PHILADELPHIA, Aug. 10, 2020 /PRNewswire/ -- FS KKR Capital
Corp. II (NYSE: FSKR), a leading publicly traded business
development company focused on providing customized credit
solutions to private middle market U.S. companies, announced its
financial and operating results for the quarter ended June 30, 2020, and that its board of directors
has declared a third quarter 2020 distribution totaling
$0.55 per share. Effective
June 10, 2020, FSKR completed a 4 to
1 reverse stock split of its shares of common stock (the Reverse
Stock Split). On June 17, 2020,
shares of FSKR's common stock began trading on the New York Stock
Exchange (NYSE).
Financial and Operating Highlights for the Quarter Ended
June 30, 2020(1)
- Net investment income of $0.44
per share, compared to $0.55 per
share for the quarter ended March 31,
2020
- Adjusted net investment income of $0.48 per share, which excludes $6.6 million, or $0.04 per share, in fees associated with FSKR's
listing on the NYSE
- Total net realized and unrealized loss of $0.31 per share, compared to a total net realized
and unrealized loss of $4.72 per
share for the quarter ended March 31,
2020
- Paid cash distributions to stockholders totaling
$0.60 per
share(2)
- Total purchases of $182
million versus $367 million of
sales and repayments
- Net asset value of $24.22 per
share, compared to $24.68 per share
as of March 31, 2020
Commenting on the quarter, CEO and Chairman, Michael C. Forman, stated, "We took a
significant step forward during the second quarter, as we
successfully listed FSKR on the NYSE, thereby providing
liquidity to our existing shareholders while simultaneously
positioning the Company for future growth by receiving shareholder
approval to take advantage of the 150% Asset Coverage Ratio as
defined by the SEC. With this
approval, FSKR becomes one of the most well positioned
BDCs in the industry with approximately $1.6
billion of committed growth capital. In addition, our third
quarter dividend of $0.55 per share
equates to an annualized yield of 9.1% on our net asset value per
share and is reflective of our view toward future growth."
Declaration of Distribution for Third Quarter 2020
FSKR's board of directors has declared a cash distribution for
the third quarter of $0.55 per share,
which will be paid on or about October 1,
2020 to stockholders of record as of the close of business
on September 16, 2020.
Summary Consolidated Results
|
Three Months
Ended
|
(dollars in
millions, except per share data)
(all per share amounts are basic and
diluted)(1)
|
June 30,
2020
|
March 31,
2020
|
Total investment
income
|
$168
|
$195
|
Net investment
income
|
75
|
93
|
Net increase
(decrease) in net assets resulting from operations
|
22
|
(708)
|
|
|
|
Net investment income
per share
|
$0.44
|
$0.55
|
Total net realized
and unrealized gain (loss) per share
|
$(0.31)
|
$(4.72)
|
Net increase
(decrease) in net assets resulting from operations (Earnings per
Share)
|
$0.13
|
$(4.17)
|
Stockholder
distributions per share(2)
|
$0.60
|
$0.60
|
Net asset value per
share at period end
|
$24.22
|
$24.68
|
Weighted average
shares outstanding
|
171,598,176
|
169,594,825
|
Shares outstanding,
end of period
|
172,862,454
|
169,594,825
|
|
|
|
(dollar amounts in
millions)
|
As of
June 30, 2020
|
As of
December 31, 2019
|
Total fair value of
investments
|
$7,281
|
$8,591
|
Total
assets
|
7,758
|
8,970
|
Total stockholders'
equity
|
4,186
|
4,996
|
Portfolio Highlights as of June 30,
2020
- Total fair value of investments was $7.3
billion of which 77% was invested in senior secured
securities.
- Direct originations(3) represented approximately 88%
of the portfolio by fair value as of June
30, 2020.
- Weighted average annual yield on accruing debt
investments(4) was 8.7%, compared to 8.9% as of
March 31, 2020.
- Weighted average annual yield on all debt
investments(4) was 7.4%, compared to 7.8% as of
March 31, 2020.
- Exposure to the top ten largest portfolio companies by fair
value was 26% as of June 30, 2020,
compared to 26% as of March 31,
2020.
Total Portfolio Activity
|
Three Months
Ended
|
(dollar amounts in
millions)
|
June 30,
2020
|
March 31,
2020
|
Purchases
|
$182
|
$1,317
|
Sales and
redemptions
|
(367)
|
(1,643)
|
Net portfolio
activity
|
$(185)
|
$(326)
|
Sales to
COP
|
—
|
253
|
Adjusted net
portfolio activity
|
$(185)
|
$(73)
|
|
Portfolio
Data
|
As of June
30, 2020
|
As of
December 31, 2019
|
Total fair value of
investments
|
$7,281
|
$8,591
|
Number of Portfolio
Companies
|
164
|
213
|
% of Investments on
Non-Accrual (based on fair
value)(5)
|
5.4%
|
2.1%
|
|
|
Asset Class
(based on fair value)
|
|
Senior Secured Loans
— First Lien
|
66.7%
|
66.6%
|
Senior Secured Loans
— Second Lien
|
8.7%
|
9.4%
|
Other Senior Secured
Debt
|
1.4%
|
2.7%
|
Subordinated
Debt
|
2.4%
|
5.7%
|
Asset Based
Finance
|
9.3%
|
5.6%
|
Strategic Credit
Opportunities Partners, LLC
|
7.9%
|
5.9%
|
Equity/Other
|
3.6%
|
4.1%
|
|
|
|
Interest Rate
Type (based on fair value)
|
|
|
% Variable Rate Debt
Investments
|
71.1%
|
72.9%
|
% Fixed Rate Debt
Investments
|
9.9%
|
14.7%
|
% Other Income
Producing Investments
|
10.1%
|
6.9%
|
% Non-Income
Producing Investments(6)
|
3.5%
|
3.4%
|
% of Investments on
Non-Accrual(5)
|
5.4%
|
2.1%
|
Direct Originations
Direct
Originations Portfolio Data
|
|
As of June 30,
2020
|
As of December 31,
2019
|
Total Fair Value of
Direct Originations(3)
|
|
$6,416
|
$6,713
|
Leverage and Liquidