $ | ||||||||||||||||||||||
Net increase (decrease) in net assets resulting from operations | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||
| Weighted average shares outstanding | ||||||||||||||||||||||||||
The sum of quarterly per share amounts does not necessarily equal per share amounts reported for the years ended December 31, 2023 and 2022. This is due to changes in the number of weighted-average shares outstanding and the effects of rounding for each period.
154
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As required by Exchange Act Rule 13(a)-15(b), 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 December 31, 2023. Based on the foregoing, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were (a) designed to ensure that the information we are required to disclose in our reports under the Exchange Act is recorded, processed and reported in an accurate manner and on a timely basis and the information that we are required to disclose in our Exchange Act reports is accumulated and communicated to management to permit timely decisions with respect to required disclosure and (b) operating in an effective manner.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Exchange Act Rules 13a-15(f) and 15d-15(f), internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.
Our internal control over financial reporting includes those policies and procedures that:
1. Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the Company’s transactions and the dispositions of assets of the Company;
2. Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of our management and board of directors; and
3. Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation and presentation and may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management’s report on internal control over financial reporting is set forth above under the heading “Management’s Report on Internal Control over Financial Reporting” in Item 8 of this annual report on Form 10-K.
Attestation Report of the Registered Public Accounting Firm
Our registered public accounting firm has issued an attestation report on our internal control over financial reporting. This report appears on page 68.
Changes in Internal Control Over Financial Reporting
During the quarter ended December 31, 2023, there was no change in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) or 15d-15(f)) that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
155
Item 9B. Other Information.
Rule 10b5-1 Trading Plans
During the fiscal quarter ended December 31, 2023, none of our directors or executive officers adopted terminated
156
PART III
We will file a definitive Proxy Statement for our 2024 Annual Meeting of Stockholders with the SEC, pursuant to Regulation 14A promulgated under the Exchange Act, not later than 120 days after the end of our fiscal year. Accordingly, certain information required by Part III has been omitted under General Instruction G(3) to Form 10-K. Only those sections of our definitive Proxy Statement that specifically address the items set forth herein are incorporated by reference.
Item 10. Directors, Executive Officers and Corporate Governance.
The information required by Item 10 is hereby incorporated by reference from the Company’s definitive Proxy Statement relating to the Company’s 2024 Annual Meeting of Stockholders, to be filed with the SEC within 120 days following the end of our fiscal year.
Item 11. Executive Compensation.
The information required by Item 11 is hereby incorporated by reference from the Company’s definitive Proxy Statement relating to the Company’s 2024 Annual Meeting of Stockholders, to be filed with the SEC within 120 days following the end of our fiscal year.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by Item 12 is hereby incorporated by reference from the Company’s definitive Proxy Statement relating to the Company’s 2024 Annual Meeting of Stockholders, to be filed with the SEC within 120 days following the end of our fiscal year.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by Item 13 is hereby incorporated by reference from the Company’s definitive Proxy Statement relating to the Company’s 2024 Annual Meeting of Stockholders, to be filed with the SEC within 120 days following the end of our fiscal year.
Item 14. Principal Accountant Fees and Services.
The information required by Item 14 is hereby incorporated by reference from the Company’s definitive Proxy Statement relating to the Company’s 2024 Annual Meeting of Stockholders, to be filed with the SEC within 120 days following the end of our fiscal year.
PCAOB ID: | Auditor Name: | Auditor Location: | ||||||
157
PART IV
Item 15. Exhibits, Financial Statement Schedules.
a. Documents Filed as Part of this Report
The following financial statements are set forth in Item 8:
| Page | |||||
b. Exhibits
Please note that the agreements included as exhibits to this annual report on Form 10-K are included to provide information regarding their terms and are not intended to provide any other factual or disclosure information about the Company or the other parties to the agreements. The agreements contain representations and warranties by each of the parties to the applicable agreement that have been made solely for the benefit of the other parties to the applicable agreement and may not describe the actual state of affairs as of the date they were made or at any other time.
The following exhibits are filed as part of this annual report or hereby incorporated by reference to exhibits previously filed with the SEC:
158
159
160
161
162
*Filed herewith.
†Pursuant to Item 601(a)(5) of Regulation S-K, certain exhibits and schedules have been omitted. The registrant hereby agrees to furnish supplementally a copy of any omitted attachment to the SEC upon request.
c. Financial Statement Schedules
No financial statement schedules are filed herewith because (1) such schedules are not required or (2) the information has been presented in the aforementioned financial statements.
163
Item 16. Form 10-K Summary.
None.
164
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized.
| FS KKR CAPITAL CORP. | ||||||||
Date: February 26, 2024 | /s/ MICHAEL C. FORMAN | |||||||
| Michael C. Forman | ||||||||
| Chief Executive Officer and Director | ||||||||
| (Principal Executive Officer) | ||||||||
165
Pursuant to the requirements of the Securities Exchange Act of 1934, this annual report has been signed below by the following persons on behalf of the registrant and in the capacity and on the dates indicated.
Date: February 26, 2024 | /s/ MICHAEL C. FORMAN | |||||||
| Michael C. Forman | ||||||||
| Chief Executive Officer and Director | ||||||||
| (Principal Executive Officer) | ||||||||
Date: February 26, 2024 | /s/ STEVEN LILLY | |||||||
| Steven Lilly | ||||||||
| Chief Financial Officer | ||||||||
| (Principal Financial Officer) | ||||||||
Date: February 26, 2024 | /s/ WILLIAM GOEBEL | |||||||
| William Goebel | ||||||||
| Chief Accounting Officer | ||||||||
| (Principal Accounting Officer) | ||||||||
Date: February 26, 2024 | /s/ BARBARA ADAMS | |||||||
| Barbara Adams | ||||||||
| Director | ||||||||
Date: February 26, 2024 | /s/ BRIAN R. FORD | |||||||
| Brian R. Ford | ||||||||
| Director | ||||||||
Date: February 26, 2024 | /s/ RICHARD GOLDSTEIN | |||||||
| Richard Goldstein | ||||||||
| Director | ||||||||
Date: February 26, 2024 | /s/ MICHAEL J. HAGAN | |||||||
| Michael J. Hagan | ||||||||
| Director | ||||||||
Date: February 26, 2024 | /s/ JEFFREY K. HARROW | |||||||
| Jeffrey K. Harrow | ||||||||
| Director | ||||||||
Date: February 26, 2024 | /s/ JEREL A. HOPKINS | |||||||
| Jerel A. Hopkins | ||||||||
| Director | ||||||||
Date: February 26, 2024 | /s/ OSAGIE IMASOGIE | |||||||
| Osagie Imasogie | ||||||||
| Director | ||||||||
Date: February 26, 2024 | /s/ JAMES H. KROPP | |||||||
| James H. Kropp | ||||||||
| Director | ||||||||
Date: February 26, 2024 | /s/ DANIEL PIETRZAK | |||||||
| Daniel Pietrzak | ||||||||
| Director | ||||||||
Date: February 26, 2024 | /s/ ELIZABETH SANDLER | |||||||
| Elizabeth Sandler | ||||||||
| Director | ||||||||
166
Exhibit [4.27]
DESCRIPTION OF SECURITIES
As of December 31, 2023, FS KKR Capital Corp. (“we,” “our,” or the “Company”) had one class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”): our common stock, par value $0.001 per share (“common stock”).
Common Stock, par value $0.001 per share
Our charter authorizes us to issue up to 800,000,000 shares of stock, of which 750,000,000 shares are classified as common stock, par value $0.001 per share, and 50,000,000 shares are classified as preferred stock, par value $0.001 per share. A majority of the board of directors, without any action by our stockholders, may amend our charter to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that we have authority to issue. Our common stock trades on the New York Stock Exchange under the ticker symbol “FSK”. There are no outstanding options or warrants to purchase our stock. No stock has been authorized for issuance under any equity compensation plans.
Our charter also contains a provision permitting the board of directors to classify or reclassify any unissued shares of common stock or preferred stock in one or more classes or series of common stock or preferred stock by setting or changing the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications, or terms or conditions of redemption of the common stock or preferred stock. We believe that the power to classify or reclassify unissued shares of capital stock and thereafter issue the classified or reclassified shares provides us with increased flexibility in structuring possible future financings and investments and in meeting other needs that might arise.
Common Stock
All shares of our common stock have equal rights as to earnings, assets, dividends and voting and, when they are issued, will be duly authorized, validly issued, fully paid and nonassessable. Distributions may be paid to the holders of our common stock if, as and when authorized by our board of directors and declared by us out of funds legally available therefor. Shares of our common stock have no preemptive, conversion or redemption rights and will be freely transferable, except where their transfer is restricted by federal and state securities laws or by contract. In the event of our liquidation, dissolution or winding up, each share of our common stock will be entitled to share ratably in all of our assets that are legally available for distribution after we pay all debts and other liabilities and subject to any preferential rights of holders of our preferred stock, if any preferred stock is outstanding at such time. Each share of our common stock is entitled to one vote on all matters submitted to a vote of stockholders, including the election of directors. Except as may be provided by our board of directors in setting the terms of classified or reclassified stock, the holders of our common stock will possess exclusive voting power. There will be no cumulative voting. As permitted by the MGCL, our charter provides that the presence of stockholders entitled to cast one-third of the votes entitled to be cast at a meeting of stockholders will constitute a quorum.
Preferred Stock
Our charter authorizes our board of directors to classify and reclassify any unissued shares of stock into other classes or series of stock, including preferred stock. Prior to issuance of shares of each class or series, the board of directors is required by Maryland law and by our charter to set the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption for each class or series. Thus, the board of directors could authorize the issuance of shares of preferred stock with terms and conditions which could have the effect of delaying, deferring or preventing a transaction or a change in control that might involve a premium price for holders of our common stock or otherwise be in their best interest.
Limitation on Liability of Directors and Officers; Indemnification and Advancement of Expenses
Maryland law permits a Maryland corporation to include in its charter a provision expanding or limiting the liability of its directors and officers to the corporation and its stockholders for money damages, but a corporation may not include any provision that restricts or limits the liability of directors or officers to the corporation or its stockholders:
(a) to the extent that it is proved that the person actually received an improper benefit or profit in money, property or services; or
(b) to the extent that a judgment or other final adjudication adverse to the person is entered in a proceeding based on a finding in the proceeding that the person’s action, or failure to act, was the result of active and deliberate dishonesty and was material to the cause of action adjudicated in the proceeding.
Our charter contains a provision which limits directors’ and officers’ liability to us and our stockholders for money damages, to the maximum extent permitted by Maryland law. In addition, we have obtained directors’ and officers’ liability insurance.
Under the MGCL, a Maryland corporation may indemnify its directors, officers and certain other parties against judgments, penalties, fines, settlements and reasonable expenses actually incurred by them in connection with any proceeding to which they may be made a party by reason of their service to the corporation or at its request, unless it is established that (i) the act or omission of the indemnified party was material to the matter giving rise to the proceeding and was committed in bad faith or was the result of active and deliberate dishonesty, (ii) the director actually received an improper personal benefit in money, property or services, or (iii) in the case of any criminal proceeding, the indemnified party had reasonable cause to believe that the act or omission was unlawful. Maryland law does not permit indemnification in respect of any proceeding in which the party seeking indemnification shall have been adjudged to be liable to the corporation. Further, a party may not be indemnified for a proceeding brought by that party against the corporation, except (i) for a proceeding brought to enforce indemnification or (ii) if the charter or bylaws, a resolution of the corporation’s board of directors or an agreement approved by the corporation’s board of directors to which the corporation is a party expressly provides otherwise.
Our charter permits us to indemnify and to pay or reimburse reasonable expenses in advance of final disposition of a proceeding to any individual (a) who is a present or former director or officer of ours and who is made or threatened to be made a party to a proceeding by reason of his or her service in that capacity, or (b) who, while a director or officer of ours and at our request, serves or has served as a director, officer, partner, member, manager or trustee of any corporation, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise and who is made or threatened to be made a party to a proceeding by reason of his or her service in such capacity and from and against any claim or liability to which such person may become subject or such person may incur, in each case to the fullest extent permitted by Maryland law.
Our charter provides that any provisions of the charter relating to limiting liability of directors and officers or to indemnifying directors and officers are subject to any applicable limitations in the Investment Company Act of 1940, as amended (the “1940 Act”).
Our bylaws obligate us to indemnify and, without requiring a preliminary determination of the ultimate entitlement to indemnification, to pay or reimburse reasonable expenses in advance of final disposition of a proceeding to any individual who (a) is a present or former director or officer of ours and who is made or threatened to be made a party to a proceeding by reason of his or her service in that capacity, or (b) while a director or officer of ours and at our request, serves or has served as a director, officer, partner, member, manager or trustee of any corporation, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise and who is made or threatened to be made a party to a proceeding by reason of his or her service in such capacity and from and against any claim or liability to which such person may become subject or such person may incur, in each case to the fullest extent permitted by Maryland law and the 1940 Act. Our charter and bylaws also permit us to provide such indemnification and advancement for expenses to a person who served a predecessor of ours in any of the capacities described in (a) or (b) above and to any employee or agent of ours or a predecessor of ours. In accordance with the 1940 Act, we will not indemnify any person for any liability to which such person would be subject by reason of such person’s willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office.
Board of Directors
Our charter provides that the number of directors will be ten, and may be increased or decreased by our board of directors in accordance with our bylaws. Our bylaws provide that the number of directors may not be less than the minimum number required by the MGCL or more than twelve. Our charter also provides that the directors, other than any director elected solely by holders of one or more classes or series of preferred stock, shall be classified, with respect to the terms for which they severally hold office, into three classes, as nearly equal in number as possible as determined by the board of directors. Generally, at each annual meeting of stockholders, the successors to the class of directors whose term expires at such meeting shall be elected for a three-year term and until their successors are duly elected and qualify. Our directors may be elected to an unlimited number of successive terms.
Our bylaws provide that a director shall be elected only if such director receives the affirmative vote of a majority of the total votes cast for and affirmatively withheld as to such director at a meeting of stockholders duly called and at which a quorum is present. However, directors shall be elected by a plurality of votes cast at a meeting of stockholders duly called and at which a quorum is present if the number of nominees is greater than the number of directors to be elected at the meeting.
Except as may be provided by our board of directors in setting the terms of any class or series of preferred stock, pursuant to an election in our charter as permitted by the MGCL, any and all vacancies on our board of directors may be filled only by the affirmative vote of a majority of the remaining directors in office, even if the remaining directors do not constitute a quorum, and any director elected to fill a vacancy will serve for the remainder of the full term of the directorship in which the vacancy occurred and until a successor is elected and qualifies, subject to any applicable requirements of the 1940 Act.
Pursuant to our charter, subject to the rights, if any, of holders of one or more classes or series of preferred stock to elect or remove one or more directors, any director may be removed from office at any time only for cause and only by the affirmative vote of at least two-thirds of the votes entitled to cast generally in the election of directors. Pursuant to our bylaws, any director may resign at any time by delivering his or her resignation to the board of directors, the chairman of the board or the secretary, which resignation shall take effect immediately upon its receipt or at such later time specified in the resignation.
We currently have a total of eleven members of the board of directors, nine of whom are independent directors. A director is considered independent if he or she is not an “interested person” as that term is defined under Section 2(a)(19) of the 1940 Act. Our charter provides that a majority of our board of directors must be independent directors except for a period of up to 60 days after the death, removal or resignation of an independent director pending the election of his or her successor.
Action by Stockholders
The MGCL provides that stockholder action can be taken only at an annual or special meeting of stockholders or by unanimous consent in lieu of a meeting (unless the charter permits the consent in lieu of a meeting to be less than unanimous, which our charter does not). These provisions, combined with the requirements of our bylaws regarding the calling of a stockholder-requested special meeting of stockholders discussed below, may have the effect of delaying consideration of a stockholder proposal until the next annual meeting.
Advance Notice Provisions for Stockholder Nominations and Stockholder Proposals
Our bylaws provide that, with respect to an annual meeting of stockholders, nominations of persons for election to our board of directors and the proposal of business to be considered by stockholders may be made only (a) pursuant to our notice of the meeting, (b) by our board of directors or (c) by a stockholder who is entitled to vote at the meeting and who has complied with the advance notice procedures of the bylaws. With respect to special meetings of stockholders, only the business specified in our notice of the meeting may be brought before the meeting. Nominations of persons for election to our board of directors at a special meeting may be made only (x) pursuant to our notice of the meeting, (y) by our board of directors or (z) provided that our board of directors has determined that directors will be elected at the meeting, by a stockholder who is entitled to vote at the meeting and who has complied with the advance notice provisions of the bylaws.
The purpose of requiring stockholders to give us advance notice of nominations and other business is to afford our board of directors a meaningful opportunity to consider the qualifications of the proposed nominees and the advisability of any other proposed business and, to the extent deemed necessary or desirable by our board of directors, to inform stockholders and make recommendations about such qualifications or business, as well as to provide a more orderly procedure for conducting meetings of stockholders. Although our bylaws do not give our board of directors any power to disapprove stockholder nominations for the election of directors or proposals recommending certain action, they may have the effect of precluding a contest for the election of directors or the consideration of stockholder proposals if proper procedures are not followed and of discouraging or deterring a third party from conducting a solicitation of proxies to elect its own slate of directors or to approve its own proposal without regard to whether consideration of such nominees or proposals might be harmful or beneficial to us and our stockholders.
Exclusive Forum
Our bylaws provide that, unless we consent in writing to the selection of a different forum, the Circuit Court for Baltimore City, Maryland, or, if that court does not have jurisdiction, the United States District Court for the District of Maryland, Baltimore Division, will be the sole and exclusive forum for (a) any derivative action or proceeding brought on our behalf, (b) any action asserting a claim of breach of any duty owed by any of our directors, officers or other employees to us or our stockholders, (c) any action asserting a claim against us or any of our directors, officers or other employees arising pursuant to any provision of the MGCL, or our charter or bylaws or (d) any action asserting a claim against us or any of our directors, officers or other employees that is governed by the internal affairs doctrine. Our bylaws also provide that, unless we consent in writing to the selection of a different forum, to the fullest extent permitted by law, the United States District Court for the District of Maryland, Baltimore Division, shall be the sole and exclusive forum for resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended.
Calling of Special Meetings of Stockholders
Our bylaws provide that special meetings of stockholders may be called by our board of directors and certain of our officers. In addition, our bylaws provide that, subject to the satisfaction of certain procedural and informational requirements by the stockholders requesting the meeting, a special meeting of stockholders will be called by our secretary upon the written request of stockholders entitled to cast not less than a majority of all the votes entitled to be cast at the meeting.
Approval of Extraordinary Corporate Action; Amendment of Charter and Bylaws
Under the MGCL, a Maryland corporation generally cannot dissolve, amend its charter, merge, consolidate, sell all or substantially all of its assets or engage in a share exchange, unless the transaction is advised by its board of directors and approved by the affirmative vote of stockholders entitled to cast at least two-thirds of the votes entitled to be cast on the matter. However, a Maryland corporation may provide in its charter for approval of these matters by a lesser percentage, but not less than a majority of all of the votes entitled to be cast on the matter. Under our charter, provided that our directors then in office have approved and declared the action advisable and submitted such action to the stockholders, action that requires stockholder approval, including amending our charter, our dissolution, a
merger, consolidation or a sale of all or substantially all of our assets must be approved by the affirmative vote of stockholders entitled to cast at least a majority of all the votes entitled to be cast on the matter. Notwithstanding the foregoing, the affirmative vote of the holders of shares entitled to cast at least 80% of all the votes entitled to be cast on the matter, with each class that is entitled to vote on the matter voting as a separate class, shall be required to effect any amendment to our charter to make our common stock a “redeemable security” or convert us, whether by merger or otherwise, from a “closed-end company” to an “open-end company” (as such terms are defined in the 1940 Act), to cause our liquidation or dissolution or any amendment to our charter to effect any such liquidation or dissolution, or to amend certain charter provisions, provided that, if the Continuing Directors (as defined in our charter), by a vote of at least two-thirds of such Continuing Directors, in addition to approval by the board of directors, approve such amendment, the affirmative vote of only the holders of stock entitled to cast a majority of all the votes entitled to be cast on the matter shall be required.
Our charter and bylaws provide that our board of directors will have the exclusive power to make, alter, amend or repeal any provision of our bylaws.
No Appraisal Rights
In certain extraordinary transactions, the MGCL provides the right to dissenting stockholders to demand and receive the fair value of their shares, subject to certain procedures and requirements set forth in the statute. Those rights are commonly referred to as appraisal rights. Except with respect to appraisal rights arising in connection with the Control Share Acquisition Act discussed below, as permitted by the MGCL, our charter provides that stockholders will not be entitled to exercise appraisal rights.
Control Share Acquisitions
The MGCL provides that control shares of a Maryland corporation acquired in a control share acquisition have no voting rights except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter, which we refer to as the Control Share Acquisition Act. Shares owned by the acquirer, by officers or by directors who are employees of the corporation are excluded from shares entitled to vote on the matter. Control shares are voting shares of stock which, if aggregated with all other shares of stock owned by the acquirer or in respect of which the acquirer is able to exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), would entitle the acquirer to exercise voting power in electing directors within one of the following ranges of voting power:
•one-tenth or more but less than one-third;
•one-third or more but less than a majority; or
•a majority or more of all voting power.
The requisite stockholder approval must be obtained each time an acquirer crosses one of the thresholds of voting power set forth above. Control shares do not include shares the acquiring person is then entitled to vote as a result of having previously obtained stockholder approval. A control share acquisition means the acquisition of control shares, subject to certain exceptions.
A person who has made or proposes to make a control share acquisition may compel the corporation’s board of directors to call a special meeting of stockholders to be held within 50 days of demand to consider the voting rights of the shares. The right to compel the calling of a special meeting is subject to the satisfaction of certain conditions, including an undertaking to pay the expenses of the meeting. If no request for a meeting is made, the corporation may present the question at any stockholders meeting.
If voting rights are not approved at the meeting or if the acquiring person does not deliver an acquiring person statement as required by the statute, then the corporation may repurchase for fair value any or all of the control shares, except those for which voting rights have previously been approved. The corporation’s right to repurchase control shares is subject to certain conditions and limitations, including compliance with the 1940 Act. Fair value is determined, without regard to the absence of voting rights for the control shares, as of the date of the last control share acquisition by the acquirer or of any meeting of stockholders at which the voting rights of the shares are considered and not approved. If voting rights for control shares are approved at a stockholders meeting and the acquirer becomes entitled to vote a majority of the shares entitled to vote, all other stockholders may exercise appraisal rights. The fair value of the shares as determined for purposes of appraisal rights may not be less than the highest price per share paid by the acquirer in the control share acquisition.
The Control Share Acquisition Act does not apply (a) to shares acquired in a merger, consolidation or share exchange if the corporation is a party to the transaction or (b) to acquisitions approved or exempted by the corporation’s charter or bylaws. Our bylaws contain a provision exempting from the Control Share Acquisition Act any and all acquisitions by any person of our shares of stock. There can be no assurance that such provision will not be amended or eliminated at any time in the future (before or after a control share acquisition). However, we will amend our bylaws to repeal such provision (so as to be subject to the Control Share
Acquisition Act) only if our board of directors determines that it would be in our best interests and if the staff of the Securities and Exchange Commission (the “SEC”) does not object to our determination that our being subject to the Control Share Acquisition Act does not conflict with the 1940 Act.
Stockholder Liability
The MGCL provides that our stockholders are under no obligation to us or our creditors with respect to their shares other than the obligation to pay to us the full amount of the consideration for which their shares were issued.
Under our charter, our stockholders shall not be liable for any debt, claim, demand, judgment or obligation of any kind by reason of being a stockholder, nor shall any stockholder be subject to any personal liability by reason of being a stockholder.
Business Combinations
Under the MGCL, certain “business combinations” between a Maryland corporation and an interested stockholder or an affiliate of an interested stockholder are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. We refer to these provisions as the Business Combination Act. These business combinations include a merger, consolidation, share exchange or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities. An interested stockholder is defined as:
•any person who beneficially owns 10% or more of the voting power of the corporation’s shares; or
•an affiliate or associate of the corporation who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of the voting power of the then outstanding voting stock of the corporation.
A person is not an interested stockholder under this statute if the board of directors approved in advance the transaction by which he or she otherwise would have become an interested stockholder. However, in approving a transaction, the board of directors may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by the board of directors.
After the five-year prohibition, any business combination between the Maryland corporation and an interested stockholder generally must be recommended by the board of directors and approved by the affirmative vote of at least:
•80% of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation; and
•two-thirds of the votes entitled to be cast by holders of voting stock of the corporation other than shares held by the interested stockholder with whom or with whose affiliate the business combination is to be effected or held by an affiliate or associate of the interested stockholder.
These super-majority vote requirements do not apply if the corporation’s common stockholders receive a minimum price, as defined under the MGCL, for their shares in the form of cash or other consideration in the same form as previously paid by the interested stockholder for its shares.
The statute permits various exemptions from its provisions, including business combinations that are exempted by the board of directors before the time that the interested stockholder becomes an interested stockholder. Our board of directors has adopted a resolution that any business combination between us and any other person is exempted from the provisions of the Business Combination Act, provided that the business combination is first approved by our board of directors, including a majority of the directors who are not interested persons as defined in the 1940 Act. This resolution, however, may be altered or repealed in whole or in part at any time. If this resolution is repealed, or our board of directors does not otherwise approve a business combination, the statute may discourage others from trying to acquire control of us and increase the difficulty of consummating any offer.
Additional Provisions of the Maryland General Corporation Law
The MGCL provides that a Maryland corporation that is subject to the Exchange Act and has at least three outside directors can elect by resolution of the board of directors to be subject to some corporate governance provisions that may be inconsistent with the corporation’s charter and bylaws. Under the applicable statute, a board of directors may classify itself without the vote of stockholders. A board of directors classified in that manner cannot be altered by amendment to the charter of the corporation. Further, the board of directors may, by electing into applicable statutory provisions and notwithstanding the charter or bylaws:
•provide that a special meeting of stockholders will be called only at the request of stockholders entitled to cast at least a majority of the votes entitled to be cast at the meeting;
•reserve for itself the right to fix the number of directors;
•provide that a director may be removed only by the vote of the holders of two-thirds of the stock entitled to vote;
•retain for itself sole authority to fill vacancies created by the death, removal or resignation of a director; and
•provide that all vacancies on the board of directors may be filled only by the affirmative vote of a majority of the remaining directors, in office, even if the remaining directors do not constitute a quorum.
In addition, if the board of directors is classified, a director elected to fill a vacancy under this provision will serve for the balance of the unexpired term instead of until the next annual meeting of stockholders. A board of directors may implement all or any of these provisions without amending the charter or bylaws and without stockholder approval. A corporation may be prohibited by its charter or by resolution of its board of directors from electing any of the provisions of the statute. We are not prohibited from implementing any or all of the statute. Our board of directors has elected into the applicable statutory provisions, which provide that, except as may be provided by the board in setting the terms of any class of preferred stock, any vacancies on the board may be filled only by a majority of the directors then in office, even if less than a quorum, and a director elected to fill a vacancy will serve for the balance of the unexpired term.
Conflict with the 1940 Act
Our bylaws provide that, if and to the extent that any provision of the MGCL, including the Control Share Acquisition Act (if we amend our bylaws to be subject to such act) and the Business Combination Act, or any provision of our charter or bylaws conflicts with any mandatory provision of the 1940 Act, the applicable provision of the 1940 Act will control.
Exhibit 21.1
Subsidiaries of FS KKR Capital Corp.
| Name of Subsidiary | State of Incorporation or Organization | ||||
| CT Dublin Funding Designated Activity Company | Ireland | ||||
| CCT Holdings II LLC | Delaware | ||||
| CCT Tokyo Funding LLC | Delaware | ||||
FCF LLC | Delaware | ||||
| FS KKR MM CLO 1 LLC | Delaware | ||||
| FSIC Investments, Inc. | Delaware | ||||
| IC Altus Investments, LLC | Delaware | ||||
| IC American Energy Investments, Inc. | Delaware | ||||
| IC Arches Investments, LLC | Delaware | ||||
| IC Northern Investments, LLC | Delaware | ||||
| Locust Street Funding LLC | Delaware | ||||
| Race Street Funding LLC | Delaware | ||||
| Ambler Funding LLC | Delaware | ||||
| Cobbs Creek LLC | Delaware | ||||
| Cooper River LLC | Delaware | ||||
| Darby Creek LLC | Delaware | ||||
| Dunlap Funding LLC | Delaware | ||||
| FSIC II Investments, Inc. | Delaware | ||||
| Germantown Funding LLC | Delaware | ||||
| IC II Northern Investments, LLC | Delaware | ||||
| Juniata River LLC | Delaware | ||||
| Meadowbrook Run Funding LLC | Delaware | ||||
Exhibit 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement No. 333-231221 on Form N-2 of our reports dated February 26, 2024, relating to the financial statements and financial highlights of FS KKR Capital Corp. (the “Company”), and the effectiveness of the Company’s internal control over financial reporting, appearing in this Annual Report on Form 10-K for the year ended December 31, 2023.
/s/ Deloitte & Touche LLP
San Francisco, California
February 26, 2024
Certification of Chief Executive Officer
I, Michael C. Forman, Chief Executive Officer of FS KKR Capital Corp., certify that:
1. I have reviewed this annual report on Form 10-K of FS KKR Capital Corp.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Dated this 26th day of February 2024.
| /s/ Michael C. Forman | |||||
Michael C. Forman Chief Executive Officer | |||||
Certification of Chief Financial Officer
I, Steven Lilly, Chief Financial Officer of FS KKR Capital Corp., certify that:
1. I have reviewed this annual report on Form 10-K of FS KKR Capital Corp.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Dated this 26th day of February 2024.
| /s/ Steven Lilly | |||||
Steven Lilly Chief Financial Officer | |||||
CERTIFICATION of CEO PURSUANT TO
Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
In connection with the Annual Report on Form 10-K for the year ended December 31, 2023 (the “Report”) of FS KKR Capital Corp. (the “Registrant”), as filed with the Securities and Exchange Commission on the date hereof, I, Michael C. Forman, the Chief Executive Officer of the Registrant, hereby certify, to the best of my knowledge, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
Dated: February 26, 2024 | |||||
| /s/ Michael C. Forman | |||||
Michael C. Forman Chief Executive Officer | |||||
CERTIFICATION of CFO PURSUANT TO
Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
In connection with the Annual Report on Form 10-K for the year ended December 31, 2023 (the “Report”) of FS KKR Capital Corp. (the “Registrant”), as filed with the Securities and Exchange Commission on the date hereof, I, Steven Lilly, the Chief Financial Officer of the Registrant, hereby certify, to the best of my knowledge, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
Dated: February 26, 2024 | |||||
| /s/ Steven Lilly | |||||
Steven Lilly Chief Financial Officer | |||||
FS KKR CAPITAL CORP.
CLAWBACK POLICY
The Board of Directors (the “Board”) of FS KKR Capital Corp., a Maryland corporation (the “Company”), believes that it is in the best interests of the Company and its shareholders to adopt this Clawback Policy (this “Policy”), which provides for the recovery of Incentive-Based Compensation received by Covered Executives, if any, in the event of an Accounting Restatement (as such terms are defined below). The Company has designed and implemented this Policy to comply with Section 10D of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Rule 10D-1 promulgated under the Exchange Act (“Rule 10D-1”) and Section 303A.14 of the New York Stock Exchange Listed Company Manual (the “Listing Standards”). This Policy shall be interpreted in a manner consistent with Rule 10D-1 and the Listing Standards.
1. Administration
Except as specifically set forth herein, this Policy shall be administered by the Board or, if so designated by the Board, a committee thereof (the Board or such committee charged with administration of this Policy, the “Administrator”). The Administrator is authorized to interpret and construe this Policy and to make all determinations necessary, appropriate or advisable for the administration of this Policy. Any determinations made by the Administrator shall be final and binding on all affected individuals and need not be uniform with respect to each individual covered by this Policy. In the administration of this Policy, the Administrator is authorized and directed to consult with the full Board (if this Policy is administered by a committee of the Board in accordance herewith) or such committees of the Board, such as the Audit Committee, Valuation Committee, Nominating and Corporate Governance Committee or the Compensation Committee, as applicable and as may be necessary or appropriate as to matters within the scope of such committee’s responsibility and authority. Subject to any limitation of applicable law, the Administrator may authorize and empower any one or more officers of the Company to take any and all actions necessary or appropriate to carry out the purpose and intent of this Policy (other than with respect to any recovery under this Policy involving any such officer(s)).
2. Definitions
As used in this Policy, the following definitions shall apply:
a.“Accounting Restatement” means an accounting restatement of the Company’s financial statements due to the Company’s material noncompliance with any financial reporting requirement under the securities laws of the United States of America, including any required accounting restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements, or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period.
b.“Administrator” has the meaning set forth in Section 1 hereof.
c.“Applicable Period” means the three completed fiscal years immediately preceding the date on which the Company is required to prepare an Accounting Restatement, as well as any transition period (that results from a change in the Company’s fiscal year) within or immediately following those three completed fiscal years (except that a transition period between the last day of the Company’s previous fiscal year end and the first day of its new fiscal year that comprises a period of nine to 12 months shall be deemed a completed fiscal year). The “date on which the Company is required to prepare an Accounting Restatement” is the earlier to occur of (a) the date the Board, a committee thereof, or the officer or officers of the Company authorized to take such action if action by the Board or a committee thereof is not required, concludes, or reasonably should have concluded, that the Company is required to prepare an Accounting Restatement or (b) the date a court, regulator or other legally authorized body directs the Company to prepare an Accounting Restatement, in each case regardless of if or when the restated financial statements are filed.
d.“Covered Executives” means any current or former executive officer of the Company, including the Company’s president, principal financial officer, principal accounting officer (or if there is no such accounting officer, the controller), any vice-president of the Company in charge of a principal business unit, division, or function (such as sales, administration, or finance), any other officer of the Company who performs a policy-making function, or any other person who performs similar policy-making functions for the Company, and any officer within the meaning of 17 C.F.R. 229.401(b). An executive officer of the Company’s parent or subsidiary is deemed a “Covered Executive” if the executive officer performs such policy making functions for the Company. Policy making function is not intended to include policy making functions that are not significant to the Company. The definition of “Covered Executives” shall be interpreted in accordance with the definition of “Executive Officer” set forth in Rule 10D-1 and the Listing Standards.
e.“Erroneously Awarded Compensation” has the meaning set forth in Section 5 of this Policy.
f.“Financial Reporting Measure” means any measure that is determined and presented in accordance with the accounting principles used in preparing the Company’s financial statements, and any measure that is derived wholly or in part from such measure. For the avoidance of doubt, Financial Reporting Measures include but are not limited to the following (and any measure derived from the following): the Company’s stock price; total shareholder return (“TSR”); net asset value; net investment income; net investment gains; profitability; financial ratios; earnings before interest, taxes depreciation and amortization; funds from operations and adjusted funds from operations; liquidity measures; return measures (e.g., return on investment capital; return on assets); earnings measures (e.g., earnings per share); and any of such financial reporting measures relative to a peer group. A Financial Reporting Measure need not be presented within the Company’s financial statements or included in a filing with the Securities and Exchange Commission.
g.“Incentive-Based Compensation” means any compensation that is granted, earned or vested based wholly or in part upon the attainment of a Financial Reporting Measure. For purposes of this Policy, Incentive-Based Compensation is deemed “received” in the Company’s fiscal period during which the Financial Reporting Measure specified in the Incentive -Based Compensation award is attained, even if the payment or grant of such Incentive-Based Compensation occurs after the end of that period.
3. Covered Executives; Incentive-Based Compensation
This Policy applies to all Incentive-Based Compensation received by a person (a) after beginning services as a Covered Executive; (b) if that person served as a Covered Executive at any time during the performance period for such Incentive-Based Compensation; and (c) while the Company had a class of its securities listed on a national securities exchange or a national securities association.
4. Required Recovery of Erroneously Awarded Compensation in the Event of an Accounting Restatement
In the event the Company is required to prepare an Accounting Restatement, the Company shall recover reasonably promptly the amount of any Erroneously Awarded Compensation received by any Covered Executive, as calculated pursuant to Section 5 hereof, during the Applicable Period.
5. Erroneously Awarded Compensation: Amount Subject to Recovery
The amount of “Erroneously Awarded Compensation” subject to recovery under this Policy, as determined by the Administrator, is the amount of Incentive-Based Compensation received by the Covered Executive that exceeds the amount of Incentive-Based Compensation that otherwise would have been received by the Covered Executive had it been determined based on the restated amounts.
Erroneously Awarded Compensation shall be computed without regard to any taxes paid by the Covered Executive with respect to the Erroneously Awarded Compensation.
For Incentive-Based Compensation based on the Company’s stock price or TSR: (a) the Administrator shall determine the amount of Erroneously Awarded Compensation based on a reasonable estimate of the effect of the Accounting Restatement on the stock price or TSR upon which the Incentive-Based Compensation was received; and (b) the Company shall maintain documentation of the determination of that reasonable estimate and provide such documentation to the New York Stock Exchange (the “NYSE”).
6. Method of Recovery
The Administrator shall determine, in its sole discretion, the timing and method for promptly recovering Erroneously Awarded Compensation hereunder, which may include without limitation (a) seeking reimbursement of all or part of any cash or equity-based award, (b) cancelling prior cash or equity-based awards, whether vested or unvested or paid or unpaid, (c) cancelling or offsetting against any planned future cash or equity-based awards, (d) forfeiture of deferred compensation, subject to compliance with Section 409A of the Internal Revenue Code and the regulations promulgated thereunder and (e) any other method authorized by applicable law or contract. Subject to compliance with applicable law, the Administrator may affect recovery under this Policy from any amount otherwise payable to the Covered Executive, including amounts payable to such
individual under any otherwise applicable Company plan or program, including base salary, bonuses, other compensation, and/or compensation previously deferred by the Covered Executive.
The Company is authorized and directed pursuant to this Policy to promptly recover Erroneously Awarded Compensation in compliance with this Policy unless the Board (including a majority of independent directors) or applicable committee thereof has determined that recovery would be impracticable solely for one of the following limited reasons, and subject to the following procedural requirements:
a.The direct expense paid to a third party to assist in enforcing this Policy would exceed the amount to be recovered. Before concluding that it would be impracticable to recover any amount of Erroneously Awarded Compensation based on expense of enforcement, the Company must make, or cause to be made, a reasonable attempt to recover such Erroneously Awarded Compensation, document such reasonable attempt(s) to recover and provide that documentation to the NYSE;
b.Recovery would violate home country law of the Company where that law was adopted prior to November 28, 2022. Before concluding that it would be impracticable to recovery any amount of Erroneously Awarded Compensation based on violation of home country law, the Company must obtain an opinion of home country counsel, acceptable to the NYSE, that recovery would result in such a violation and provide such opinion to the NYSE; or
c.Recovery would likely cause an otherwise tax-qualified requirement plan, under which benefits are broadly available to executive officers and/or employees, if any, of the Company, to fail to meet the requirements of 26 U.S.C. 401(a)(13) or 26 U.S.C. 411(a) and regulations thereunder.
7. No indemnification of Covered Executives
Notwithstanding the terms of any indemnification or insurance policy or any contractual or other arrangements with any Covered Executive that may be interpreted to the contrary, the Company shall not indemnify any Covered Executives against the loss of any Erroneously Awarded Compensation, including any payment or reimbursement for the cost of third-party insurance purchased by any Covered Executives to fund potential clawback obligations under this Policy.
8. Administrator Indemnification
Any members of the Administrator, and any other members of the Board who assist in the administration of this Policy, shall not be personally liable for any action, determination or interpretation made with respect to this Policy and shall be fully indemnified by the Company to the fullest extent under applicable law and Company policy with respect to any such action, determination or interpretation. The foregoing sentence shall not limit any other rights to indemnification of the members of the Board under applicable law or Company policy.
9. Effective Date; Retroactive Application
This Policy shall be effective as of the date first written below (the “Effective Date”). The terms of this Policy shall apply to any Incentive-Based Compensation that is received by Covered Executives on or after the Effective Date, even if such Incentive-Based Compensation was approved, awarded, granted or paid to Covered Executives prior to the Effective Date. Without limiting the generality of Section 6 hereof, and subject to applicable aw, the Administrator may affect recovery under this Policy from any amount of compensation approved, awarded, granted, payable or paid to the Covered Executive prior to, on or after the Effective Date.
10. Amendment; Termination
The Board may amend, modify, supplement, rescind or replace all or any portion of this Policy at any time and from time to time in its discretion, and shall amend this Policy as it deems necessary to comply with applicable law or any rules or standards adopted by a national securities exchange on which the Company’s securities are listed.
11. Other Recovery Rights; Company Claims
The Board intends that this Policy shall be applied to the fullest extent of applicable law. Any right of recovery under this Policy is in addition to, and not in lieu of, any other remedies or rights of recovery that may be available to the Company under applicable law or pursuant to the terms of any similar policy in any employment agreement, equity award agreement, or similar agreement and any other legal remedies available to the Company.
Nothing contained in this Policy, and no recovery as contemplated by this Policy, shall limit any claims, damages or other legal remedies the Company or any of its affiliates may have against a Covered Executive arising out of resulting from any actions or omissions by the Covered Executive.
12. Successors
This Policy shall be binding and enforceable against all Covered Executives and their beneficiaries, heirs, executors, administrators or other legal representatives.
13. Exhibit Filing Requirement
A copy of this Policy, including any amendments thereto, shall be filed as an exhibit to the Company’s annual report on Form 10-K to the extent required by applicable law.
Adopted: November 2, 2023
Credit Opportunities Partners JV, LLC and Subsidiaries
Consolidated Financial Statements
As of December 31, 2023 and 2022 and for the years then ended and Independent Auditor’s Report
CREDIT OPPORTUNITIES PARTNERS JV, LLC
Index
December 31, 2023
| Page | |||||
| Independent Auditor’s Report | |||||
| Consolidated Financial Statements as of December 31, 2023 and 2022 and for the years then ended | |||||
Consolidated Statements of Assets and Liabilities | |||||
Consolidated Statements of Operations | |||||
Consolidated Statements of Changes in Members’ Equity | |||||
Consolidated Statements of Cash Flows | |||||
Consolidated Schedules of Investments | |||||
Notes to Consolidated Financial Statements | |||||
Deloitte & Touche LLP 555 Mission Street Suite 1400 San Francisco, CA 94105 USA Tel: +1 415 783 4000 www.deloitte.com | ||
INDEPENDENT AUDITOR’S REPORT
To the Members of Credit Opportunities Partners JV, LLC:
Opinion
We have audited the consolidated financial statements of Credit Opportunities Partners JV, LLC and subsidiaries (the “Company”), which comprise the consolidated statements of assets and liabilities, including the consolidated schedules of investments, as of December 31, 2023 and 2022, and the related consolidated statements of operations, changes in members’ equity, and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively referred to as the “financial statements”).
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations, changes in its members’ equity and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date that the financial statements are issued.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
1
In performing an audit in accordance with GAAS, we:
•Exercise professional judgment and maintain professional skepticism throughout the audit.
•Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
•Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, no such opinion is expressed.
•Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
•Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
/s/ Deloitte & Touche LLP
February 26, 2024
2
Credit Opportunities Partners JV, LLC and Subsidiaries
Consolidated Statements of Assets and Liabilities
| December 31, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| Assets | ||||||||||||||
| Investments, at fair value (amortized cost of $3,668,840,462 and $3,755,503,700, respectively) | $ | 3,470,828,104 | $ | 3,562,861,807 | ||||||||||
| Cash | 171,010,458 | 106,070,686 | ||||||||||||
| Interest receivable | 58,630,885 | 44,934,466 | ||||||||||||
| Receivable for investments sold and repaid | 14,233,310 | 3,103,692 | ||||||||||||
| Deferred financing costs | 9,722,726 | 9,392,803 | ||||||||||||
| Unrealized appreciation on foreign currency forward contracts | 5,028,542 | 25,540,554 | ||||||||||||
| Foreign currency (cost of $13,238,592 and $69,366,508, respectively) | 13,607,252 | 70,207,723 | ||||||||||||
| Total assets | $ | 3,743,061,277 | $ | 3,822,111,731 | ||||||||||
| Liabilities | ||||||||||||||
| Debt (net of deferred financing costs of $2,782,278 and $3,870,706, respectively) | $ | 1,840,137,448 | $ | 1,913,408,792 | ||||||||||
| Payable for investments purchased | 206,518,398 | 178,307,437 | ||||||||||||
| Distributions payable | 58,000,000 | 60,000,000 | ||||||||||||
| Interest payable | 25,300,738 | 20,324,348 | ||||||||||||
| Unrealized depreciation on foreign currency forward contracts | 13,059,999 | 13,659,509 | ||||||||||||
| Administrative services expense payable | 2,285,927 | 2,436,485 | ||||||||||||
| Other accrued expenses and liabilities | 1,328,209 | 1,672,746 | ||||||||||||
| Total liabilities | $ | 2,146,630,719 | $ | 2,189,809,317 | ||||||||||
| Members' equity (1,871,175 and 1,871,175 units outstanding, respectively) | $ | 1,596,430,558 | $ | 1,632,302,414 | ||||||||||
| Members' equity per unit | $ | 853.17 | $ | 872.34 | ||||||||||
See notes to consolidated financial statements.
3
Credit Opportunities Partners JV, LLC and Subsidiaries
Consolidated Statements of Operations
| For the Year Ended December 31, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| Investment income | ||||||||||||||
| Interest income | $ | 345,832,668 | $ | 271,960,514 | ||||||||||
| Dividend income | 26,707,168 | 22,479,905 | ||||||||||||
| Fee income | 8,281,165 | 6,426,570 | ||||||||||||
| Total investment income | 380,821,001 | 300,866,989 | ||||||||||||
| Operating expenses | ||||||||||||||
| Interest expense | 123,490,771 | 69,558,301 | ||||||||||||
| Administrative services expenses | 9,273,205 | 10,212,465 | ||||||||||||
| Custody and administrative fees | 1,632,951 | 1,321,067 | ||||||||||||
| Professional services expenses | 566,527 | 138,071 | ||||||||||||
| Other expenses | 695,486 | 355,761 | ||||||||||||
| Total operating expenses | 135,658,940 | 81,585,665 | ||||||||||||
| Income tax expense | 430,135 | 61,069 | ||||||||||||
| Net operating expenses | 136,089,075 | 81,646,734 | ||||||||||||
| Net investment income | 244,731,926 | 219,220,255 | ||||||||||||
| Net realized and unrealized gain (loss) | ||||||||||||||
| Net realized gain (loss) on investments | (8,563,462) | 21,480,138 | ||||||||||||
| Net realized gain (loss) on foreign currency forward contracts | 13,037,709 | 24,855,033 | ||||||||||||
| Net realized gain (loss) on foreign currency transactions | 1,289,848 | 3,754,550 | ||||||||||||
| Net realized gain (loss) | 5,764,095 | 50,089,721 | ||||||||||||
| Net change in unrealized appreciation (depreciation) on investments | (5,370,465) | (246,482,320) | ||||||||||||
| Net change in unrealized appreciation (depreciation) on foreign currency forward contracts | (19,912,502) | 18,603,521 | ||||||||||||
| Net change in unrealized gain (loss) on foreign currency translation | (11,084,910) | 22,235,798 | ||||||||||||
| Net change in unrealized appreciation (depreciation) | (36,367,877) | (205,643,001) | ||||||||||||
| Total net realized and unrealized gain (loss) | (30,603,782) | (155,553,280) | ||||||||||||
| Net increase (decrease) in Members' equity resulting from operations | $ | 214,128,144 | $ | 63,666,975 | ||||||||||
See notes to consolidated financial statements.
4
Credit Opportunities Partners JV, LLC and Subsidiaries
Consolidated Statements of Changes in Members’ Equity
| For the Year Ended December 31, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| Operations | ||||||||||||||
| Net investment income | $ | 244,731,926 | $ | 219,220,255 | ||||||||||
| Net realized gain (loss) on investments, foreign currency forward contracts and foreign currency transactions | 5,764,095 | 50,089,721 | ||||||||||||
| Net change in unrealized appreciation (depreciation) on investments, foreign currency forward contracts and foreign currency translation | (36,367,877) | (205,643,001) | ||||||||||||
| Net increase (decrease) in Members' equity resulting from operations | 214,128,144 | 63,666,975 | ||||||||||||
| Distributions to shareholders from | ||||||||||||||
| Net investment income | (250,000,000) | (227,000,000) | ||||||||||||
| Net decrease in Members' equity resulting from shareholders' distributions | (250,000,000) | (227,000,000) | ||||||||||||
| Issuance of units | — | 200,000,000 | ||||||||||||
| Net increase in Members' equity | — | 200,000,000 | ||||||||||||
| Total increase (decrease) in Members' equity | (35,871,856) | 36,666,975 | ||||||||||||
| Members' equity at beginning of year | 1,632,302,414 | 1,595,635,439 | ||||||||||||
| Members' equity at end of year | $ | 1,596,430,558 | $ | 1,632,302,414 | ||||||||||
See notes to consolidated financial statements.
5
Credit Opportunities Partners JV, LLC and Subsidiaries
Consolidated Statements of Cash Flows
| Year Ended December 31, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| Operating Activities: | ||||||||||||||
| Net increase (decrease) in net assets resulting from operations | $ | 214,128,144 | $ | 63,666,975 | ||||||||||
| Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities: | ||||||||||||||
| Purchases of investments | (634,538,919) | (1,217,947,096) | ||||||||||||
| Payment-in-kind interest capitalized | (11,239,073) | (11,558,237) | ||||||||||||
| Proceeds from sales of investments | 725,921,542 | 708,177,971 | ||||||||||||
| Proceeds from principal payments | 7,181,875 | 2,150,062 | ||||||||||||
| Net realized (gains) losses on investments | 8,563,462 | (21,168,580) | ||||||||||||
| Net change in unrealized (appreciation) depreciation on investments | 5,370,465 | 246,482,320 | ||||||||||||
| Net change in unrealized (appreciation) depreciation on foreign currency forward contract | 19,912,502 | (18,603,521) | ||||||||||||
| Net change in unrealized (gain) loss on foreign currency translation | 11,021,415 | (22,217,419) | ||||||||||||
| Amortization of premium/discount - net | (9,225,649) | (9,007,554) | ||||||||||||
| Amortization of deferred financing costs | 3,847,446 | 1,243,085 | ||||||||||||
| Decrease (increase) in receivable for investments sold and repaid | (11,129,618) | (667,822) | ||||||||||||
| Decrease (increase) in interest receivable | (13,696,419) | (10,829,677) | ||||||||||||
| Increase (decrease) in payable for investments purchased | 28,210,961 | (382,257,882) | ||||||||||||
| Increase (decrease) in interest payable | 4,976,390 | 6,734,151 | ||||||||||||
| Increase (decrease) in administrative services expense payable | (150,558) | 276,607 | ||||||||||||
| Increase (decrease) in other accrued expenses and liabilities | (344,537) | (1,340,917) | ||||||||||||
| Net cash provided by (used in) operating activities | 348,809,429 | (666,867,534) | ||||||||||||
| Financing Activities: | ||||||||||||||
| Contributions | — | 200,000,000 | ||||||||||||
| Distributions paid | (252,000,000) | (214,500,000) | ||||||||||||
| Deferred financing costs paid | (3,088,941) | (3,304,238) | ||||||||||||
| Borrowing under revolving credit facilities | 281,302,213 | 665,123,090 | ||||||||||||
| Repayments of revolving credit facilities | (366,683,400) | (170,939,593) | ||||||||||||
| Net cash provided by (used in) financing activities | (340,470,128) | 476,379,259 | ||||||||||||
| Effect of exchange rate changes on cash | — | 1,097,457 | ||||||||||||
| Net increase (decrease) in cash | 8,339,301 | (189,390,818) | ||||||||||||
| Cash and cash denominated in foreign currency, beginning of year | 176,278,409 | 365,669,227 | ||||||||||||
Cash and cash denominated in foreign currency, end of year (1) | $ | 184,617,710 | $ | 176,278,409 | ||||||||||
| Supplemental disclosure: | ||||||||||||||
| Cash paid for interest | $ | 114,666,935 | $ | 61,581,065 | ||||||||||
| Local and excise taxes paid | $ | 424,407 | $ | — | ||||||||||
(1)As of December 2023 and 2022, balance includes cash of $171,010,458 and $106,070,686, respectively, and cash denominated in foreign currency of $13,607,252 and $70,207,723, respectively.
See notes to consolidated financial statements.
6
Credit Opportunities Partners JV, LLC and Subsidiaries
Consolidated Statements of Investments
As of December 31, 2023
Company(a) | Footnotes | Industry | Interest Rate(b) | Base Rate Floor | Maturity Date | No. Shares/Principal Amount(c) | Cost | Fair Value(d) | ||||||||||||||||||||||||||||||||||||||||||
| Senior Secured Loans—First Lien—162.4% | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 48Forty Solutions LLC | (e)(o) | Commercial & Professional Services | SF+600 | 1.0% | 11/30/26 | $ | 19,158,250 | $ | 19,029,593 | $ | 18,173,942 | |||||||||||||||||||||||||||||||||||||||
| Accuride Corp | (h)(j) | Capital Goods | SF+525, 1.6% PIK (1.6% Max PIK) | 1.0% | 5/18/26 | 17,535,491 | 17,506,864 | 14,554,458 | ||||||||||||||||||||||||||||||||||||||||||
| Advania Sverige AB | (e)(o) | Software & Services | SR+610, 0.0% PIK (3.3% Max PIK) | 0.0% | 4/28/28 | SEK | 587,977,850 | 66,857,616 | 57,347,270 | |||||||||||||||||||||||||||||||||||||||||
| Advania Sverige AB | (e)(o) | Software & Services | R+610, 0.0% PIK (3.3% Max PIK) | 0.0% | 4/28/28 | ISK | 1,644,903,680 | 12,884,271 | 11,902,390 | |||||||||||||||||||||||||||||||||||||||||
| Affordable Care Inc | (e)(h)(o) | Health Care Equipment & Services | SF+550 | 0.8% | 8/2/28 | $ | 75,939,767 | 75,611,593 | 75,211,811 | |||||||||||||||||||||||||||||||||||||||||
| Alacrity Solutions Group LLC | (e)(j)(o) | Insurance | SF+525 | 0.8% | 12/22/28 | 31,571,823 | 30,996,766 | 31,205,922 | ||||||||||||||||||||||||||||||||||||||||||
| Alera Group Intermediate Holdings Inc | (e)(k)(o) | Insurance | SF+600 | 0.8% | 10/2/28 | 31,931,171 | 31,583,701 | 31,931,171 | ||||||||||||||||||||||||||||||||||||||||||
| Alstom SA | (g)(p) | Transportation | SF+550, 4.5% PIK (4.5% Max PIK) | 1.0% | 8/29/24 | 6,451,680 | 5,362,108 | 2,526,898 | ||||||||||||||||||||||||||||||||||||||||||
| American Vision Partners | (e)(k)(o) | Health Care Equipment & Services | SF+600 | 0.8% | 9/30/27 | 39,799,489 | 39,074,071 | 38,307,008 | ||||||||||||||||||||||||||||||||||||||||||
| Amerivet Partners Management Inc | (e)(h) | Health Care Equipment & Services | SF+550 | 0.8% | 2/25/28 | 17,792,680 | 17,253,562 | 17,639,753 | ||||||||||||||||||||||||||||||||||||||||||
| Ammeraal Beltech Holding BV | (h)(k) | Capital Goods | E+375 | 0.0% | 7/30/25 | € | 1,121,536 | 1,174,787 | 1,234,273 | |||||||||||||||||||||||||||||||||||||||||
| Apex Group Limited | (h) | Financial Services | SF+375 | 0.5% | 7/27/28 | $ | 4,137,826 | 4,141,917 | 4,127,481 | |||||||||||||||||||||||||||||||||||||||||
| Apex Group Limited | (h) | Financial Services | E+400 | 0.0% | 7/27/28 | € | 1,600,000 | 1,854,991 | 1,750,090 | |||||||||||||||||||||||||||||||||||||||||
| Arcfield Acquisition Corp | (e)(o) | Capital Goods | SF+625 | 0.8% | 8/4/29 | $ | 7,998,750 | 7,942,025 | 8,005,965 | |||||||||||||||||||||||||||||||||||||||||
| Arcos LLC/VA | (e)(h)(j) | Software & Services | SF+300, 3.3% PIK (3.3% Max PIK) | 1.0% | 4/20/28 | 22,457,664 | 22,315,036 | 20,127,187 | ||||||||||||||||||||||||||||||||||||||||||
| Ardonagh Group Ltd | (e)(h) | Insurance | SA+725 | 0.8% | 7/14/26 | £ | 3,767,607 | 4,727,452 | 4,799,934 | |||||||||||||||||||||||||||||||||||||||||
| Ardonagh Group Ltd | (e)(h) | Insurance | E+725 | 1.0% | 7/14/26 | € | 480,155 | 551,276 | 528,433 | |||||||||||||||||||||||||||||||||||||||||
| Ardonagh Group Ltd | (e)(j)(k)(o) | Insurance | SF+600 | 0.8% | 7/14/26 | $ | 54,787,266 | 54,387,494 | 53,552,103 | |||||||||||||||||||||||||||||||||||||||||
| Arrotex Australia Group Pty Ltd | (e)(h)(j) | Pharmaceuticals, Biotechnology & Life Sciences | B+675 | 1.0% | 6/30/28 | A$ | 70,822,383 | 44,497,254 | 47,809,180 | |||||||||||||||||||||||||||||||||||||||||
| athenahealth Inc | (k) | Health Care Equipment & Services | SF+325 | 0.5% | 2/15/29 | $ | 7,037,119 | 6,388,402 | 7,016,007 | |||||||||||||||||||||||||||||||||||||||||
| Barbri Inc | (e)(h) | Consumer Services | SF+575 | 0.8% | 4/28/28 | 46,761,312 | 46,775,342 | 45,472,140 | ||||||||||||||||||||||||||||||||||||||||||
| Belk Inc | Consumer Discretionary Distribution & Retail | P+650 | 2.0% | 7/31/25 | 636,703 | 634,988 | 579,400 | |||||||||||||||||||||||||||||||||||||||||||
| Belk Inc | (g)(p) | Consumer Discretionary Distribution & Retail | 5.0%, 8.0% PIK (8.0% Max PIK) | 7/31/25 | 3,077,282 | 1,604,054 | 571,220 | |||||||||||||||||||||||||||||||||||||||||||
| BGB Group LLC | (e)(h)(o) | Media & Entertainment | SF+575 | 1.0% | 8/16/27 | 53,801,461 | 53,481,383 | 52,591,462 | ||||||||||||||||||||||||||||||||||||||||||
| Bloom Fresh International Limited | (e)(h)(j) | Food, Beverage & Tobacco | SF+575 | 0.5% | 8/9/30 | 33,038,301 | 32,413,877 | 32,425,386 | ||||||||||||||||||||||||||||||||||||||||||
| Bugaboo International BV | (e)(h) | Consumer Durables & Apparel | E+700, 0.0% PIK (7.8% Max PIK) | 0.0% | 3/20/25 | € | 34,984,429 | 41,094,180 | 38,694,539 | |||||||||||||||||||||||||||||||||||||||||
| CFC Underwriting Ltd | (e)(h)(j) | Insurance | SF+500, 0.0% PIK (2.8% Max PIK) | 0.5% | 5/16/29 | $ | 39,458,838 | 39,176,745 | 39,853,427 | |||||||||||||||||||||||||||||||||||||||||
| Cision Ltd | Software & Services | SF+375 | 0.0% | 1/29/27 | 3,769,617 | 3,443,103 | 2,664,987 | |||||||||||||||||||||||||||||||||||||||||||
| Clarience Technologies LLC | (e)(j)(k) | Capital Goods | SF+625 | 1.0% | 12/14/26 | 40,604,843 | 39,792,746 | 40,604,843 | ||||||||||||||||||||||||||||||||||||||||||
| ClubCorp Club Operations Inc | (j)(k) | Consumer Services | SF+500 | 0.0% | 9/18/26 | 27,654,422 | 26,389,170 | 26,781,648 | ||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
7
Credit Opportunities Partners JV, LLC and Subsidiaries
Consolidated Statements of Investments (continued)
As of December 31, 2023
Company(a) | Footnotes | Industry | Interest Rate(b) | Base Rate Floor | Maturity Date | No. Shares/Principal Amount(c) | Cost | Fair Value(d) | ||||||||||||||||||||||||||||||||||||||||||
| Creation Technologies Inc | (k) | Technology Hardware & Equipment | SF+550 | 0.5% | 10/5/28 | 2,257,472 | 2,056,798 | 2,201,035 | ||||||||||||||||||||||||||||||||||||||||||
| CSafe Global | (e)(h)(k) | Transportation | SF+625 | 1.0% | 12/23/27 | $ | 58,764,281 | 58,685,977 | 58,543,915 | |||||||||||||||||||||||||||||||||||||||||
| CSafe Global | (e)(h) | Transportation | SF+625 | 1.0% | 8/13/28 | 17,106,250 | 17,106,250 | 17,020,719 | ||||||||||||||||||||||||||||||||||||||||||
| Cubic Corp | (h) | Software & Services | SF+425 | 0.8% | 5/25/28 | 8,979,165 | 9,010,428 | 8,386,361 | ||||||||||||||||||||||||||||||||||||||||||
| Encora Digital LLC | (e)(k)(o) | Commercial & Professional Services | SF+508, 0.0% PIK (2.3% Max PIK) | 0.8% | 12/20/28 | 23,250,000 | 22,835,845 | 23,250,000 | ||||||||||||||||||||||||||||||||||||||||||
| Envirotainer Ltd | (e)(h) | Transportation | E+575, 0.0% PIK (3.0% Max PIK) | 0.0% | 7/30/29 | € | 14,851,248 | 13,944,669 | 16,066,554 | |||||||||||||||||||||||||||||||||||||||||
| Envirotainer Ltd | (e)(h) | Transportation | SF+575, 0.0% PIK (3.0% Max PIK) | 0.8% | 7/30/29 | $ | 7,557,582 | 7,427,212 | 7,392,099 | |||||||||||||||||||||||||||||||||||||||||
| Excelitas Technologies Corp | (e)(k) | Technology Hardware & Equipment | E+575 | 0.0% | 8/12/29 | € | 4,011,240 | 4,167,736 | 4,423,488 | |||||||||||||||||||||||||||||||||||||||||
| Excelitas Technologies Corp | (e)(j)(k) | Technology Hardware & Equipment | SF+575 | 0.8% | 8/12/29 | $ | 25,909,180 | 25,666,127 | 25,832,412 | |||||||||||||||||||||||||||||||||||||||||
| Follett Software Co | (e)(h) | Software & Services | SF+575 | 0.8% | 8/31/28 | 37,145,000 | 36,864,028 | 37,052,362 | ||||||||||||||||||||||||||||||||||||||||||
| Foundation Consumer Brands LLC | (e)(j) | Pharmaceuticals, Biotechnology & Life Sciences | SF+625 | 1.0% | 2/12/27 | 7,950,000 | 7,950,000 | 7,950,000 | ||||||||||||||||||||||||||||||||||||||||||
| Galaxy Universal LLC | (e)(h) | Consumer Durables & Apparel | SF+550 | 1.0% | 11/30/26 | 7,578,635 | 7,578,635 | 7,370,222 | ||||||||||||||||||||||||||||||||||||||||||
| Galway Partners Holdings LLC | (e)(k)(o) | Insurance | SF+525, 0.0% PIK (1.3% Max PIK) | 0.8% | 9/29/28 | 36,514,925 | 35,911,754 | 36,167,865 | ||||||||||||||||||||||||||||||||||||||||||
| General Datatech LP | (e)(h)(j) | Software & Services | SF+625 | 1.0% | 6/18/27 | 36,291,792 | 35,041,160 | 35,449,400 | ||||||||||||||||||||||||||||||||||||||||||
| Gigamon Inc | (e)(j)(k) | Software & Services | SF+575 | 1.0% | 3/9/29 | 36,182,772 | 35,820,106 | 35,994,817 | ||||||||||||||||||||||||||||||||||||||||||
| Greystone Equity Member Corp | (e) | Financial Services | SF+725 | 3.8% | 4/1/26 | 30,226,700 | 30,103,666 | 30,226,700 | ||||||||||||||||||||||||||||||||||||||||||
| HealthChannels LLC | (j) | Health Care Equipment & Services | SF+450 | 0.0% | 4/3/25 | 15,243,683 | 15,198,306 | 10,794,433 | ||||||||||||||||||||||||||||||||||||||||||
| Heniff Transportation Systems LLC | (e)(j)(k) | Transportation | SF+575 | 1.0% | 12/3/26 | 32,575,034 | 32,203,131 | 32,575,034 | ||||||||||||||||||||||||||||||||||||||||||
| Hermes UK Ltd | (e)(k) | Transportation | SA+650 | 0.0% | 11/30/27 | £ | 14,668,920 | 19,599,006 | 17,921,996 | |||||||||||||||||||||||||||||||||||||||||
| Higginbotham Insurance Agency Inc | (e)(h) | Insurance | SF+550 | 1.0% | 11/24/28 | $ | 37,240,000 | 37,530,705 | 36,867,600 | |||||||||||||||||||||||||||||||||||||||||
| Industria Chimica Emiliana Srl | (e)(j)(k)(o) | Pharmaceuticals, Biotechnology & Life Sciences | E+725 | 0.0% | 9/27/26 | € | 113,856,600 | 125,896,247 | 120,493,592 | |||||||||||||||||||||||||||||||||||||||||
| iNova Pharmaceuticals (Australia) Pty Limited | (e)(k) | Pharmaceuticals, Biotechnology & Life Sciences | B+650 | 0.8% | 10/30/28 | A$ | 34,218,189 | 22,470,790 | 23,175,050 | |||||||||||||||||||||||||||||||||||||||||
| Insight Global LLC | (e)(h)(o) | Commercial & Professional Services | SF+600 | 0.8% | 9/22/28 | $ | 63,064,674 | 62,402,411 | 63,064,674 | |||||||||||||||||||||||||||||||||||||||||
| J S Held LLC | (e)(k) | Insurance | SF+550 | 1.0% | 7/1/25 | 15,900,121 | 15,792,000 | 15,791,205 | ||||||||||||||||||||||||||||||||||||||||||
| KBP Investments LLC | (e)(h) | Consumer Staples Distribution & Retail | SF+550, 1.0% PIK (1.0% Max PIK) | 0.8% | 5/26/27 | 23,734,732 | 23,629,893 | 22,473,629 | ||||||||||||||||||||||||||||||||||||||||||
| Kellermeyer Bergensons Services LLC | (e) | Commercial & Professional Services | SF+600 | 1.0% | 11/7/26 | 13,099,137 | 12,710,353 | 13,099,137 | ||||||||||||||||||||||||||||||||||||||||||
| Kellermeyer Bergensons Services LLC | (e)(g)(p) | Commercial & Professional Services | SF+100, 7.0% PIK (7.0% Max PIK) | 0.8% | 11/7/26 | 15,848,232 | 15,373,139 | 10,697,556 | ||||||||||||||||||||||||||||||||||||||||||
| Lakefield Veterinary Group | (e)(o) | Health Care Equipment & Services | SF+550 | 0.8% | 11/23/28 | 26,803,000 | 26,495,335 | 26,159,337 | ||||||||||||||||||||||||||||||||||||||||||
| Lakeview Farms Inc | (e)(j) | Food, Beverage & Tobacco | SF+575 | 1.0% | 6/10/27 | 15,370,912 | 15,305,808 | 15,310,890 | ||||||||||||||||||||||||||||||||||||||||||
| Lakeview Farms Inc | (e)(j) | Food, Beverage & Tobacco | SF+575 | 1.0% | 6/10/27 | 7,632,807 | 7,461,832 | 7,603,039 | ||||||||||||||||||||||||||||||||||||||||||
| Lexitas Inc | (e)(h) | Commercial & Professional Services | SF+675 | 1.0% | 5/18/29 | 33,285,568 | 33,173,589 | 33,798,166 | ||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
8
Credit Opportunities Partners JV, LLC and Subsidiaries
Consolidated Statements of Investments (continued)
As of December 31, 2023
Company(a) | Footnotes | Industry | Interest Rate(b) | Base Rate Floor | Maturity Date | No. Shares/Principal Amount(c) | Cost | Fair Value(d) | ||||||||||||||||||||||||||||||||||||||||||
| Lionbridge Technologies Inc | (e)(h)(j) | Media & Entertainment | SF+700 | 1.0% | 12/29/25 | 23,819,549 | 23,541,820 | 23,819,549 | ||||||||||||||||||||||||||||||||||||||||||
| Lloyd's Register Quality Assurance Ltd | (e)(h)(o) | Consumer Services | E+600, 0.0% PIK (6.3% Max PIK) | 0.0% | 12/2/28 | € | 44,315,170 | 48,953,525 | 47,799,504 | |||||||||||||||||||||||||||||||||||||||||
| MB2 Dental Solutions LLC | (e)(h) | Health Care Equipment & Services | SF+600 | 1.0% | 1/29/27 | $ | 32,069,832 | 31,623,323 | 32,069,832 | |||||||||||||||||||||||||||||||||||||||||
| Med-Metrix | (e)(o) | Software & Services | SF+600 | 1.0% | 9/15/27 | 11,759,398 | 11,744,969 | 11,759,398 | ||||||||||||||||||||||||||||||||||||||||||
| Misys Ltd | (e)(k) | Software & Services | SF+725 | 1.0% | 9/13/29 | $ | 14,803,650 | 14,507,577 | 14,507,577 | |||||||||||||||||||||||||||||||||||||||||
| Motion Recruitment Partners LLC | (e)(h)(j) | Commercial & Professional Services | SF+650 | 1.0% | 12/22/25 | 29,339,991 | 29,032,044 | 28,520,044 | ||||||||||||||||||||||||||||||||||||||||||
| New Era Technology Inc | (e)(h)(j)(k) | Software & Services | SF+625 | 1.0% | 10/31/26 | 33,193,127 | 32,770,296 | 32,762,615 | ||||||||||||||||||||||||||||||||||||||||||
| NovaTaste Austria GmbH | (e)(j) | Food, Beverage & Tobacco | E+700 | 0.0% | 5/30/30 | € | 10,925,000 | 11,823,220 | 11,755,661 | |||||||||||||||||||||||||||||||||||||||||
| Novotech Pty Ltd | (e)(k)(o) | Health Care Equipment & Services | SF+525 | 0.5% | 1/13/28 | $ | 47,654,265 | 46,674,317 | 47,381,552 | |||||||||||||||||||||||||||||||||||||||||
| One Call Care Management Inc | (h) | Health Care Equipment & Services | SF+550 | 0.8% | 4/22/27 | 4,875,000 | 4,908,140 | 4,227,039 | ||||||||||||||||||||||||||||||||||||||||||
| Pantherx Specialty LLC | (e)(j) | Pharmaceuticals, Biotechnology & Life Sciences | SF+550 | 0.5% | 7/16/29 | 15,754,622 | 14,811,831 | 15,754,622 | ||||||||||||||||||||||||||||||||||||||||||
| Parts Town LLC | (e)(h)(k)(o) | Consumer Discretionary Distribution & Retail | SF+598 | 0.8% | 11/1/28 | 48,935,823 | 47,949,584 | 48,790,555 | ||||||||||||||||||||||||||||||||||||||||||
| Peraton Corp | (j) | Capital Goods | SF+375 | 0.8% | 2/1/28 | 8,656,211 | 8,329,402 | 8,688,672 | ||||||||||||||||||||||||||||||||||||||||||
| Performance Health Holdings Inc | (e)(k) | Health Care Equipment & Services | SF+575 | 1.0% | 7/12/27 | 15,100,000 | 15,056,210 | 15,056,210 | ||||||||||||||||||||||||||||||||||||||||||
| Plaskolite, LLC | (k) | Materials | SF+400 | 0.8% | 12/15/25 | 1,114,559 | 1,067,445 | 1,068,583 | ||||||||||||||||||||||||||||||||||||||||||
| Pretium Packaging LLC | (j) | Materials | SF+460, 0.0% PIK (2.3% Max PIK) | 1.0% | 10/2/28 | 1,491,063 | 1,491,063 | 1,174,212 | ||||||||||||||||||||||||||||||||||||||||||
| Pretium Packaging LLC | (n) | Materials | SF+500, 0.0% PIK (2.5% Max PIK) | 1.0% | 10/2/28 | 1,235,268 | 1,190,130 | 1,213,657 | ||||||||||||||||||||||||||||||||||||||||||
| Project Marron | (e)(j)(k) | Consumer Services | B+625 | 0.5% | 7/2/25 | A$ | 40,281,279 | 27,357,700 | 26,433,463 | |||||||||||||||||||||||||||||||||||||||||
| Project Marron | (e)(h)(j) | Consumer Services | C+625 | 0.5% | 7/2/25 | C$ | 50,570,593 | 38,874,925 | 36,796,551 | |||||||||||||||||||||||||||||||||||||||||
| PSKW LLC (dba ConnectiveRx) | (e)(j)(k) | Health Care Equipment & Services | SF+625 | 1.0% | 3/9/26 | $ | 21,095,207 | 21,095,207 | 21,095,207 | |||||||||||||||||||||||||||||||||||||||||
| Pure Fishing Inc | (e) | Consumer Durables & Apparel | SF+450 | 0.0% | 12/22/25 | 9,719,388 | 9,649,847 | 8,747,449 | ||||||||||||||||||||||||||||||||||||||||||
| Reliant Rehab Hospital Cincinnati LLC | (e)(g)(p) | Health Care Equipment & Services | SF+625, 0.0% PIK (6.3% Max PIK) | 0.0% | 2/28/26 | 13,937,689 | 13,652,569 | 117,690 | ||||||||||||||||||||||||||||||||||||||||||
| Reliant Rehab Hospital Cincinnati LLC | (e) | Health Care Equipment & Services | SF+625 | 0.0% | 3/2/26 | 13,915,531 | 13,663,570 | 12,573,435 | ||||||||||||||||||||||||||||||||||||||||||
| Revere Superior Holdings Inc | (e)(k) | Software & Services | SF+550 | 1.0% | 9/30/26 | 19,359,656 | 19,382,844 | 19,359,587 | ||||||||||||||||||||||||||||||||||||||||||
| Rise Baking Company | (e)(j)(k) | Food, Beverage & Tobacco | SF+625 | 1.0% | 8/13/27 | 30,102,493 | 29,626,058 | 30,102,493 | ||||||||||||||||||||||||||||||||||||||||||
| Rise Baking Company | (e)(f) | Food, Beverage & Tobacco | SF+625 | 1.0% | 8/13/27 | 1,944,887 | 1,912,935 | 1,944,887 | ||||||||||||||||||||||||||||||||||||||||||
| RSC Insurance Brokerage Inc | (e)(k) | Insurance | SF+550 | 0.8% | 11/1/29 | 18,611,860 | 18,599,031 | 18,537,507 | ||||||||||||||||||||||||||||||||||||||||||
| Safe-Guard Products International LLC | (e)(h)(j)(k) | Financial Services | SF+550 | 0.5% | 1/27/27 | 71,662,836 | 71,999,722 | 71,238,584 | ||||||||||||||||||||||||||||||||||||||||||
| SAMBA Safety Inc | (e)(h)(j) | Software & Services | L+525 | 1.0% | 9/1/27 | 26,829,622 | 26,637,730 | 26,809,928 | ||||||||||||||||||||||||||||||||||||||||||
| SavATree LLC | (e)(j)(k) | Consumer Services | SF+525 | 0.8% | 10/12/28 | 39,205,972 | 38,978,325 | 38,888,971 | ||||||||||||||||||||||||||||||||||||||||||
| SI Group Inc | (k) | Materials | SF+475 | 0.0% | 10/15/25 | 1,528,208 | 1,473,357 | 1,049,115 | ||||||||||||||||||||||||||||||||||||||||||
| SIRVA Worldwide Inc | (h) | Commercial & Professional Services | SF+550 | 0.0% | 8/4/25 | 6,696,641 | 6,518,314 | 5,953,749 | ||||||||||||||||||||||||||||||||||||||||||
| SitusAMC Holdings Corp | (e)(j)(o) | Real Estate Management & Development | L+550, 0.0% PIK (0.0%% Max PIK) | 1.0% | 12/22/27 | 37,017,214 | 36,235,014 | 37,017,214 | ||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
9
Credit Opportunities Partners JV, LLC and Subsidiaries
Consolidated Statements of Investments (continued)
As of December 31, 2023
Company(a) | Footnotes | Industry | Interest Rate(b) | Base Rate Floor | Maturity Date | No. Shares/Principal Amount(c) | Cost | Fair Value(d) | ||||||||||||||||||||||||||||||||||||||||||
| Solina France SASU | (e)(k) | Food, Beverage & Tobacco | SF+650 | 0.0% | 7/28/28 | 20,500,000 | 20,295,000 | 20,705,000 | ||||||||||||||||||||||||||||||||||||||||||
| Sorenson Communications LLC | (j) | Telecommunication Services | SF+550 | 0.8% | 3/17/26 | 17,568,351 | 17,148,447 | 17,531,809 | ||||||||||||||||||||||||||||||||||||||||||
| Source Code LLC | (e)(o) | Software & Services | SF+650 | 1.0% | 6/30/27 | 10,473,684 | 10,473,684 | 10,473,684 | ||||||||||||||||||||||||||||||||||||||||||
| Spins LLC | (e)(o) | Software & Services | SF+550 | 1.0% | 1/20/27 | 10,124,041 | 10,124,041 | 10,124,041 | ||||||||||||||||||||||||||||||||||||||||||
| Summit Interconnect Inc | (e)(o) | Capital Goods | SF+600 | 1.0% | 9/22/28 | 19,324,273 | 19,117,659 | 17,885,178 | ||||||||||||||||||||||||||||||||||||||||||
| Time Manufacturing Co | (e)(h) | Capital Goods | E+650 | 0.8% | 12/1/27 | € | 29,095,382 | 32,363,160 | 30,040,923 | |||||||||||||||||||||||||||||||||||||||||
| Total Safety US Inc | (h) | Capital Goods | SF+600 | 1.0% | 8/16/25 | $ | 10,506,808 | 9,789,833 | 10,053,754 | |||||||||||||||||||||||||||||||||||||||||
| Transaction Services Group Ltd | (e)(j)(k)(o) | Software & Services | B+550 | 0.0% | 10/14/26 | A$ | 124,140,618 | 85,492,618 | 84,689,062 | |||||||||||||||||||||||||||||||||||||||||
| Unifrax I LLC / Unifrax Holding Co | (k) | Capital Goods | SF+375 | 0.0% | 12/12/25 | $ | 2,812,728 | 2,690,521 | 2,631,152 | |||||||||||||||||||||||||||||||||||||||||
| Version1 Software Ltd | (e)(k) | Software & Services | E+575, 0.0% PIK (1.7% Max PIK) | 0.0% | 7/11/29 | € | 2,477,331 | 2,539,627 | 2,718,132 | |||||||||||||||||||||||||||||||||||||||||
| Version1 Software Ltd | (e)(k) | Software & Services | SA+575, 0.0% PIK (1.7% Max PIK) | 0.0% | 7/11/29 | £ | 4,032,564 | 4,673,990 | 5,096,388 | |||||||||||||||||||||||||||||||||||||||||
| Vytalogy Wellness LLC (fka Jarrow Formulas Inc) | (e)(j)(o) | Household & Personal Products | SF+625 | 1.0% | 11/30/26 | $ | 35,147,044 | 34,300,000 | 34,265,641 | |||||||||||||||||||||||||||||||||||||||||
| Wealth Enhancement Group LLC | (e)(k) | Financial Services | SF+575 | 1.0% | 10/4/27 | 2,914,834 | 2,898,803 | 2,914,850 | ||||||||||||||||||||||||||||||||||||||||||
| West Corp | (h) | Commercial & Professional Services | SF+400 | 1.0% | 4/10/27 | 4,002,736 | 3,960,888 | 3,825,115 | ||||||||||||||||||||||||||||||||||||||||||
| Wittur Holding GmbH | (e) | Capital Goods | 10.0% PIK (10.0% Max PIK) | 12/31/28 | € | 1,677,983 | 1,849,810 | 1,852,410 | ||||||||||||||||||||||||||||||||||||||||||
| Wittur Holding GmbH | (e)(f) | Capital Goods | 10.0% PIK (10.0% Max PIK) | 12/31/28 | 20,898,418 | 22,845,897 | 22,802,009 | |||||||||||||||||||||||||||||||||||||||||||
| Woolpert Inc | (e)(h)(j) | Capital Goods | SF+600 | 1.0% | 4/5/28 | $ | 52,462,576 | 52,084,916 | 52,462,576 | |||||||||||||||||||||||||||||||||||||||||
| Worldwise Inc | (e)(j)(k) | Household & Personal Products | SF+625, 0.5% PIK (0.5% Max PIK) | 1.0% | 3/29/28 | 57,334,872 | 54,740,894 | 52,548,044 | ||||||||||||||||||||||||||||||||||||||||||
| Yak Access LLC | (n) | Capital Goods | SF+640 | 1.0% | 3/10/28 | 455,555 | 363,802 | 411,993 | ||||||||||||||||||||||||||||||||||||||||||
| Total Senior Secured Loans—First Lien | 2,673,244,937 | 2,617,190,488 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Unfunded Loan Commitments | (24,790,786) | (24,790,786) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net Senior Secured Loans—First Lien | 2,648,454,151 | 2,592,399,702 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Senior Secured Loans—Second Lien—14.7% | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Access CIG LLC | (h) | Commercial & Professional Services | SF+775 | 0.0% | 2/27/26 | 2,520,082 | 2,339,337 | 2,517,978 | ||||||||||||||||||||||||||||||||||||||||||
| Apex Group Limited | (e)(h)(o) | Financial Services | SF+675 | 0.5% | 7/27/29 | 40,000,000 | 39,704,969 | 39,201,795 | ||||||||||||||||||||||||||||||||||||||||||
| Cubic Corp | (e)(k) | Software & Services | SF+763 | 0.8% | 5/25/29 | 10,000,000 | 9,702,000 | 9,564,053 | ||||||||||||||||||||||||||||||||||||||||||
| Element Materials Technology Group US Holdings Inc | (e)(h) | Commercial & Professional Services | SA+725 | 0.5% | 6/24/30 | £ | 20,999,137 | 22,980,522 | 26,324,866 | |||||||||||||||||||||||||||||||||||||||||
| NEP Broadcasting LLC | (h) | Media & Entertainment | SF+700 | 0.0% | 10/19/26 | $ | 6,847,253 | 6,769,734 | 5,512,039 | |||||||||||||||||||||||||||||||||||||||||
| OEConnection LLC | (e)(h)(j) | Software & Services | SF+700 | 0.5% | 9/25/27 | 50,000,000 | 50,000,000 | 49,760,363 | ||||||||||||||||||||||||||||||||||||||||||
| Paradigm Acquisition Corp | (h)(k) | Health Care Equipment & Services | SF+750 | 0.0% | 10/26/26 | 2,536,227 | 2,479,915 | 2,346,010 | ||||||||||||||||||||||||||||||||||||||||||
| Peraton Corp | (e)(h) | Capital Goods | SF+775 | 0.8% | 2/1/29 | 21,399,977 | 21,246,597 | 21,360,387 | ||||||||||||||||||||||||||||||||||||||||||
| Pretium Packaging LLC | (e)(h)(j) | Materials | SF+675 | 0.5% | 10/1/29 | 39,900,250 | 39,757,310 | 25,722,244 | ||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
10
Credit Opportunities Partners JV, LLC and Subsidiaries
Consolidated Statements of Investments (continued)
As of December 31, 2023
Company(a) | Footnotes | Industry | Interest Rate(b) | Base Rate Floor | Maturity Date | No. Shares/Principal Amount(c) | Cost | Fair Value(d) | ||||||||||||||||||||||||||||||||||||||||||
| SIRVA Worldwide Inc | (h)(j) | Commercial & Professional Services | SF+950 | 0.0% | 8/3/26 | 10,287,070 | 9,006,297 | 8,859,739 | ||||||||||||||||||||||||||||||||||||||||||
| Valeo Foods Group Ltd | (e)(h) | Food, Beverage & Tobacco | SA+800 | 0.0% | 9/28/29 | £ | 9,289,917 | 11,852,318 | 9,991,410 | |||||||||||||||||||||||||||||||||||||||||
| Wittur Holding GmbH | (e)(g)(n)(p) | Capital Goods | E+850, 1.0% PIK (1.0% Max PIK) | 0.0% | 10/4/27 | € | 122,358,053 | 132,409,598 | 33,088,185 | |||||||||||||||||||||||||||||||||||||||||
| Total Senior Secured Loans—Second Lien | 348,248,597 | 234,249,069 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Other Senior Secured Debt—1.3% | ||||||||||||||||||||||||||||||||||||||||||||||||||
| One Call Care Management Inc | (e) | Health Care Equipment & Services | 8.5% PIK (8.5% Max PIK) | 11/1/28 | $ | 27,797,552 | 27,342,773 | 20,628,563 | ||||||||||||||||||||||||||||||||||||||||||
| Total Other Senior Secured Debt | 27,342,773 | 20,628,563 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Subordinated Debt—0.3% | ||||||||||||||||||||||||||||||||||||||||||||||||||
| athenahealth Inc | Health Care Equipment & Services | 7% | 2/15/30 | $ | 5,545,000 | 4,857,558 | 5,037,702 | |||||||||||||||||||||||||||||||||||||||||||
| Total Subordinated Debt | 4,857,558 | 5,037,702 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Asset Based Finance—27.4% | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Abacus JV, Private Equity | (e) | Insurance | 30,011,455 | 30,752,738 | 30,934,998 | |||||||||||||||||||||||||||||||||||||||||||||
| Altavair AirFinance, Private Equity | (e) | Capital Goods | 33,549,481 | 39,487,739 | 34,831,071 | |||||||||||||||||||||||||||||||||||||||||||||
| GA Capital Specialty Lending Fund, Limited Partnership Interest | (e)(n) | Financial Services | 1 | 1 | 497,200 | |||||||||||||||||||||||||||||||||||||||||||||
| Global Lending Services LLC, Private Equity | (e)(n) | Financial Services | 1,147,621 | 1,147,621 | 1,338,980 | |||||||||||||||||||||||||||||||||||||||||||||
| Global Lending Services LLC, Private Equity | (e) | Financial Services | 12,120,364 | 15,929,794 | 11,617,914 | |||||||||||||||||||||||||||||||||||||||||||||
| Kilter Finance, Preferred Stock | (e) | Insurance | 12% | 24,000,000 | 24,000,000 | 24,000,000 | ||||||||||||||||||||||||||||||||||||||||||||
| KKR Chord IP Aggregator LP, Partnership Interest | (e) | Media & Entertainment | 19,625,000 | 22,931,812 | 21,898,615 | |||||||||||||||||||||||||||||||||||||||||||||
| KKR Zeno Aggregator LP (K2 Aviation), Partnership Interest | (e)(n)(p) | Capital Goods | 9,940,842 | 12,369,390 | 9,825,340 | |||||||||||||||||||||||||||||||||||||||||||||
| Luxembourg Life Fund - Absolute Return Fund I, 1L Term Loan | (e)(h)(n) | Insurance | SF+750 | 1.5% | 2/27/25 | $ | 16,286,449 | 16,300,024 | 16,302,767 | |||||||||||||||||||||||||||||||||||||||||
| Luxembourg Life Fund - Absolute Return Fund II, Structured Mezzanine | (e)(h) | Insurance | SF+750 | 0.5% | 2/10/27 | $ | 22,589,239 | 22,452,751 | 22,355,290 | |||||||||||||||||||||||||||||||||||||||||
| My Community Homes PropCo 2, Private Equity | (e)(p) | Equity Real Estate Investment Trusts (REITs) | 33,409,091 | 33,409,091 | 32,431,608 | |||||||||||||||||||||||||||||||||||||||||||||
| NewStar Clarendon 2014-1A Class D | (e)(k)(n) | Financial Services | 1% | 1/25/27 | $ | 30,040,000 | 9,126,801 | 8,035,700 | ||||||||||||||||||||||||||||||||||||||||||
| Pretium Partners LLC P1, Structured Mezzanine | (e)(h) | Equity Real Estate Investment Trusts (REITs) | 2.8%, 5.3% PIK (5.3% Max PIK) | 10/22/26 | $ | 31,179,833 | 30,331,798 | 30,899,776 | ||||||||||||||||||||||||||||||||||||||||||
| Pretium Partners LLC P2, Private Equity | (e) | Equity Real Estate Investment Trusts (REITs) | 16,772,368 | 16,165,208 | 18,883,288 | |||||||||||||||||||||||||||||||||||||||||||||
| Pretium Partners LLC P2, Term Loan | (e) | Equity Real Estate Investment Trusts (REITs) | 11% | 12/16/29 | $ | 33,544,735 | 32,873,841 | 32,873,841 | ||||||||||||||||||||||||||||||||||||||||||
| Roemanu LLC (FKA Toorak Capital Partners LLC), Private Equity | (e) | Financial Services | 40,000,000 | 50,156,000 | 43,671,080 | |||||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
11
Credit Opportunities Partners JV, LLC and Subsidiaries
Consolidated Statements of Investments (continued)
As of December 31, 2023
Company(a) | Footnotes | Industry | Interest Rate(b) | Base Rate Floor | Maturity Date | No. Shares/Principal Amount(c) | Cost | Fair Value(d) | ||||||||||||||||||||||||||||||||||||||||||
| Saluda Grade Alternative Mortgage Trust 2022-BC2, Structured Mezzanine | (e) | Real Estate Management & Development | 8% | 7/25/30 | $ | 5,742,683 | 5,694,677 | 5,634,273 | ||||||||||||||||||||||||||||||||||||||||||
| Saluda Grade Alternative Mortgage Trust 2022-BC2, Term Loan | (e) | Real Estate Management & Development | 7% | 7/25/30 | $ | 34,456,103 | 34,125,351 | 34,033,705 | ||||||||||||||||||||||||||||||||||||||||||
| SG Residential Mortgage Trust 2022-2, Structured Mezzanine | Real Estate Management & Development | 5% | 8/25/62 | $ | 4,586,736 | 3,826,680 | 4,109,289 | |||||||||||||||||||||||||||||||||||||||||||
| Star Mountain Strategic Credit Income Fund IV LP, Private Equity | (e) | Financial Services | 47,000,000 | 47,000,000 | 46,201,000 | |||||||||||||||||||||||||||||||||||||||||||||
| Verus Securitization Trust 2023-5, Structured Mezzanine | Real Estate Management & Development | 8% | 6/25/68 | $ | 2,383,340 | 2,131,874 | 2,232,243 | |||||||||||||||||||||||||||||||||||||||||||
| Verus Securitization Trust 2023-5, Structured Mezzanine | Real Estate Management & Development | 8% | 6/25/68 | $ | 3,525,130 | 3,358,381 | 3,503,905 | |||||||||||||||||||||||||||||||||||||||||||
| Verus Securitization Trust 2023-INV1, Structured Mezzanine | Real Estate Management & Development | 8% | 2/25/68 | $ | 1,932,910 | 1,705,529 | 1,770,259 | |||||||||||||||||||||||||||||||||||||||||||
| Total Asset Based Finance | 455,277,101 | 437,882,142 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Equity/Other—11.3% | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Ascent Resources Utica Holdings LLC / ARU Finance Corp | (e)(l)(p) | Energy | 1,151,785 | 30,412,774 | 30,631,722 | |||||||||||||||||||||||||||||||||||||||||||||
| Ascent Resources Utica Holdings LLC / ARU Finance Corp, Common Stock | (e)(l)(p) | Energy | 13,556 | 3,592,223 | 3,605,100 | |||||||||||||||||||||||||||||||||||||||||||||
| athenahealth Inc, Preferred Stock | (e) | Health Care Equipment & Services | 10.8% PIK (10.8% Max PIK) | 50,000,000 | 47,657,728 | 47,208,535 | ||||||||||||||||||||||||||||||||||||||||||||
| Belk Inc, Common Stock | (e)(p) | Consumer Discretionary Distribution & Retail | 381 | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Misys Ltd, Preferred Stock | (e) | Software & Services | L+1,125 PIK (L+1,125 Max PIK) | 0.0% | 29,573,080 | 29,093,380 | 25,223,020 | |||||||||||||||||||||||||||||||||||||||||||
| One Call Care Management Inc, Common Stock | (e)(p) | Health Care Equipment & Services | 34,873 | 2,220,193 | 1,881,826 | |||||||||||||||||||||||||||||||||||||||||||||
| One Call Care Management Inc, Preferred Stock A | (e)(p) | Health Care Equipment & Services | 371,993 | 23,682,302 | 18,470,448 | |||||||||||||||||||||||||||||||||||||||||||||
| One Call Care Management Inc, Preferred Stock B | (e) | Health Care Equipment & Services | 9.0% PIK (9.0% Max PIK) | 10/25/29 | 7,672,346 | 8,587,468 | 7,672,292 | |||||||||||||||||||||||||||||||||||||||||||
| Pure Gym Ltd, Private Equity | (e)(p) | Consumer Services | 30,218,000 | 39,390,642 | 45,922,305 | |||||||||||||||||||||||||||||||||||||||||||||
| Yak Access LLC, Common Stock | (n)(p) | Capital Goods | 1,256 | 974 | 100 | |||||||||||||||||||||||||||||||||||||||||||||
| Yak Access LLC, Preferred Stock | (n)(p) | Capital Goods | 301,310 | 22,598 | 15,578 | |||||||||||||||||||||||||||||||||||||||||||||
| Total Equity/Other | 184,660,282 | 180,630,926 | ||||||||||||||||||||||||||||||||||||||||||||||||
| TOTAL INVESTMENTS—217.4% | 3,668,840,462 | 3,470,828,104 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative Instruments—(0.5)% | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency forward contracts | (8,031,457) | |||||||||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
12
Credit Opportunities Partners JV, LLC and Subsidiaries
Consolidated Statements of Investments (continued)
As of December 31, 2023
(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, 2023, the three-month London Interbank Offered Rate, or LIBOR or “L”, was 5.59%, the Euro Interbank Offered Rate, or EURIBOR or “E”, was 3.91%, Canadian Dollar Offer Rate, or CDOR or “C”, was 5.45%, the Bank Bill Swap Bid Rate, or BBSY or “B”, was 4.41%, the Reykjavik Interbank Offered Rate, or REIBOR or “R”, was 9.91%, the Stockholm Interbank Offered Rate, or STIBOR or “SR”, was 4.05%, the Sterling Overnight Index Average, or SONIA or “SA”, was 5.21%, the Secured Overnight Financing Rate, or SOFR or “SF”, was 5.33%, and the U.S. Prime Lending Rate, or Prime or “P”, was 8.50%. PIK means paid-in-kind. PIK income accruals may be adjusted based on the performance of the underlying investment.
(c)Denominated in U.S. dollars unless otherwise noted.
(d)Fair value is determined in accordance with the Company’s valuation process.
(e)Investments classified as Level 3.
(f)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.
(g)Asset is on non-accrual status.
(h)Security or portion thereof held within Big Cedar Creek LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with BNP Paribas.
(i)Security or portion thereof held within Boxwood Drive Funding and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with BNP Paribas
(j)Security or portion thereof held within Chestnut Street Funding LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with Citibank, N.A.
(k)Security or portion thereof held within Green Creek LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with Goldman Sachs Bank.
(l)Security or portion thereof held within IC II American Energy Investment, Inc., a wholly-owned subsidiary of the company.
(m)Security or portion thereof held within JCF Cayman Ltd and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with Goldman Sachs.
(n)Security or portion thereof held within Jersey City Funding LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with Goldman Sachs.
(o)Security or portion thereof held within Magnolia Funding LLC.
(p)Security is non-income producing.
See notes to consolidated financial statements.
13
Credit Opportunities Partners JV, LLC and Subsidiaries
Consolidated Statements of Investments
As of December 31, 2022
Company(a) | Footnotes | Industry | Interest Rate(b) | Base Rate Floor | Maturity Date | No. Shares/Principal Amount(c) | Cost | Fair Value(d) | ||||||||||||||||||||||||||||||||||||||||||
| Senior Secured Loans—First Lien—147.9% | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 48Forty Solutions LLC | (e)(o) | Commercial & Professional Services | SF+550 | 1.0% | 11/30/26 | $ | 19,352,750 | $ | 19,185,538 | $ | 18,835,758 | |||||||||||||||||||||||||||||||||||||||
| Accuride Corp | (i)(j) | Capital Goods | L+525 | 1.0% | 11/17/23 | 20,765,321 | 20,381,148 | 17,695,998 | ||||||||||||||||||||||||||||||||||||||||||
| Advania Sverige AB | (e)(o) | Software & Services | SR+610, 0.0% PIK (3.3% Max PIK) | 0.0% | 4/28/28 | SEK | 587,977,580 | 66,641,570 | 54,093,588 | |||||||||||||||||||||||||||||||||||||||||
| Advania Sverige AB | (e)(o) | Software & Services | R+610, 0.0% PIK (3.3% Max PIK) | 0.0% | 4/28/28 | ISK | 1,644,903,680 | 12,837,725 | 11,215,120 | |||||||||||||||||||||||||||||||||||||||||
| Affordable Care Inc | (e)(h)(i)(o) | Health Care Equipment & Services | L+550, 0.0% PIK (1.3% Max PIK) | 0.8% | 8/2/28 | $ | 76,138,972 | 75,749,292 | 74,494,371 | |||||||||||||||||||||||||||||||||||||||||
| Alacrity Solutions Group LLC | (e)(j)(o) | Insurance | L+525 | 0.8% | 12/22/28 | 40,648,125 | 39,863,586 | 39,119,756 | ||||||||||||||||||||||||||||||||||||||||||
| Alera Group Intermediate Holdings Inc | (e)(k)(o) | Insurance | L+600 | 0.8% | 10/2/28 | 32,257,833 | 31,854,088 | 30,708,989 | ||||||||||||||||||||||||||||||||||||||||||
| Alstom SA | (k) | Transportation | L+550, 2.5% PIK (2.5% Max PIK) | 1.0% | 8/29/24 | 6,215,149 | 5,813,584 | 3,480,484 | ||||||||||||||||||||||||||||||||||||||||||
| American Airlines Group Inc | (k) | Transportation | L+175 | 0.0% | 6/27/25 | 2,483,040 | 2,270,246 | 2,393,427 | ||||||||||||||||||||||||||||||||||||||||||
| American Vision Partners | (e)(o) | Health Care Equipment & Services | L+575 | 0.8% | 9/30/27 | 19,547,055 | 19,332,613 | 18,884,410 | ||||||||||||||||||||||||||||||||||||||||||
| Ammeraal Beltech Holding BV | (h)(k) | Capital Goods | E+375 | 0.0% | 7/30/25 | € | 4,759,231 | 4,824,434 | 4,790,838 | |||||||||||||||||||||||||||||||||||||||||
| Apex Group Limited | (h) | Diversified Financials | L+375 | 0.5% | 7/27/28 | $ | 4,180,157 | 4,184,873 | 4,002,500 | |||||||||||||||||||||||||||||||||||||||||
| Apex Group Limited | (h) | Diversified Financials | E+400 | 0.0% | 7/27/28 | € | 1,600,000 | 1,855,568 | 1,631,212 | |||||||||||||||||||||||||||||||||||||||||
| Arcfield Acquisition Corp | (e)(o) | Capital Goods | L+575 | 0.8% | 3/10/28 | $ | 8,039,250 | 7,968,199 | 7,855,151 | |||||||||||||||||||||||||||||||||||||||||
| Arcos LLC/VA | (e)(h)(j) | Software & Services | L+575 | 1.0% | 3/31/28 | 22,218,750 | 22,048,933 | 20,608,612 | ||||||||||||||||||||||||||||||||||||||||||
| Ardonagh Group Ltd | (e)(i) | Insurance | SA+700 | 0.8% | 7/14/26 | £ | 3,767,607 | 4,706,030 | 4,497,457 | |||||||||||||||||||||||||||||||||||||||||
| Ardonagh Group Ltd | (e)(i) | Insurance | E+700 | 1.0% | 7/14/26 | € | 480,155 | 548,904 | 509,358 | |||||||||||||||||||||||||||||||||||||||||
| Ardonagh Group Ltd | (e)(j)(k)(o) | Insurance | L+575 | 0.8% | 7/14/26 | $ | 54,787,266 | 54,262,908 | 53,061,372 | |||||||||||||||||||||||||||||||||||||||||
| Arrotex Australia Group Pty Ltd | (e)(j)(k)(o) | Pharmaceuticals, Biotechnology & Life Sciences | B+525 | 1.0% | 7/10/24 | A$ | 109,385,493 | 73,939,248 | 74,460,356 | |||||||||||||||||||||||||||||||||||||||||
| Arrotex Australia Group Pty Ltd | (e)(j)(k)(o) | Pharmaceuticals, Biotechnology & Life Sciences | B+525 | 1.0% | 7/10/24 | 8,004,500 | 5,733,065 | 5,448,784 | ||||||||||||||||||||||||||||||||||||||||||
| athenahealth Inc | (k) | Health Care Equipment & Services | SF+350 | 0.5% | 2/15/29 | $ | 7,108,562 | 6,372,959 | 6,435,808 | |||||||||||||||||||||||||||||||||||||||||
| athenahealth Inc | (f) | Health Care Equipment & Services | SF+350 | 0.5% | 2/15/29 | 871,076 | 871,076 | 788,637 | ||||||||||||||||||||||||||||||||||||||||||
| Barbri Inc | (e)(h)(i) | Consumer Services | L+575 | 0.8% | 4/28/28 | 47,240,915 | 47,259,782 | 46,865,350 | ||||||||||||||||||||||||||||||||||||||||||
| BearCom Acquisition Corp | (e)(j) | Technology Hardware & Equipment | L+650, 0.5% PIK (0.5% Max PIK) | 1.0% | 7/5/24 | 2,199,228 | 2,155,934 | 2,150,625 | ||||||||||||||||||||||||||||||||||||||||||
| BearCom Acquisition Corp | (e)(j) | Technology Hardware & Equipment | C+650, 0.5% PIK (0.5% Max PIK) | 1.0% | 7/5/24 | C$ | 14,273,362 | 10,551,636 | 10,308,656 | |||||||||||||||||||||||||||||||||||||||||
| BearCom Acquisition Corp | (e)(f) | Technology Hardware & Equipment | C+550 | 1.0% | 1/5/24 | 1,335,371 | 993,138 | 1,031,059 | ||||||||||||||||||||||||||||||||||||||||||
| Belk Inc | Retailing | L+750 | 1.0% | 7/31/25 | $ | 636,703 | 634,127 | 564,278 | ||||||||||||||||||||||||||||||||||||||||||
| Belk Inc | (g)(p) | Retailing | 5.0%, 8.0% PIK (8.0% Max PIK) | 7/31/25 | 3,083,315 | 1,665,798 | 382,331 | |||||||||||||||||||||||||||||||||||||||||||
| BGB Group LLC | (e)(h)(i)(o) | Media & Entertainment | L+575 | 1.0% | 8/16/27 | 54,351,860 | 53,958,530 | 53,009,294 | ||||||||||||||||||||||||||||||||||||||||||
| Big Bus Tours Ltd | (e)(j) | Consumer Services | L+850 PIK (L+850 Max PIK) | 1.0% | 3/15/24 | 10,737,579 | 10,737,579 | 8,750,800 | ||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
14
Credit Opportunities Partners JV, LLC and Subsidiaries
Consolidated Statements of Investments (continued)
As of December 31, 2022
Company(a) | Footnotes | Industry | Interest Rate(b) | Base Rate Floor | Maturity Date | No. Shares/Principal Amount(c) | Cost | Fair Value(d) | ||||||||||||||||||||||||||||||||||||||||||
| Big Bus Tours Ltd | (e)(j) | Consumer Services | E+850 PIK (E+850 Max PIK) | 1.0% | 3/15/24 | € | 12,605,812 | 14,029,530 | 10,997,516 | |||||||||||||||||||||||||||||||||||||||||
| Big Bus Tours Ltd | (e)(j) | Consumer Services | L+850 PIK (L+850 Max PIK) | 1.0% | 3/15/24 | $ | 7,224,124 | 7,224,124 | 5,887,661 | |||||||||||||||||||||||||||||||||||||||||
| Bugaboo International BV | (e)(h)(i) | Consumer Durables & Apparel | E+700, 0.0% PIK (7.8% Max PIK) | 0.0% | 3/20/25 | € | 34,984,429 | 40,974,820 | 37,439,085 | |||||||||||||||||||||||||||||||||||||||||
| CFC Underwriting Ltd | (e)(h)(j) | Insurance | SF+500, 0.0% PIK (2.8% Max PIK) | 0.5% | 5/16/29 | $ | 39,458,838 | 38,314,532 | 39,151,928 | |||||||||||||||||||||||||||||||||||||||||
| Cision Ltd | Software & Services | L+375 | 0.0% | 1/29/27 | 3,802,044 | 3,391,177 | 2,369,148 | |||||||||||||||||||||||||||||||||||||||||||
| ClubCorp Club Operations Inc | (j)(k) | Consumer Services | L+275 | 0.0% | 9/18/24 | 31,938,327 | 29,873,288 | 28,912,330 | ||||||||||||||||||||||||||||||||||||||||||
| Creation Technologies Inc | (k) | Technology Hardware & Equipment | L+550 | 0.5% | 10/5/28 | 2,280,390 | 2,051,706 | 1,835,714 | ||||||||||||||||||||||||||||||||||||||||||
| CSafe Global | (e)(h)(i)(k) | Capital Goods | L+625 | 0.8% | 12/23/27 | 59,368,541 | 59,274,195 | 59,368,541 | ||||||||||||||||||||||||||||||||||||||||||
| CSafe Global | (e)(h) | Capital Goods | L+625 | 0.8% | 8/13/28 | 17,281,250 | 17,281,250 | 17,281,250 | ||||||||||||||||||||||||||||||||||||||||||
| Cubic Corp | (i) | Software & Services | L+425 | 0.8% | 5/25/28 | 9,071,259 | 9,107,943 | 7,681,406 | ||||||||||||||||||||||||||||||||||||||||||
| EIF Van Hook Holdings LLC | (i)(k) | Energy | SF+525 | 0.0% | 9/5/24 | 7,220,779 | 7,025,903 | 7,004,155 | ||||||||||||||||||||||||||||||||||||||||||
| Emerald Expositions Holding Inc | (k) | Media & Entertainment | L+250 | 0.0% | 5/22/24 | 1,377,860 | 1,335,690 | 1,350,302 | ||||||||||||||||||||||||||||||||||||||||||
| Encora Digital Inc | (e)(o) | Software & Services | L+550, 0.0% PIK (2.4% Max PIK) | 0.8% | 12/20/28 | 16,250,000 | 15,903,310 | 15,398,031 | ||||||||||||||||||||||||||||||||||||||||||
| Envirotainer Ltd | (e)(h) | Transportation | E+600, 0.0% PIK (3.0% Max PIK) | 0.0% | 7/30/29 | € | 14,851,248 | 13,927,014 | 15,106,466 | |||||||||||||||||||||||||||||||||||||||||
| Envirotainer Ltd | (e)(i) | Transportation | SF+600, 0.0% PIK (3.0% Max PIK) | 0.8% | 7/30/29 | $ | 7,557,582 | 7,417,011 | 7,270,575 | |||||||||||||||||||||||||||||||||||||||||
| Excelitas Technologies Corp | (e)(k) | Technology Hardware & Equipment | E+575 | 0.0% | 8/12/29 | € | 4,051,758 | 4,209,834 | 4,220,297 | |||||||||||||||||||||||||||||||||||||||||
| Excelitas Technologies Corp | (e)(j)(k) | Technology Hardware & Equipment | SF+575 | 0.8% | 8/12/29 | $ | 24,515,501 | 24,273,455 | 23,865,840 | |||||||||||||||||||||||||||||||||||||||||
| Follett Software Co | (e)(h)(i) | Software & Services | L+575 | 0.8% | 8/31/28 | 37,525,000 | 37,197,181 | 36,733,223 | ||||||||||||||||||||||||||||||||||||||||||
| Galaxy Universal LLC | (e)(h) | Consumer Durables & Apparel | L+500 | 1.0% | 11/12/26 | 8,775,598 | 8,775,598 | 8,665,903 | ||||||||||||||||||||||||||||||||||||||||||
| Galway Partners Holdings LLC | (e)(k)(o) | Insurance | L+525, 0.0% PIK (1.3% Max PIK) | 0.8% | 9/29/28 | 36,888,117 | 36,179,690 | 36,412,261 | ||||||||||||||||||||||||||||||||||||||||||
| General Datatech LP | (e)(j) | Software & Services | L+625 | 1.0% | 6/18/27 | 18,301,529 | 17,709,256 | 17,144,875 | ||||||||||||||||||||||||||||||||||||||||||
| Greystone Equity Member Corp | (e) | Diversified Financials | L+725 | 3.8% | 4/1/26 | 30,226,700 | 30,056,659 | 29,282,116 | ||||||||||||||||||||||||||||||||||||||||||
| HealthChannels LLC | (j) | Health Care Equipment & Services | L+450 | 0.0% | 4/3/25 | 15,420,173 | 15,346,198 | 10,914,630 | ||||||||||||||||||||||||||||||||||||||||||
| Hermes UK Ltd | (e)(k) | Transportation | SA+650 | 0.0% | 11/30/27 | £ | 14,668,920 | 19,534,728 | 16,059,245 | |||||||||||||||||||||||||||||||||||||||||
| Higginbotham Insurance Agency Inc | (e)(h)(i) | Insurance | L+525 | 0.8% | 11/25/26 | $ | 37,620,000 | 37,967,033 | 37,732,860 | |||||||||||||||||||||||||||||||||||||||||
| Industria Chimica Emiliana Srl | (e)(j)(k)(o) | Pharmaceuticals, Biotechnology & Life Sciences | E+725 | 0.0% | 9/27/26 | € | 113,856,600 | 125,456,986 | 117,124,233 | |||||||||||||||||||||||||||||||||||||||||
| iNova Pharmaceuticals (Australia) Pty Limited | (e)(k) | Pharmaceuticals, Biotechnology & Life Sciences | B+650 | 0.8% | 10/30/28 | A$ | 34,218,189 | 22,470,790 | 22,563,623 | |||||||||||||||||||||||||||||||||||||||||
| Insight Global LLC | (e)(h)(i)(o) | Commercial & Professional Services | L+600 | 0.8% | 9/22/28 | $ | 63,709,837 | 62,932,320 | 61,750,605 | |||||||||||||||||||||||||||||||||||||||||
| KBP Investments LLC | (e)(h)(i) | Food & Staples Retailing | SF+550, 0.5% PIK (0.5%Max PIK) | 0.8% | 5/26/27 | 23,642,296 | 23,513,110 | 21,876,213 | ||||||||||||||||||||||||||||||||||||||||||
| Kellermeyer Bergensons Services LLC | (e)(i)(j) | Commercial & Professional Services | L+600 | 1.0% | 11/7/26 | 29,172,932 | 28,065,611 | 26,541,554 | ||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
15
Credit Opportunities Partners JV, LLC and Subsidiaries
Consolidated Statements of Investments (continued)
As of December 31, 2022
Company(a) | Footnotes | Industry | Interest Rate(b) | Base Rate Floor | Maturity Date | No. Shares/Principal Amount(c) | Cost | Fair Value(d) | ||||||||||||||||||||||||||||||||||||||||||
| Lakefield Veterinary Group | (e)(o) | Health Care Equipment & Services | L+550 | 0.8% | 11/23/28 | 27,076,500 | 26,714,750 | 25,947,410 | ||||||||||||||||||||||||||||||||||||||||||
| Lakeview Farms Inc | (e)(j) | Food, Beverage & Tobacco | L+625 | 1.0% | 6/10/27 | 15,528,159 | 15,446,511 | 15,017,319 | ||||||||||||||||||||||||||||||||||||||||||
| Lexitas Inc | (e)(h) | Commercial & Professional Services | SF+675 | 1.0% | 5/18/29 | 18,478,733 | 18,425,758 | 18,197,856 | ||||||||||||||||||||||||||||||||||||||||||
| Lionbridge Technologies Inc | (e)(i)(j) | Media & Entertainment | SF+700 | 1.0% | 12/29/25 | 26,796,992 | 26,349,130 | 26,939,017 | ||||||||||||||||||||||||||||||||||||||||||
| Lloyd's Register Quality Assurance Ltd | (e)(i)(o) | Consumer Services | E+575, 0.0% PIK (6.3% Max PIK) | 0.0% | 12/2/28 | € | 44,315,170 | 48,779,164 | 45,923,906 | |||||||||||||||||||||||||||||||||||||||||
| MB2 Dental Solutions LLC | (e)(i) | Health Care Equipment & Services | SF+600 | 1.0% | 1/29/27 | $ | 11,939,241 | 11,791,328 | 11,739,855 | |||||||||||||||||||||||||||||||||||||||||
| Med-Metrix | (e)(o) | Software & Services | L+600 | 1.0% | 9/15/27 | 11,879,699 | 11,861,845 | 11,988,992 | ||||||||||||||||||||||||||||||||||||||||||
| Misys Ltd | (k) | Software & Services | L+350 | 1.0% | 6/13/24 | 2,273,499 | 2,151,779 | 2,016,776 | ||||||||||||||||||||||||||||||||||||||||||
| Monitronics International Inc | (h)(i)(k) | Commercial & Professional Services | L+600 | 1.5% | 7/3/24 | 35,469,587 | 33,682,315 | 33,696,108 | ||||||||||||||||||||||||||||||||||||||||||
| Motion Recruitment Partners LLC | (e)(h)(j) | Commercial & Professional Services | L+650 | 1.0% | 12/22/25 | 24,766,142 | 24,531,647 | 24,617,545 | ||||||||||||||||||||||||||||||||||||||||||
| New Era Technology Inc | (e)(h)(j)(k) | Software & Services | L+625 | 1.0% | 10/31/26 | 34,295,898 | 33,829,414 | 33,706,008 | ||||||||||||||||||||||||||||||||||||||||||
| Novotech Pty Ltd | (e)(k)(o) | Health Care Equipment & Services | SF+525 | 0.5% | 1/13/28 | 24,423,493 | 23,931,454 | 23,629,729 | ||||||||||||||||||||||||||||||||||||||||||
| Novotech Pty Ltd | (e)(k)(o) | Health Care Equipment & Services | B+525 | 0.5% | 1/13/28 | A$ | 33,704,420 | 24,817,308 | 22,088,915 | |||||||||||||||||||||||||||||||||||||||||
| One Call Care Management Inc | (h) | Health Care Equipment & Services | L+550 | 0.8% | 4/22/27 | $ | 4,925,000 | 4,965,223 | 4,071,350 | |||||||||||||||||||||||||||||||||||||||||
| Ontic Engineering & Manufacturing Inc | (h) | Capital Goods | L+400 | 0.0% | 10/30/26 | 2,121,439 | 1,896,151 | 2,103,757 | ||||||||||||||||||||||||||||||||||||||||||
| Pantherx Specialty LLC | (e)(j) | Pharmaceuticals, Biotechnology & Life Sciences | SF+550 | 0.5% | 7/16/29 | 15,913,760 | 14,846,667 | 14,577,004 | ||||||||||||||||||||||||||||||||||||||||||
| Parts Town LLC | (e)(h)(k)(o) | Retailing | L+550 | 0.8% | 11/1/28 | $ | 49,435,553 | 48,302,299 | 47,754,744 | |||||||||||||||||||||||||||||||||||||||||
| Peraton Corp | (j) | Capital Goods | L+375 | 0.8% | 2/1/28 | 8,772,321 | 8,381,605 | 8,582,268 | ||||||||||||||||||||||||||||||||||||||||||
| Plaskolite, LLC | (k) | Materials | L+400 | 0.8% | 12/15/25 | 1,126,020 | 1,057,062 | 1,011,166 | ||||||||||||||||||||||||||||||||||||||||||
| Precision Global Corp | (e)(j) | Materials | L+475 | 1.0% | 8/3/24 | 8,904,750 | 8,729,040 | 8,775,631 | ||||||||||||||||||||||||||||||||||||||||||
| Pretium Packaging LLC | (j) | Household & Personal Products | L+400 | 0.5% | 10/2/28 | 1,605,176 | 1,609,478 | 1,287,584 | ||||||||||||||||||||||||||||||||||||||||||
| Project Marron | (e)(h)(j)(k) | Consumer Services | B+625 | 0.5% | 7/2/25 | A$ | 81,780,578 | 56,397,765 | 52,010,831 | |||||||||||||||||||||||||||||||||||||||||
| Project Marron | (e)(i)(j) | Consumer Services | C+625 | 0.5% | 7/2/25 | C$ | 52,452,868 | 40,099,132 | 36,252,137 | |||||||||||||||||||||||||||||||||||||||||
| Pure Fishing Inc | (i) | Consumer Durables & Apparel | L+450 | 0.0% | 12/22/25 | $ | 9,821,429 | 9,724,626 | 6,574,219 | |||||||||||||||||||||||||||||||||||||||||
| Reliant Rehab Hospital Cincinnati LLC | (e)(j)(o) | Health Care Equipment & Services | L+625 | 0.0% | 2/28/26 | 33,566,127 | 32,681,175 | 26,657,343 | ||||||||||||||||||||||||||||||||||||||||||
| Revere Superior Holdings Inc | (e)(k) | Software & Services | L+575 | 1.0% | 9/30/26 | 19,559,784 | 19,590,082 | 19,559,784 | ||||||||||||||||||||||||||||||||||||||||||
| Rise Baking Company | (e)(k) | Food, Beverage & Tobacco | L+650 | 1.0% | 8/13/27 | 510,533 | 470,985 | 489,652 | ||||||||||||||||||||||||||||||||||||||||||
| Rise Baking Company | (e)(j)(k) | Food, Beverage & Tobacco | L+650 | 1.0% | 8/13/27 | 30,409,661 | 29,829,934 | 29,165,723 | ||||||||||||||||||||||||||||||||||||||||||
| Rise Baking Company | (e)(f) | Food, Beverage & Tobacco | L+650 | 1.0% | 8/13/27 | 1,434,354 | 1,434,354 | 1,375,689 | ||||||||||||||||||||||||||||||||||||||||||
| RSC Insurance Brokerage Inc | (e)(k) | Insurance | SF+550 | 0.8% | 10/30/26 | 18,805,501 | 18,789,155 | 18,489,569 | ||||||||||||||||||||||||||||||||||||||||||
| Safe-Guard Products International LLC | (e)(i)(j)(k) | Diversified Financials | L+500 | 0.5% | 1/27/27 | 71,662,836 | 72,081,482 | 71,662,836 | ||||||||||||||||||||||||||||||||||||||||||
| SAMBA Safety Inc | (e)(h)(j) | Software & Services | L+525 | 1.0% | 9/1/27 | 27,103,013 | 26,867,904 | 26,772,357 | ||||||||||||||||||||||||||||||||||||||||||
| SavATree LLC | (e)(j)(k) | Consumer Services | L+525 | 0.8% | 10/12/28 | 39,597,167 | 39,333,049 | 38,931,934 | ||||||||||||||||||||||||||||||||||||||||||
| SI Group Inc | (k) | Materials | SF+475 | 0.0% | 10/15/25 | 1,528,208 | 1,449,426 | 1,242,433 | ||||||||||||||||||||||||||||||||||||||||||
| SIRVA Worldwide Inc | (i) | Commercial & Professional Services | L+550 | 0.0% | 8/4/25 | 6,887,973 | 6,618,128 | 6,146,069 | ||||||||||||||||||||||||||||||||||||||||||
| SitusAMC Holdings Corp | (e)(j)(o) | Real Estate | L+550 | 0.8% | 12/22/27 | 39,528,924 | 38,651,558 | 38,145,412 | ||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
16
Credit Opportunities Partners JV, LLC and Subsidiaries
Consolidated Statements of Investments (continued)
As of December 31, 2022
Company(a) | Footnotes | Industry | Interest Rate(b) | Base Rate Floor | Maturity Date | No. Shares/Principal Amount(c) | Cost | Fair Value(d) | ||||||||||||||||||||||||||||||||||||||||||
| Sorenson Communications LLC | (j) | Telecommunication Services | L+550 | 0.8% | 3/17/26 | 19,991,572 | 19,339,868 | 19,148,228 | ||||||||||||||||||||||||||||||||||||||||||
| Staples Canada | (e)(h)(i)(j)(k) | Retailing | C+700 | 1.0% | 9/12/24 | C$ | 74,180,675 | 57,025,761 | 55,627,599 | |||||||||||||||||||||||||||||||||||||||||
| Summit Interconnect Inc | (e)(o) | Capital Goods | SF+600 | 1.0% | 9/22/28 | $ | 19,521,964 | 19,278,525 | 18,401,403 | |||||||||||||||||||||||||||||||||||||||||
| Time Manufacturing Co | (e)(h)(i) | Capital Goods | E+650 | 0.8% | 12/1/27 | € | 29,243,074 | 32,426,306 | 29,434,749 | |||||||||||||||||||||||||||||||||||||||||
| Total Safety US Inc | (h)(i) | Capital Goods | L+600 | 1.0% | 8/18/25 | $ | 11,173,907 | 10,071,222 | 10,643,146 | |||||||||||||||||||||||||||||||||||||||||
| Transaction Services Group Ltd | (e)(j)(k)(n)(o) | Software & Services | B+550 | 0.0% | 10/14/26 | A$ | 124,140,618 | 85,270,610 | 82,619,939 | |||||||||||||||||||||||||||||||||||||||||
| Unifrax I LLC / Unifrax Holding Co | (k) | Capital Goods | L+375 | 0.0% | 12/12/25 | $ | 2,842,336 | 2,668,134 | 2,535,904 | |||||||||||||||||||||||||||||||||||||||||
| Varsity Brands Inc | (k) | Consumer Durables & Apparel | L+350 | 1.0% | 12/16/24 | 3,966,286 | 3,791,218 | 3,833,912 | ||||||||||||||||||||||||||||||||||||||||||
| Version1 Software Ltd | (e)(k) | Software & Services | E+575, 0.0% PIK (1.7% Max PIK) | 0.0% | 7/11/29 | € | 2,477,331 | 2,539,627 | 2,547,260 | |||||||||||||||||||||||||||||||||||||||||
| Version1 Software Ltd | (e)(k) | Software & Services | SA+575, 0.0% PIK (1.7% Max PIK) | 0.0% | 7/11/29 | £ | 4,032,564 | 4,673,990 | 4,680,198 | |||||||||||||||||||||||||||||||||||||||||
| West Corp | (i) | Software & Services | L+400 | 1.0% | 10/10/24 | $ | 12,143,242 | 11,979,781 | 11,219,020 | |||||||||||||||||||||||||||||||||||||||||
| West Corp | (i) | Software & Services | L+350 | 1.0% | 10/10/24 | 2,517,370 | 2,470,250 | 2,324,640 | ||||||||||||||||||||||||||||||||||||||||||
| Woolpert Inc | (e)(h)(i)(j) | Capital Goods | L+600 | 1.0% | 4/5/28 | 53,000,653 | 52,553,368 | 51,582,218 | ||||||||||||||||||||||||||||||||||||||||||
| Worldwise Inc | (e)(h)(i)(j)(k)(o) | Household & Personal Products | SF+625 | 1.0% | 3/29/28 | 64,674,185 | 61,717,121 | 59,843,013 | ||||||||||||||||||||||||||||||||||||||||||
| Yak Access LLC | (e)(n) | Capital Goods | SF+825 | 2.0% | 1/27/23 | 225,140 | 223,468 | 222,889 | ||||||||||||||||||||||||||||||||||||||||||
| Yak Access LLC | (g)(n)(p) | Capital Goods | L+500 | 0.0% | 7/11/25 | 754,857 | 643,726 | 320,814 | ||||||||||||||||||||||||||||||||||||||||||
| Total Senior Secured Loans—First Lien | 2,522,813,711 | 2,418,149,825 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Unfunded Loan Commitments | (3,338,758) | (3,338,758) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net Senior Secured Loans—First Lien | 2,519,474,953 | 2,414,811,067 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Senior Secured Loans—Second Lien—23.6% | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Access CIG LLC | (h)(i) | Commercial & Professional Services | L+775 | 0.0% | 2/27/26 | $ | 2,520,082 | 2,279,323 | 2,242,873 | |||||||||||||||||||||||||||||||||||||||||
| Ammeraal Beltech Holding BV | (e)(h)(k)(o) | Capital Goods | L+775 | 0.0% | 9/12/26 | 42,805,979 | 42,070,598 | 41,765,066 | ||||||||||||||||||||||||||||||||||||||||||
| Apex Group Limited | (e)(h)(i)(o) | Diversified Financials | L+675 | 0.5% | 7/27/29 | 40,000,000 | 39,668,847 | 37,591,605 | ||||||||||||||||||||||||||||||||||||||||||
| Cubic Corp | (e)(k) | Software & Services | L+763 | 0.8% | 5/25/29 | 10,000,000 | 9,702,000 | 9,057,000 | ||||||||||||||||||||||||||||||||||||||||||
| EaglePicher Technologies LLC | (h) | Capital Goods | L+725 | 0.0% | 3/8/26 | 449,560 | 413,099 | 224,780 | ||||||||||||||||||||||||||||||||||||||||||
| Element Materials Technology Group US Holdings Inc | (e)(h)(i) | Commercial & Professional Services | SA+725 | 0.5% | 6/24/30 | £ | 20,999,137 | 22,959,357 | 24,666,332 | |||||||||||||||||||||||||||||||||||||||||
| Misys Ltd | (h)(i)(k)(o) | Software & Services | L+725 | 1.0% | 6/13/25 | $ | 46,614,412 | 44,713,329 | 34,994,138 | |||||||||||||||||||||||||||||||||||||||||
| NEP Broadcasting LLC | (i) | Media & Entertainment | L+700 | 0.0% | 10/19/26 | 6,847,253 | 6,748,970 | 5,126,881 | ||||||||||||||||||||||||||||||||||||||||||
| OEConnection LLC | (e)(h)(i)(j) | Software & Services | SF+700 | 0.5% | 9/25/27 | 50,000,000 | 50,000,000 | 48,359,094 | ||||||||||||||||||||||||||||||||||||||||||
| Paradigm Acquisition Corp | (h)(k) | Health Care Equipment & Services | L+750 | 0.0% | 10/26/26 | 2,536,227 | 2,466,419 | 2,434,778 | ||||||||||||||||||||||||||||||||||||||||||
| Peraton Corp | (e)(h)(i) | Capital Goods | L+775 | 0.8% | 2/1/29 | 21,500,000 | 21,326,714 | 21,241,964 | ||||||||||||||||||||||||||||||||||||||||||
| Pretium Packaging LLC | (e)(h)(i)(j) | Household & Personal Products | L+675 | 0.5% | 10/1/29 | 39,900,250 | 39,737,401 | 31,617,330 | ||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
17
Credit Opportunities Partners JV, LLC and Subsidiaries
Consolidated Statements of Investments (continued)
As of December 31, 2022
Company(a) | Footnotes | Industry | Interest Rate(b) | Base Rate Floor | Maturity Date | No. Shares/Principal Amount(c) | Cost | Fair Value(d) | ||||||||||||||||||||||||||||||||||||||||||
| Pure Fishing Inc | (e)(h) | Consumer Durables & Apparel | L+838 | 1.0% | 12/21/26 | 26,467,842 | 24,158,276 | 14,848,459 | ||||||||||||||||||||||||||||||||||||||||||
| SIRVA Worldwide Inc | (i)(j) | Commercial & Professional Services | L+950 | 0.0% | 8/3/26 | 10,287,070 | 8,687,851 | 8,900,887 | ||||||||||||||||||||||||||||||||||||||||||
| Valeo Foods Group Ltd | (e)(h) | Food, Beverage & Tobacco | SA+800 | 0.0% | 9/28/29 | £ | 9,289,917 | 11,817,094 | 9,886,566 | |||||||||||||||||||||||||||||||||||||||||
| Wittur Holding GmbH | (e)(j)(k)(n) | Capital Goods | E+850, 1.0% PIK (1.0% Max PIK) | 0.0% | 9/23/27 | € | 121,126,848 | 132,353,711 | 91,996,767 | |||||||||||||||||||||||||||||||||||||||||
| Total Senior Secured Loans—Second Lien | 459,102,989 | 384,954,520 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Other Senior Secured Debt—1.3% | ||||||||||||||||||||||||||||||||||||||||||||||||||
| One Call Care Management Inc | (e) | Health Care Equipment & Services | 8.5% PIK (8.5% Max PIK) | 11/1/28 | $ | 25,577,285 | 25,020,473 | 20,911,988 | ||||||||||||||||||||||||||||||||||||||||||
| Total Other Senior Secured Debt | 25,020,473 | 20,911,988 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Subordinated Debt—1.3% | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Arrotex Australia Group Pty Ltd | (e) | Pharmaceuticals, Biotechnology & Life Sciences | B+1,150 PIK (B+1,150 Max PIK | 1.0% | 12/22/26 | 25,000,000 | 16,176,576 | 17,021,253 | ||||||||||||||||||||||||||||||||||||||||||
| athenahealth Inc | Health Care Equipment & Services | 7% | 2/15/30 | 5,545,000 | 4,777,098 | 4,096,686 | ||||||||||||||||||||||||||||||||||||||||||||
| Total Subordinated Debt | 20,953,674 | 21,117,939 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Asset Based Finance—33.2% | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Abacus JV, Private Equity | (e) | Insurance | 31,400,804 | 32,176,404 | 34,027,324 | |||||||||||||||||||||||||||||||||||||||||||||
| Altavair AirFinance, Private Equity | (e) | Capital Goods | 36,500,000 | 42,960,500 | 42,164,362 | |||||||||||||||||||||||||||||||||||||||||||||
| Connecticut Avenue Securities Trust 2022-R08, Structured Mezzanine | Real Estate | SF+560 | 0.0% | 07/25/42 | $ | 2,347,356 | 2,347,356 | 2,378,717 | ||||||||||||||||||||||||||||||||||||||||||
| GA Capital Specialty Lending Fund, Limited Partnership Interest | (e)(n) | Diversified Financials | 1 | 1 | 5,264,299 | |||||||||||||||||||||||||||||||||||||||||||||
| Global Lending Services LLC, Private Equity | (e)(n) | Diversified Financials | 2,209,115 | 2,209,115 | 2,446,043 | |||||||||||||||||||||||||||||||||||||||||||||
| Global Lending Services LLC, Private Equity | (e) | Diversified Financials | 17,450,851 | 22,935,654 | 18,346,638 | |||||||||||||||||||||||||||||||||||||||||||||
| Kilter Finance, Preferred Stock | (e)(k) | Insurance | 12% | $ | 24,000,000 | 24,000,000 | 24,000,000 | |||||||||||||||||||||||||||||||||||||||||||
| KKR Chord IP Aggregator LP, Partnership Interest | (e) | Media & Entertainment | 19,616,330 | 22,921,682 | 21,117,293 | |||||||||||||||||||||||||||||||||||||||||||||
| KKR Zeno Aggregator LP (K2 Aviation), Partnership Interest | (e)(n)(p) | Capital Goods | 19,642,734 | 24,441,454 | 16,608,069 | |||||||||||||||||||||||||||||||||||||||||||||
| Lenovo Group Ltd, Structured Mezzanine | (e) | Technology Hardware & Equipment | SF+1,050 | 1.0% | 09/30/24 | $ | 4,703,824 | 4,703,824 | 4,695,805 | |||||||||||||||||||||||||||||||||||||||||
| Lenovo Group Ltd, Structured Mezzanine | (e) | Technology Hardware & Equipment | E+1,050 | 1.0% | 09/30/24 | € | 3,620,852 | 3,613,430 | 3,869,373 | |||||||||||||||||||||||||||||||||||||||||
| Lenovo Group Ltd, Structured Mezzanine | (e) | Technology Hardware & Equipment | E+650 | 1.0% | 09/30/24 | € | 5,023,977 | 5,013,679 | 5,368,257 | |||||||||||||||||||||||||||||||||||||||||
| Lenovo Group Ltd, Structured Mezzanine | (e) | Technology Hardware & Equipment | SA+650 | 1.0% | 09/30/24 | £ | 1,141,765 | 1,317,597 | 1,377,824 | |||||||||||||||||||||||||||||||||||||||||
| Lenovo Group Ltd, Structured Mezzanine | (e) | Technology Hardware & Equipment | SF+650 | 1.0% | 09/30/24 | $ | 6,526,613 | 6,526,613 | 6,514,911 | |||||||||||||||||||||||||||||||||||||||||
| Lenovo Group Ltd, Structured Mezzanine | (e) | Technology Hardware & Equipment | SA+1,050 | 1.0% | 09/30/24 | £ | 822,886 | 949,611 | 993,102 | |||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
18
Credit Opportunities Partners JV, LLC and Subsidiaries
Consolidated Statements of Investments (continued)
As of December 31, 2022
Company(a) | Footnotes | Industry | Interest Rate(b) | Base Rate Floor | Maturity Date | No. Shares/Principal Amount(c) | Cost | Fair Value(d) | ||||||||||||||||||||||||||||||||||||||||||
| Luxembourg Life Fund - Absolute Return Fund I, 1L Term Loan | (e)(h)(n) | Insurance | L+750 | 1.5% | 02/27/25 | $ | 21,298,762 | 21,329,148 | 21,258,295 | |||||||||||||||||||||||||||||||||||||||||
| Luxembourg Life Fund - Absolute Return Fund III, Term Loan | (e)(h)(k)(n) | Insurance | L+925 | 0.0% | 05/27/26 | $ | 56,150,891 | 55,757,160 | 57,010,000 | |||||||||||||||||||||||||||||||||||||||||
| Luxembourg Life Fund - Long Term Growth Fund, Term Loan | (e)(h)(i)(k)(n) | Insurance | SF+925 | 0.0% | 04/01/23 | $ | 67,367,477 | 67,292,027 | 68,404,937 | |||||||||||||||||||||||||||||||||||||||||
| My Community Homes PropCo 2, Private Equity | (e)(p) | Real Estate | 34,708,333 | $ | 34,708,333 | $ | 32,528,650 | |||||||||||||||||||||||||||||||||||||||||||
| NewStar Clarendon 2014-1A Class D | (e)(k)(n) | Diversified Financials | 18% | 01/25/27 | $ | 30,040,000 | 9,255,554 | 12,671,805 | ||||||||||||||||||||||||||||||||||||||||||
| Pretium Partners LLC P1, Structured Mezzanine | (e)(h)(i) | Real Estate | 2.8%, 5.3% PIK (5.3% Max PIK) | 10/22/26 | $ | 29,610,242 | 28,637,189 | 28,333,940 | ||||||||||||||||||||||||||||||||||||||||||
| Pretium Partners LLC P2, Private Equity | (e) | Real Estate | 16,772,368 | 16,165,208 | 13,659,081 | |||||||||||||||||||||||||||||||||||||||||||||
| Roemanu LLC (FKA Toorak Capital Partners LLC), Private Equity | (e) | Real Estate | 40,000,000 | 50,156,000 | 47,300,000 | |||||||||||||||||||||||||||||||||||||||||||||
| Saluda Grade Alternative Mortgage Trust 2022-BC2, Term Loan | (e)(k) | Real Estate | 7% | 07/25/30 | $ | 24,000,000 | 23,724,000 | 23,720,751 | ||||||||||||||||||||||||||||||||||||||||||
| Sealane Trade Finance | (e)(m)(p) | Banks | 1,104,510 | 1,092,441 | 248,515 | |||||||||||||||||||||||||||||||||||||||||||||
| SG Residential Mortgage Trust 2022-2, Structured Mezzanine | Real Estate | 5% | 08/25/62 | $ | 4,586,736 | 3,822,000 | 3,710,032 | |||||||||||||||||||||||||||||||||||||||||||
| Star Mountain Strategic Credit Income Fund IV LP, Private Equity | (e) | Diversified Financials | 42,500,000 | 42,500,000 | 44,030,000 | |||||||||||||||||||||||||||||||||||||||||||||
| Total Asset Based Finance | 550,555,980 | 542,048,023 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Equity/Other—11.0% | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Ascent Resources Utica Holdings LLC / ARU Finance Corp, Common Stock | (e)(l)(p) | Energy | 13,556 | 3,592,223 | 4,771,556 | |||||||||||||||||||||||||||||||||||||||||||||
| Ascent Resources Utica Holdings LLC / ARU Finance Corp, Trade Claim | (e)(l)(p) | Energy | 115,178,571 | 30,522,321 | 40,542,857 | |||||||||||||||||||||||||||||||||||||||||||||
| athenahealth Inc, Preferred Stock | (e) | Health Care Equipment & Services | 10.8% PIK (10.8% Max PIK) | 50,000,000 | 47,489,068 | 43,207,003 | ||||||||||||||||||||||||||||||||||||||||||||
| Belk Inc, Common Stock | (e)(p) | Retailing | 381 | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Misys Ltd, Preferred Stock | (e) | Software & Services | L+1,025 PIK (L+1,025 Max PIK | 0.0% | 25,265,621 | 24,785,921 | 21,130,841 | |||||||||||||||||||||||||||||||||||||||||||
| One Call Care Management Inc, Common Stock | (e)(p) | Health Care Equipment & Services | 10/25/29 | 34,873 | 2,220,193 | 1,925,884 | ||||||||||||||||||||||||||||||||||||||||||||
| One Call Care Management Inc, Preferred Stock A | (e)(p) | Health Care Equipment & Services | 371,993 | 23,682,302 | 20,542,951 | |||||||||||||||||||||||||||||||||||||||||||||
| One Call Care Management Inc, Preferred Stock B | (e) | Health Care Equipment & Services | 9.0% PIK (9.0% Max PIK) | 7,672,346 | 8,712,961 | 7,672,346 | ||||||||||||||||||||||||||||||||||||||||||||
| Pure Gym Ltd, Private Equity | (e)(p) | Consumer Services | 30,218,000 | 39,390,642 | 39,224,832 | |||||||||||||||||||||||||||||||||||||||||||||
| Total Equity/Other | 180,395,631 | 179,018,270 | ||||||||||||||||||||||||||||||||||||||||||||||||
| TOTAL INVESTMENTS—218.3% | $ | 3,755,503,700 | $ | 3,562,861,807 | ||||||||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
19
Credit Opportunities Partners JV, LLC and Subsidiaries
Consolidated Statements of Investments (continued)
As of December 31, 2022
Company(a) | Footnotes | Industry | Interest Rate(b) | Base Rate Floor | Maturity Date | No. Shares/Principal Amount(c) | Cost | Fair Value(d) | ||||||||||||||||||||||||||||||||||||||||||
| Derivative Instruments—0.7% | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency forward contracts | $ | 11,881,045 | ||||||||||||||||||||||||||||||||||||||||||||||||
____________
(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, 2022, the three-month London Interbank Offered Rate, or LIBOR or “L”, was 4.77% and the Euro Interbank Offered Rate, or EURIBOR or “E”, was 2.13%, Canadian Dollar Offer Rate, or CDOR or “C”, was 4.94% and the Australian Interbank Rate, or BBSY or “B”, was 3.32%, the Reykjavik Interbank Offered Rate, or REIBOR or “R”, was 6.55%, the Stockholm Interbank Offered Rate, or STIBOR or “SR”, was 2.70%, the Sterling Interbank Offered Rate, or SONIA or “SA”, was 3.43%, and the U.S. Prime Lending Rate, or Prime or “P”, was 7.50%. PIK means paid-in-kind. PIK income accruals may be adjusted based on the performance of the underlying investment.
(c)Denominated in U.S. dollars unless otherwise noted.
(d)See Note 8 for additional information regarding the fair value of the Company's financial instruments.
(e)Investments classified as Level 3.
(f)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.
(g)Asset is on non-accrual status.
(h)Security or portion thereof held within Big Cedar Creek LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with BNP Paribas.
(i)Security or portion thereof held within Boxwood Drive Funding and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with BNP Paribas.
(j)Security or portion thereof held within Chestnut Street Funding LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with Citibank, N.A.
(k)Security or portion thereof held within Green Creek LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with Goldman Sachs Bank.
(l)Security or portion thereof held within IC II American Energy Investment, Inc., a wholly-owned subsidiary of the company.
(m)Security or portion thereof held within JCF Cayman Ltd and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with Goldman Sachs.
(n)Security or portion thereof held within Jersey City Funding LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with Goldman Sachs.
(o)Security or a portion thereof held withing Magnolia Funding LLC.
(p)Security is non-income producing.
See notes to consolidated financial statements.
20
Credit Opportunities Partners JV, LLC and Subsidiaries
Notes to Consolidated Financial Statements
Note 1. Principal Business and Organization
Credit Opportunities Partners JV, LLC (formerly known as Strategic Credit Opportunities Partners, LLC) (“COPJV” or the “Company”), is a joint venture between FS KKR Capital Corp. (“FSK”) and South Carolina Retirement Systems Group Trust (“SCRS” and, together with FSK, the “Members”). FSK acquired its interests in the Company, and succeeded Corporate Capital Trust, Inc (“CCT”) as the administrative agent of the Company, as a result of its acquisition of CCT. SCRS purchased its interests in the Company from Conway Capital, LLC, an affiliate of Guggenheim Life and Annuity Company and Delaware Life Insurance Company. Effective as of June 18, 2021, Credit Opportunities Partners, LLC (“COP”) merged with and into COPJV, with COPJV surviving the merger (the “Merger”). As of June 18, 2021, COPJV assumed all of COP’s obligations under its credit facilities, and COP’s wholly- owned special purpose financing subsidiaries became wholly-owned special purpose financing subsidiaries of COPJV, in each case, as a result of the consummation of the Merger. The Company’s second amended and restated limited liability company agreement, as amended by the Amendment to the Second Amended and Restated.
Limited Liability Company agreement dated June 28, 2022, (the “Company Agreement”) requires FSK and SCRS to provide capital to the Company of up to $2.44 billion in the aggregate where FSK and SCRS would provide 87.5% and 12.5%, respectively, of the committed capital. Pursuant to the terms of the Company Agreement, FSK and SCRS each have 50% voting control of the Company and are required to agree on all investment decisions as well as certain other significant actions for the Company. The Company invests its capital in a range of investments, including senior secured loans (both first lien and second lien) to middle market companies, broadly syndicated loans, asset-based financing loans, equity, warrants and other investments. As administrative agent of the Company, FSK performs certain day-to-day management responsibilities on behalf of the Company.
Note 2. Significant Accounting Policies
Basis of Presentation — The accompanying consolidated financial statements of the Company are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The Company is an investment company following accounting and reporting guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946, Financial Services—Investment Companies (“ASC Topic 946”).
Principles of Consolidation — COPJV owns all of the outstanding limited liability company interests of Chestnut Street Funding LLC (“Chestnut Street Funding”), Big Cedar Creek LLC (“Big Cedar Creek Funding”), Green Creek LLC (“Green Creek Funding”), Jersey City Funding LLC (“Jersey City Funding”) and Magnolia Funding LLC (“Magnolia Funding”). The financial position and results of operations of Chestnut Street Funding, Big Cedar Creek Funding, Green Creek Funding, Jersey City Funding and Magnolia Funding have been consolidated in the accompanying consolidated financial statements. All intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates — The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities at the date of the consolidated financial statements, (ii) the reported amounts of income and expenses during the reporting periods presented and (iii) disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Actual results could differ from those estimates.
Cash and Foreign Currency — Cash consists of deposits held at a custodian bank and foreign currency.
Valuation of Investments — The Company measures the value of its investments in accordance with ASC Topic 820, Fair Value Measurements and Disclosure (“ASC Topic 820”), issued by FASB. 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 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.
Valuation of the Company’s assets is completed in a manner consistent with the Company’s valuation guidelines approved by the board of managers and to the extent required, determined by a third-party valuation expert in accordance with such valuation guidelines. The Company’s valuation guidelines and the third-party valuation expert shall be subject to board approval on an annual basis.
21
Credit Opportunities Partners JV, LLC and Subsidiaries
Notes to Consolidated Financial Statements (continued)
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 the Company’s 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.
Equity interests in portfolio companies for which there is no liquid public market are valued at fair value. The Company 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 actual investment position. For example, adjustments to EBITDA may take into account compensation to previous owners or acquisition, recapitalization, restructuring or other related items.
The Company may 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. The Company 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 may be relevant in assessing fair value. Generally, the value of equity interests in public companies for which market quotations are readily available is based upon the most recent closing public market price.
When the Company receives 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. These warrants or other equity securities received are subsequently recorded at fair value.
Security Transactions, Realized/Unrealized Gains or Losses, and Income Recognition— Investment transactions are recorded on trade date. The Company measures realized gains or losses from the sale of investments using the specific identification method. Realized gains or losses are measured by the difference between the net proceeds from the sale and the amortized cost basis of the investment without regard to unrealized gains or losses previously recognized, and include investments charged off during the period, net of recoveries. Unrealized gains or losses primarily reflect the change in investment values, including the reversal of previously recorded unrealized gains or losses when gains or losses are realized. The amortized cost basis of investments includes (i) the original cost and (ii) adjustments for the accretion/amortization of market discounts and premiums, original issue discount and loan origination fees. The Company reports changes in fair value of investments as a component of net change in unrealized appreciation (depreciation) on investments in the consolidated statements of operations.
Revenue Recognition — Security transactions are accounted for on the trade date. The Company records interest income on an accrual basis to the extent that it expects to collect such amounts. The Company records dividend income on the ex-dividend date. Distributions received from limited liability company (“LLC”) and limited partnership (“LP”) investments are evaluated to determine if the distribution should be recorded as dividend income or a return of capital. The Company does not accrue as a receivable interest or dividends on loans and securities if it has reason to doubt its ability to collect such income. The Company's policy is to place investments on non-accrual status when there is reasonable doubt that interest income will be collected. The Company considers 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 the Company will receive any previously accrued interest, then the accrued interest 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 the Company's judgment.
Loan origination fees, original issue discount and market discount are capitalized and the Company amortizes 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.
22
Credit Opportunities Partners JV, LLC and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Structuring and other non-recurring upfront fees are recorded as fee income when earned. The Company records prepayment premiums on loans and securities as fee income when it receives such amounts.
Derivative Instruments — The Company’s derivative instruments consist of foreign currency forward contracts. The Company recognizes all derivative instruments as assets or liabilities at fair value in its consolidated financial statements. Derivative contracts entered into by the Company are not designated as hedging instruments, and as a result, the Company presents changes in fair value through net change in unrealized appreciation (depreciation) on derivative instruments in the statements of operations. Realized gains and losses that occur upon the cash settlement of the derivative instruments are included in net realized gains (losses) on derivative instruments in the statements of operations.
Income Taxes — No provision has been made in the accompanying consolidated financial statements for federal, state or local income taxes of the Members. Each Member is individually responsible for reporting its share of the Company’s taxable income or loss. Interest and other income realized by the Company from non—U.S. sources and capital gains realized on the sale of securities of non—U.S. issuers may be subject to withholding and other taxes levied by the jurisdiction in which the income is sourced. The Company reports on the accrual basis of accounting for financial statement and tax purposes.
As of December 31, 2023, the Company had a deferred tax asset of $8 million resulting from a combination of unrealized depreciation on investments held by and net operating losses and other tax attributes of the Company’s wholly-owned taxable subsidiaries. As of December 31, 2023, 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 $8 million.
Deferred Financing Costs — Financing costs, including upfront fees, commitment fees and legal fees related to the Company’s credit facilities are deferred and amortized over the life of the related financing instrument using either the effective interest method or straight-line method. The amortization of deferred financing costs is included in interest expense in the consolidated statements of operations.
Distributions — COPJV intends to make distributions quarterly based on the Company’s net investment income earned in the preceding quarter. Distributions are made pro rata in accordance with each Member’s proportionate share.
Distributions of $250.00 million and $227.00 million were made during the years ended December 31, 2023 and 2022, respectively.
Reclassifications — Certain prior year amounts in the consolidated financial statements may have been reclassified to conform to the current year presentation.
Recent Accounting Pronouncements — In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”),” which clarifies guidance for fair value measurement of an equity security subject to a contractual sale restriction and establishes new disclosure requirements for such equity securities. ASU 2022-03 is effective for fiscal years beginning after December 15, 2023 and for interim periods within those fiscal years, with early adoption permitted. The Company has concluded that this guidance will not have a material impact on its consolidated financial statements.
Note 3. Investments
As of December 31, 2023 and 2022, the Company’s investment portfolio consisted of the following:
| December 31, 2023 | ||||||||||||||||||||||||||
| Investment Type | Amortized Cost(1) | Fair Value | % of Investment Portfolio | % of Net Assets | ||||||||||||||||||||||
| Senior Secured Loans—First Lien | $ | 2,648,454,151 | $ | 2,592,399,702 | 74.7 | % | 162.4 | % | ||||||||||||||||||
| Senior Secured Loans—Second Lien | 348,248,597 | 234,249,069 | 6.8 | % | 14.7 | % | ||||||||||||||||||||
| Other Senior Secured Debt | 27,342,773 | 20,628,563 | 0.6 | % | 1.3 | % | ||||||||||||||||||||
| Subordinated Debt | 4,857,558 | 5,037,702 | 0.1 | % | 0.3 | % | ||||||||||||||||||||
| Asset Based Finance | 455,277,101 | 437,882,142 | 12.6 | % | 27.4 | % | ||||||||||||||||||||
| Equity/Other | 184,660,282 | 180,630,926 | 5.2 | % | 11.3 | % | ||||||||||||||||||||
| Total Investment | $ | 3,668,840,462 | $ | 3,470,828,104 | 100.0 | % | 217.4 | % | ||||||||||||||||||
23
Credit Opportunities Partners JV, LLC and Subsidiaries
Notes to Consolidated Financial Statements (continued)
| December 31, 2022 | ||||||||||||||||||||||||||
| Investment Type | Amortized Cost(1) | Fair Value | % of Investment Portfolio | % of Net Assets | ||||||||||||||||||||||
| Senior Secured Loans—First Lien | $ | 2,519,474,953 | $ | 2,414,811,067 | 67.8 | % | 147.9 | % | ||||||||||||||||||
| Senior Secured Loans—Second Lien | 459,102,989 | 384,954,520 | 10.8 | % | 23.6 | % | ||||||||||||||||||||
| Other Senior Secured Debt | 25,020,473 | 20,911,988 | 0.6 | % | 1.3 | % | ||||||||||||||||||||
| Subordinated Debt | 20,953,674 | 21,117,939 | 0.6 | % | 1.3 | % | ||||||||||||||||||||
| Asset Based Finance | 550,555,980 | 542,048,023 | 15.2 | % | 33.2 | % | ||||||||||||||||||||
| Equity/Other | 180,395,631 | 179,018,270 | 5.0 | % | 11.0 | % | ||||||||||||||||||||
| Total Investments | $ | 3,755,503,700 | $ | 3,562,861,807 | 100.0 | % | 218.3 | % | ||||||||||||||||||
____________
(1)Amortized cost represents the original cost adjusted for the amortization of premiums and/or accretion of discounts, as applicable, on investments.
Note 4. Derivative Instruments
The following is a summary of the fair value and location of the Company’s derivative instruments in the consolidated statements of assets and liabilities held as of December 31, 2023 and 2022:
| Derivative Instrument | Statement Location | December 31, 2023 | December 31, 2022 | |||||||||||||||||
| Foreign currency forward contracts | Unrealized appreciation on foreign currency forward contracts | $ | 5,028,542 | $ | 25,540,554 | |||||||||||||||
| Foreign currency forward contracts | Unrealized depreciation on foreign currency forward contracts | (13,059,999) | (13,659,509) | |||||||||||||||||
| Total | $ | (8,031,457) | $ | 11,881,045 | ||||||||||||||||
Net unrealized gains and losses on derivative instruments recorded by the Company for the year ended December 31, 2023 and 2022 are in the following locations in the consolidated statements of operations:
| Derivative Instrument | Statement Location | December 31, 2023 | December 31, 2022 | |||||||||||||||||
| Foreign currency forward contracts | Net change in unrealized appreciation (depreciation) on foreign currency forward contracts | $ | (19,912,502) | $ | 18,603,521 | |||||||||||||||
| Total | $ | (19,912,502) | $ | 18,603,521 | ||||||||||||||||
Foreign Currency Forward Contracts
The Company may enter into foreign currency forward contracts from time to time to facilitate settlement of purchases and sales of investments denominated in foreign currencies and to economically hedge the impact that an adverse change in foreign exchange rates would have on the value of the Company’s investments denominated in foreign currencies. A foreign currency forward contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. These contracts are marked-to-market by recognizing the difference between the contract forward exchange rate and the forward market exchange rate on the last day of the period presented as unrealized appreciation or depreciation. Realized gains or losses are recognized when forward contracts are settled. Risks arise as a result of the potential inability of the counterparties to meet the terms of their contracts. The Company attempts to limit counterparty risk by only dealing with well-known counterparties.
The Company was a party to twenty three foreign currency forward contracts during the period which related to economic hedging of the Company’s foreign currency denominated debt investments. As of December 31, 2023 and 2022, the Company’s open foreign currency forward contracts were as follows:
| December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||
| Foreign Currency | Settlement Date | Counterparty | Notional Amount and Transaction | US $ Value at Settlement Date | US $ Value at December 31, 2023 | Unrealized Appreciation (Depreciation) | ||||||||||||||||||||||||||||||||||||||
| SEK | March 15, 2024 | Goldman Sachs Bank | SEK | 288,600,000 | Sold | $ | 32,301,752 | $ | 28,791,730 | $ | 3,510,022 | |||||||||||||||||||||||||||||||||
| GBP | April 3, 2024 | Morgan Stanley and Co. | £ | 2,300,000 | Sold | 2,945,104 | 2,931,545 | 13,559 | ||||||||||||||||||||||||||||||||||||
| AUD | June 14, 2024 | Morgan Stanley and Co. | A$ | 10,700,000 | Sold | 6,783,800 | 7,337,829 | (554,029) | ||||||||||||||||||||||||||||||||||||
| EUR | June 14, 2024 | Goldman Sachs Bank | € | 12,728,750 | Sold | 14,102,183 | 14,172,464 | (70,281) | ||||||||||||||||||||||||||||||||||||
EUR | June 14, 2024 | Goldman Sachs Bank | € | 10,541,870 | Sold | 11,496,963 | 11,737,545 | (240,582) | ||||||||||||||||||||||||||||||||||||
24
Credit Opportunities Partners JV, LLC and Subsidiaries
Notes to Consolidated Financial Statements (continued)
| December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||
| Foreign Currency | Settlement Date | Counterparty | Notional Amount and Transaction | US $ Value at Settlement Date | US $ Value at December 31, 2023 | Unrealized Appreciation (Depreciation) | ||||||||||||||||||||||||||||||||||||||
| EUR | June 28, 2024 | Goldman Sachs Bank | € | 15,900,000 | Sold | $ | 17,257,860 | $ | 17,713,661 | $ | (455,801) | |||||||||||||||||||||||||||||||||
EUR | June 28, 2024 | Morgan Stanley and Co. | € | 51,300,000 | Sold | 55,760,535 | 57,151,623 | (1,391,088) | ||||||||||||||||||||||||||||||||||||
| CAD | September 13, 2024 | Goldman Sachs Bank | C$ | 7,920,000 | Sold | 5,837,264 | 6,014,451 | (177,187) | ||||||||||||||||||||||||||||||||||||
CAD | September 13, 2024 | Goldman Sachs Bank | C$ | 7,500,000 | Sold | 5,527,712 | 5,695,503 | (167,791) | ||||||||||||||||||||||||||||||||||||
CAD | September 13, 2024 | Goldman Sachs Bank | C$ | 19,749,875 | Sold | 14,573,403 | 14,998,063 | (424,660) | ||||||||||||||||||||||||||||||||||||
| AUD | October 21, 2024 | Goldman Sachs Bank | A$ | 69,500,000 | Sold | 43,732,875 | 47,734,786 | (4,001,911) | ||||||||||||||||||||||||||||||||||||
| AUD | October 21, 2024 | Goldman Sachs Bank | A$ | 23,300,000 | Sold | 16,044,380 | 16,003,173 | 41,207 | ||||||||||||||||||||||||||||||||||||
| AUD | October 21, 2024 | Goldman Sachs Bank | A$ | 13,300,000 | Sold | 9,158,380 | 9,134,858 | 23,522 | ||||||||||||||||||||||||||||||||||||
| AUD | October 21, 2024 | Morgan Stanley and Co. | A$ | 30,100,000 | Sold | 18,956,980 | 20,673,627 | (1,716,647) | ||||||||||||||||||||||||||||||||||||
| AUD | October 21, 2024 | Morgan Stanley and Co. | A$ | 22,500,000 | Sold | 15,511,500 | 15,453,708 | 57,792 | ||||||||||||||||||||||||||||||||||||
| EUR | November 15, 2024 | Goldman Sachs Bank | € | 3,500,000 | Sold | 4,238,150 | 3,924,198 | 313,952 | ||||||||||||||||||||||||||||||||||||
| GBP | November 15, 2024 | Goldman Sachs Bank | £ | 2,850,000 | Sold | 3,521,175 | 3,634,133 | (112,958) | ||||||||||||||||||||||||||||||||||||
| EUR | January 21, 2025 | Morgan Stanley and Co. | € | 36,000,000 | Sold | 38,970,000 | 40,493,461 | (1,523,461) | ||||||||||||||||||||||||||||||||||||
| GBP | January 31, 2025 | Goldman Sachs Bank | £ | 26,800,000 | Sold | 35,258,080 | 34,189,593 | 1,068,487 | ||||||||||||||||||||||||||||||||||||
| SEK | June 10, 2025 | Goldman Sachs Bank | SEK | 80,500,000 | Sold | 7,501,631 | 8,166,624 | (664,993) | ||||||||||||||||||||||||||||||||||||
| GBP | January 20, 2026 | Morgan Stanley and Co. | £ | 10,500,000 | Sold | 12,672,450 | 13,418,935 | (746,485) | ||||||||||||||||||||||||||||||||||||
| AUD | April 30, 2026 | Morgan Stanley and Co. | A$ | 28,500,000 | Sold | 18,963,900 | 19,488,098 | (524,198) | ||||||||||||||||||||||||||||||||||||
| GBP | December 31, 2026 | Goldman Sachs Bank | £ | 5,100,000 | Sold | 6,255,660 | 6,543,586 | (287,926) | ||||||||||||||||||||||||||||||||||||
| $ | 397,371,737 | $ | 405,403,194 | $ | (8,031,457) | |||||||||||||||||||||||||||||||||||||||
| December 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||
| Foreign Currency | Settlement Date | Counterparty | Notional Amount and Transaction | US $ Value at Settlement Date | US $ Value at December 31, 2022 | Unrealized Appreciation (Depreciation) | ||||||||||||||||||||||||||||||||||||||
| AUD | July 5, 2023 | Goldman Sachs Bank | A$ | 23,300,000 | Sold | $ | 16,861,045 | $ | 15,967,207 | $ | 893,838 | |||||||||||||||||||||||||||||||||
| AUD | July 5, 2023 | Goldman Sachs Bank | A$ | 13,300,000 | Sold | 9,796,780 | 9,114,329 | 682,451 | ||||||||||||||||||||||||||||||||||||
| AUD | July 5, 2023 | Morgan Stanley and Co. | A$ | 22,500,000 | Sold | 16,841,250 | 15,418,977 | 1,422,273 | ||||||||||||||||||||||||||||||||||||
| AUD | June 14, 2024 | Morgan Stanley and Co. | A$ | 47,300,000 | Sold | 29,988,200 | 32,502,357 | (2,514,157) | ||||||||||||||||||||||||||||||||||||
| AUD | June 14, 2024 | Goldman Sachs Bank | A$ | 17,000,000 | Sold | 11,787,800 | 11,681,608 | 106,192 | ||||||||||||||||||||||||||||||||||||
| AUD | October 21, 2024 | Goldman Sachs Bank | A$ | 69,500,000 | Sold | 43,732,875 | 47,717,035 | (3,984,160) | ||||||||||||||||||||||||||||||||||||
| AUD | October 21, 2024 | Morgan Stanley and Co. | A$ | 30,100,000 | Sold | 18,956,980 | 20,665,939 | (1,708,959) | ||||||||||||||||||||||||||||||||||||
| CAD | January 11, 2023 | Goldman Sachs Bank | C$ | 7,920,000 | Sold | 6,219,570 | 5,852,372 | 367,198 | ||||||||||||||||||||||||||||||||||||
| CAD | January 11, 2023 | Goldman Sachs Bank | C$ | 6,500,000 | Sold | 5,198,336 | 4,803,083 | 395,253 | ||||||||||||||||||||||||||||||||||||
| CAD | January 11, 2023 | Goldman Sachs Bank | C$ | 19,749,875 | Sold | 15,538,847 | 14,593,891 | 944,956 | ||||||||||||||||||||||||||||||||||||
| CAD | January 11, 2023 | Goldman Sachs Bank | C$ | 6,500,000 | Sold | (4,760,161) | (4,803,083) | 42,922 | ||||||||||||||||||||||||||||||||||||
| CAD | January 11, 2023 | Goldman Sachs Bank | C$ | 7,920,000 | Sold | (5,800,073) | (5,852,372) | 52,299 | ||||||||||||||||||||||||||||||||||||
| CAD | January 11, 2023 | Goldman Sachs Bank | C$ | 19,749,875 | Sold | (14,479,380) | (14,593,891) | 114,511 | ||||||||||||||||||||||||||||||||||||
| CAD | September 13, 2024 | Goldman Sachs Bank | C$ | 7,920,000 | Sold | 5,837,264 | 5,895,159 | (57,895) | ||||||||||||||||||||||||||||||||||||
| CAD | September 13, 2024 | Goldman Sachs Bank | C$ | 7,500,000 | Sold | 5,527,713 | 5,582,537 | (54,824) | ||||||||||||||||||||||||||||||||||||
| CAD | September 13, 2024 | Goldman Sachs Bank | C$ | 19,749,875 | Sold | 14,573,402 | 14,700,587 | (127,185) | ||||||||||||||||||||||||||||||||||||
| EUR | January 11, 2023 | Morgan Stanley and Co. | € | 64,000,000 | Sold | 72,524,800 | 68,510,856 | 4,013,944 | ||||||||||||||||||||||||||||||||||||
| EUR | July 5, 2023 | Goldman Sachs Bank | € | 12,728,750 | Sold | 13,356,277 | 13,776,786 | (420,509) | ||||||||||||||||||||||||||||||||||||
| EUR | August 4, 2023 | Morgan Stanley and Co. | € | 4,700,000 | Sold | 5,115,010 | 5,094,126 | 20,884 | ||||||||||||||||||||||||||||||||||||
| EUR | December 15, 2023 | Goldman Sachs Bank | € | 48,000,000 | Sold | 57,552,000 | 52,347,113 | 5,204,887 | ||||||||||||||||||||||||||||||||||||
| EUR | December 15, 2023 | Goldman Sachs Bank | € | 51,300,000 | Sold | 52,274,700 | 55,945,977 | (3,671,277) | ||||||||||||||||||||||||||||||||||||
| EUR | December 15, 2023 | Morgan Stanley and Co. | € | 15,900,000 | Sold | 16,260,453 | 17,339,981 | (1,079,528) | ||||||||||||||||||||||||||||||||||||
| EUR | December 15, 2023 | Goldman Sachs Bank | € | 10,541,870 | Sold | 12,768,313 | 11,496,593 | 1,271,720 | ||||||||||||||||||||||||||||||||||||
| EUR | November 15, 2024 | Goldman Sachs Bank | € | 3,500,000 | Sold | 4,238,150 | 3,853,589 | 384,561 | ||||||||||||||||||||||||||||||||||||
| GBP | April 14, 2023 | Goldman Sachs Bank | £ | 6,462,233 | Sold | 8,741,786 | 7,823,404 | 918,382 | ||||||||||||||||||||||||||||||||||||
| GBP | April 14, 2023 | Goldman Sachs Bank | £ | 11,850,000 | Sold | 14,904,338 | 14,346,022 | 558,316 | ||||||||||||||||||||||||||||||||||||
| GBP | August 4, 2023 | Morgan Stanley and Co. | £ | 2,300,000 | Sold | 2,748,730 | 2,789,745 | (41,015) | ||||||||||||||||||||||||||||||||||||
| GBP | October 13, 2023 | Morgan Stanley and Co. | £ | 10,500,000 | Sold | 14,033,250 | 12,745,825 | 1,287,425 | ||||||||||||||||||||||||||||||||||||
| GBP | January 31, 2025 | Goldman Sachs Bank | £ | 26,800,000 | Sold | 35,258,080 | 32,464,104 | 2,793,976 | ||||||||||||||||||||||||||||||||||||
| SEK | March 15, 2024 | Goldman Sachs Bank | SEK | 288,600,000 | Sold | 32,301,752 | 28,237,186 | 4,064,566 | ||||||||||||||||||||||||||||||||||||
| $ | 517,898,087 | $ | 506,017,042 | $ | 11,881,045 | |||||||||||||||||||||||||||||||||||||||
25
Credit Opportunities Partners JV, LLC and Subsidiaries
Notes to Consolidated Financial Statements (continued)
The Company’s foreign currency forward contracts are subject to master netting agreements. These agreements include provisions to offset positions with the same counterparty in the event of default by one of the parties. As of December 31, 2023, the Company had $(1,646,900) and $(6,384,557) of assets (liabilities) with Goldman Sachs Bank and Morgan Stanley and Co., respectively, that were not offset by any collateral. As of December 31, 2022, the Company had $13,071,927 and $(1,190,882) of assets (liabilities) with Goldman Sachs Bank and Morgan Stanley and Co., respectively, that were not offset by any collateral.
Note 5. Fair Value Measurement
The Company’s investments were categorized in the fair value hierarchy described in Note 2. “Significant Accounting Policies”, as follows as of December 31, 2023 and 2022:
| December 31, 2023 | ||||||||||||||||||||||||||
| Investment Type | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||
| Senior Debt | $ | — | $ | 160,252,899 | $ | 2,687,024,435 | $ | 2,847,277,334 | ||||||||||||||||||
| Subordinated Debt | — | 5,037,702 | — | 5,037,702 | ||||||||||||||||||||||
| Asset Based Finance | — | 11,615,696 | 426,266,446 | 437,882,142 | ||||||||||||||||||||||
| Equity/Other | — | 15,688 | 180,615,238 | 180,630,926 | ||||||||||||||||||||||
| Total Investments | $ | — | $ | 176,921,985 | $ | 3,293,906,119 | $ | 3,470,828,104 | ||||||||||||||||||
| December 31, 2022 | ||||||||||||||||||||||||||
| Investment Type | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||
| Senior Debt | $ | — | $ | 272,043,853 | $ | 2,548,633,722 | $ | 2,820,677,575 | ||||||||||||||||||
| Subordinated Debt | — | 4,096,686 | 17,021,253 | 21,117,939 | ||||||||||||||||||||||
| Asset Based Finance | — | 6,088,749 | 535,959,274 | 542,048,023 | ||||||||||||||||||||||
| Equity/Other | — | — | 179,018,270 | 179,018,270 | ||||||||||||||||||||||
| Total Investments | $ | — | $ | 282,229,288 | $ | 3,280,632,519 | $ | 3,562,861,807 | ||||||||||||||||||
In addition, the Company had foreign currency forward contracts, as described in Note 4. “Derivative Instruments,” which were categorized as Level 2 in the fair value hierarchy as of December 31, 2023 and 2022.
The following is a reconciliation for the years ended December 31, 2023 of investments for which significant unobservable inputs (Level 3) were used in determining fair value:
| For the Year Ended December 31, 2023 | ||||||||||||||||||||||||||||||||
| Senior Debt | Subordinated Debt | Asset Based Finance | Equity/Other | Total | ||||||||||||||||||||||||||||
| Fair value at beginning of period | $ | 2,548,633,722 | $ | 17,021,253 | $ | 535,959,274 | $ | 179,018,270 | $ | 3,280,632,519 | ||||||||||||||||||||||
| Accretion of discount (amortization of premium) | 5,414,043 | 47,559 | 314,810 | 43,168 | 5,819,580 | |||||||||||||||||||||||||||
| Net realized gain (loss) | (7,588,940) | 429,619 | (4,676,645) | — | (11,835,966) | |||||||||||||||||||||||||||
| Net change in unrealized appreciation (depreciation) | (11,707,485) | (844,677) | (9,560,841) | (2,644,101) | (24,757,104) | |||||||||||||||||||||||||||
| Purchases | 518,230,684 | — | 78,029,683 | 30,522,311 | 626,782,678 | |||||||||||||||||||||||||||
| Paid-in-kind interest | 3,825,959 | — | 1,569,591 | 4,307,459 | 9,703,009 | |||||||||||||||||||||||||||
| Sales and repayments | (379,508,174) | (16,653,754) | (175,369,426) | (30,631,869) | (602,163,223) | |||||||||||||||||||||||||||
| Transfers into Level 3 | 9,724,626 | — | — | — | 9,724,626 | |||||||||||||||||||||||||||
| Transfers out of Level 3 | — | — | — | — | — | |||||||||||||||||||||||||||
| Fair value at end of period | $ | 2,687,024,435 | $ | — | $ | 426,266,446 | $ | 180,615,238 | $ | 3,293,906,119 | ||||||||||||||||||||||
| 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 | $ | (28,780,539) | $ | — | $ | (8,597,321) | $ | 7,376,435 | $ | (30,001,425) | ||||||||||||||||||||||
There were no transfers between Level 1 and Level 2 during the years ended December 31, 2023. The carrying value of cash is classified as Level 1 with respect to the fair value hierarchy.
At December 31, 2023, the Company held investment positions classified as Level 3, representing an aggregate fair value of $3,293.9 million and 94.9% of the total investment portfolio. At December 31, 2022, the Company held investment positions classified as Level 3, representing an aggregate fair value of $3,280.6 million and 92.1% of the total investment portfolio. The ranges
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Credit Opportunities Partners JV, LLC and Subsidiaries
Notes to Consolidated Financial Statements (continued)
of unobservable inputs used in the fair value measurement of the Company’s Level 3 investments as of December 31, 2023 and 2022 were as follows:
| Type of Investment | Fair Value at December 31, 2023 | Valuation Technique(1) | Unobservable Input | Range (Weighted Average)(2) | Impact to Valuation from an Increase in Input(3) | |||||||||||||||||||||||||||
| Senior Debt | $ | 2,589,917,665 | Discounted Cash Flow | Discount Rate | 6.1% - 18.7% (11.5%) | Decrease | ||||||||||||||||||||||||||
| 97,106,770 | Waterfall | EBITDA Multiple | 7.5x - 10.4x (9.0x) | Increase | ||||||||||||||||||||||||||||
| Asset Based Finance | 296,926,469 | Discounted Cash Flow | Discount Rate | 7.4% - 13.4% (9.7%) | Decrease | |||||||||||||||||||||||||||
| 89,872,080 | Waterfall | EBITDA Multiple | 1.1x - 1.2x (1.2x) | Increase | ||||||||||||||||||||||||||||
| 31,432,197 | Other(4) | |||||||||||||||||||||||||||||||
| 8,035,700 | Indicative Dealer Quotes | 26.8% - 26.8% (26.8%) | Increase | |||||||||||||||||||||||||||||
| Equity/Other | 108,183,683 | Waterfall | EBITDA Multiple | 4.9x - 13.0x (9.0x) | Increase | |||||||||||||||||||||||||||
| 72,431,555 | Discounted Cash Flow | Discount Rate | 12.4% - 21.0% (15.4%) | Decrease | ||||||||||||||||||||||||||||
| Total | $ | 3,293,906,119 | ||||||||||||||||||||||||||||||
| Type of Investment | Fair Value at December 31, 2022 | Valuation Technique(1) | Unobservable Input | Range (Weighted Average)(2) | Impact to Valuation from an Increase in Input(3) | |||||||||||||||||||||||||||
| Senior Debt | $ | 2,533,562,374 | Discounted Cash Flow | Discount Rate | 6.0% - 32.3% (12.2%) | Decrease | ||||||||||||||||||||||||||
| 14,848,459 | Waterfall | EBITDA Multiple | 10.1% - 10.1% (10.1%) | Increase | ||||||||||||||||||||||||||||
| 222,889 | Cost | |||||||||||||||||||||||||||||||
| Subordinated Debt | 17,021,253 | Discounted Cash Flow | Discount Rate | 8.4% - 8.4% (8.4%) | Decrease | |||||||||||||||||||||||||||
| Asset Based Finance | 368,417,330 | Discounted Cash Flow | Discount Rate | 6.5% - 15.2% (11.5%) | Decrease | |||||||||||||||||||||||||||
| 91,578,515 | Waterfall | EBITDA Multiple | 1.0x - 1.4x (1.2x) | Increase | ||||||||||||||||||||||||||||
| 24,000,000 | Cost | |||||||||||||||||||||||||||||||
| 39,291,624 | Other(4) | |||||||||||||||||||||||||||||||
| 12,671,805 | Indicative Dealer Quotes | 42.0% - 42.0% (42.0%) | Increase | |||||||||||||||||||||||||||||
| Equity/Other | 114,680,429 | Waterfall | EBITDA Multiple | 5.0x - 12.8x (9.2x) | Increase | |||||||||||||||||||||||||||
| 64,337,841 | Discounted Cash Flow | Discount Rate | 13.4% - 22.1% (16.3%) | Decrease | ||||||||||||||||||||||||||||
| Total | $ | 3,280,632,519 | ||||||||||||||||||||||||||||||
(1)Certain investment may be valued at cost for a period of time after an acquisition as the best indicator of fair value.
(2)Weighted average amounts are based on the estimated fair values.
(3)This column represents the directional change in the fair value of the Level 3 investments that would result from increase to the corresponding unobservable input. A decrease to the input would have the opposite effect. Significant changes in these inputs in isolation could result in significantly higher or lower fair value measurements.
(4)Fair value based on expected outcome of proposed corporate transactions and/or other factors.
The above tables represent the significant unobservable inputs as they relate to the Company’s determination of fair values for the majority of its investments categorized within Level 3 as of December 31, 2023 and 2022. In addition to the techniques and inputs noted in the tables above, according to the Company’s valuation policy, it may also use other valuation techniques and methodologies when determining the fair value estimates for the Company’s investments. Any significant increases or decreases in the unobservable inputs would result in significant increases or decreases in the fair value of the Company’s investments.
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 repayments 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 EBITDA, cash flows, net income, revenues or, in limited instances, book value or liquidation value. An investment that is newly issued and purchased near the date of the consolidated financial statements is valued at cost if the Company determines that the cost of such investment is the best indication of its fair value. Such investments described above are typically classified as Level 3 within the fair value hierarchy. Investments that are traded on an active public market are valued at their closing price as of the date of the consolidated financial statements and are classified as Level 1 within the fair value hierarchy. Except
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Credit Opportunities Partners JV, LLC and Subsidiaries
Notes to Consolidated Financial Statements (continued)
as described above, the Company typically 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 and are typically classified as Level 2 within the fair value hierarchy.
Note 6. Significant Agreements and Related Parties
Purchase of Investments from FSK — During the years ended December 31, 2023 and 2022, the Company purchased investments from FSK at fair value, as determined in accordance with ASC 820 and as agreed to by FSK and the Company’s board of managers, for an aggregate amount of approximately $557 million and $1,068 million, respectively.
Administrative Services — The Company is a party to an administrative services agreement with FSK (the “Administrative Services Agreement”) whereby FSK performs, and oversees the performance of, various administrative services on behalf of the Company. Administrative services may include general ledger accounting services, calculating the Company’s net asset value, maintaining required corporate and financial records, financial reporting for the Company and its subsidiaries, reporting to the Company’s board of managers and lenders, overseeing the payment of the Company’s expenses and member distributions and management and oversight of service providers in their performance of administrative and professional services rendered for the Company. FSK is entitled to a fee of 0.25% of the Company’s assets under administration, calculated and payable quarterly in arrears.
Note 7. Borrowings
Big Cedar Creek Funding has a revolving credit facility with BNP Paribas, (as amended, the “Big Cedar Creek Funding Credit Facility”), which provides for up to $600 million of borrowings as of December 31, 2023. The Big Cedar Creek Funding Credit Facility provides loans in U.S. dollars, Australian dollars, Canadian dollars, New Zealand dollars, Euros and pounds sterling. U.S. dollar loans bear interest at the rate of term SOFR (subject to a 0% floor) plus a spread of 2.85% during the reinvestment period and 3.35% thereafter. Foreign currency loans bear interest at the applicable floating rate (subject to a 0% floor) plus a spread of 2.95% to 3.05% during the reinvestment period and 3.45% to 3.55% thereafter. Big Cedar Creek Funding also pays a commitment fee of up to 0.50% on undrawn commitments. The Big Cedar Creek Funding Credit Facility matures on April 11, 2027. As of December 31, 2023 and 2022, total outstanding borrowings under the Big Cedar Creek Funding Credit Facility were $523,123,652 and $259,448,237, respectively.
On April 15, 2020, Boxwood Drive Funding entered into a Revolving Credit and Security Agreement with BNP Paribas, as administrative agent and lender, Wells Fargo Bank, N.A., as collateral agent, the Company, as equityholder and servicer, and the other lenders from time to time party thereto (the “Boxwood Drive Funding Revolving Credit Facility”). On April 11, 2023, concurrent with the closing of the Fourth Amendment to the Big Cedar Creek Funding Credit Facility, Boxwood Drive Funding merged with and into Big Cedar Creek Funding, or the Big Cedar Merger, pursuant to an Agreement of Merger with Big Cedar Creek Funding surviving the Big Cedar Merger. Upon consummation of the Big Cedar Merger, the Boxwood Drive Funding Revolving Credit Facility was terminated and all outstanding borrowings were assumed into the Big Cedar Creek Funding Credit Facility.
Chestnut Street Funding has a revolving credit facility (the “Chestnut Street Funding Credit Facility”) with Citibank, N.A., as administrative agent and lender, and Wells Fargo Bank, National Association, as collateral agent, which provides for up to $400 million of borrowings as of December 31, 2023. The Chestnut Street Funding Credit Facility provides loans in U.S. dollars, Australian dollars, Canadian dollars, Euros and pounds sterling. U.S. dollar loans bear interest at the rate of SOFR (subject to a 0% floor) plus 2.45%. Foreign currency loans bear interest at the applicable floating rate (subject to a 0% floor) plus 2.45%. Chestnut Street Funding also pays a commitment fee of up to 0.50% on undrawn commitments. The Chestnut Street Funding Credit Facility matures on September 18, 2027. As of December 31, 2023 and 2022, total outstanding borrowings under the Chestnut Street Funding Credit Facility were $331,689,008 and $316,432,283, respectively.
Green Creek Funding, a wholly-owned subsidiary of COPJV, has a revolving credit facility with Goldman Sachs Bank, (as amended, the “Green Creek Funding Credit Facility”), which provides for up to $400 million of borrowings as of December 31, 2023. The Green Creek Credit Facility provides for loans in U.S. dollars, Canadian dollars, Euros and pounds sterling. U.S. dollar loans bear interest at the rate of term SOFR (subject to a 0% floor) plus 2.25%. Foreign currency loans bear interest at the rate of the applicable floating rate (subject to a 0% floor) plus the spread applicable to the specified currency. Green Creek Funding also pays a commitment fee of up to 2.25% on undrawn commitments. The Green Creek Funding Credit Facility matures on January 30, 2027. As of December 31, 2023 and 2022, total outstanding borrowings under the Green Creek Funding Credit Facility were $265,575,459 and $304,119,900, respectively.
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Credit Opportunities Partners JV, LLC and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Magnolia Funding LLC has a revolving credit facility with Morgan Stanley Senior Funding, Inc., or the Magnolia Funding Credit Facility, which provides for up to $300 million of borrowings as of December 31, 2023. The Magnolia Funding Credit Facility provides for loans in U.S. dollars, Australian dollars, Canadian dollars, Swedish Krona, Euros and pounds sterling. U.S. dollar loans bear interest at the rate of SOFR (subject to a 0% floor) plus a spread of 2.20%. Foreign currency loans bear interest at the applicable floating rate (subject to a 0% floor) plus the spread applicable to the specified currency. Magnolia Funding also pays a commitment fee of 0.35% on undrawn commitments. The Magnolia Funding Credit Facility matures on July 14, 2027. As of December 31, 2023 and 2022, total outstanding borrowings under the Magnolia Funding Credit Facility were $197,531,607 and $251,433,797, respectively.
On March 31, 2021, COPJV sold in a private placement $300 million of aggregate principal amount of unsecured notes, or the April COPJV Notes, to qualified institutional buyers in reliance on Section 4(a)(2) of the Securities Act. Interest of the April COPJV Notes is payable quarterly on the 1st of each of January, April, July and October, at a fixed annual rate of 4.25%, commencing July 1, 2021. This interest rate is subject to increase up to 4.75% in the event that the April COPJV Notes cease to be rated investment grade, and the April COPJV Notes will be subject to an additional 2.0% of default interest during the continuance of an event of default. The April COPJV Notes mature on April 1, 2026, unless redeemed, purchased or prepaid prior to such date by COPJV in accordance with their terms. As of December 31, 2023 and 2022, $300,000,000 of the April COPJV Notes was outstanding.
On August 17, 2021, COPJV sold in a private placement $225 million of aggregate principal amount of Series B senior unsecured notes, or the August COPJV Notes and together with the April COPJV Notes, the COPJV Notes, to qualified institutional buyers in reliance on Section 4(a)(2) of the Securities Act. Interest of the August COPJV Notes is payable semi-annually on the 17th of each of February and August, at a fixed annual rate of 3.62%, commencing February 17, 2022. This interest rate is subject to increase up to 4.12% in the event that the COPJV Notes cease to be rated investment grade, and the August COPJV Notes will be subject to an additional 2.0% of default interest during the continuance of an event of default. The August COPJV Notes mature on August 17, 2026, unless redeemed, purchased or prepaid prior to such date by COPJV in accordance with their terms. As of December 31, 2023 and 2022, $225,000,000 of the August COPJV Notes was outstanding.
The COPJV Notes are general unsecured obligations that rank pari passu with all outstanding and future unsecured and unsubordinated indebtedness that COPJV may issue. COPJV used the net proceeds from the COPJV Notes for general corporate purposes, including to make investments, repay existing debt and make permitted distributions.
Under its financing arrangements, the Company has made certain representations and warranties and is required to comply with various covenants, reporting requirements and other customary requirements for similar financing arrangements. The Company was in compliance with all covenants required by its financing arrangements as of December 31, 2023 and December 31, 2022.
Note 8. Commitments and Contingencies
Unfunded commitments to provide funds to portfolio companies are not recorded in the Company’s consolidated statements of assets and liabilities. Since these commitments may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. The Company has sufficient liquidity to fund these commitments. As of December 31, 2023, the Company had three unfunded debt commitments with aggregate unfunded commitments of $24,790,786. For additional details regarding the Company’s unfunded debt investments, see the Company’s Consolidated Schedule of Investments as of December 31, 2023.
In the normal course of business, the Company enters into contracts that provide a variety of general indemnifications. Any exposure to the Company under these arrangements could involve future claims that may be made against the Company. Currently, no such claims exist or are expected to arise and, accordingly, the Company has not accrued any liability in connection with such indemnifications.
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Credit Opportunities Partners JV, LLC and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Note 9. Financial Highlights
Below is the schedule of financial highlights of the Company for the years ended December 31, 2023 and 2022, respectively:
| Year Ended December 31, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| Operating performance per unit: | ||||||||||||||
| Members’ equity per unit, beginning of year | $ | 872.34 | $ | 954.80 | ||||||||||
| Income from investment operations: | ||||||||||||||
| Net investment income | 130.79 | 120.87 | ||||||||||||
| Net realized and unrealized gains (losses) | (16.35) | (80.51) | ||||||||||||
| Total from investment operations | 114.44 | 40.36 | ||||||||||||
| Distributions to members: | ||||||||||||||
| Net investment income | (133.61) | (122.82) | ||||||||||||
| Total from distributions to members | (133.61) | (122.82) | ||||||||||||
| Members’ equity per unit, end of year | $ | 853.17 | $ | 872.34 | ||||||||||
| Ratio/Supplemental Data (in thousands, except ratios) | ||||||||||||||
Total return(1) | 13.12 | % | 4.23 | % | ||||||||||
Total operating expenses to average members’ equity(2) | 8.50 | % | 4.89 | % | ||||||||||
Net investment income to average members’ equity(2) | 15.28 | % | 13.13 | % | ||||||||||
| Members’ equity, at end of year (in 000’s) | $ | 1,596,431 | $ | 1,632,302 | ||||||||||
| Weighted average units outstanding (in 000’s) | 1,871 | 1,814 | ||||||||||||
| Average members’ equity (in 000’s) | $ | 1,601,306 | $ | 1,669,485 | ||||||||||
(1)The total return is calculated by taking the increase or decrease in members' equity, adding distributions declared during the period, and dividing by the beginning members' equity.
(2)Ratios are calculated for the Members taken as a whole. The computations of such ratios are based on the amount of income and expenses assessed to a member's equity and may vary from these ratios based on the timing of equity transactions.
Note 10. Subsequent Events
Subsequent events have been evaluated through February 26, 2024, the date the audited consolidated financial statements were issued. The Company has concluded that there are no subsequent events that would require adjustment or disclosure in the consolidated financial statements.
30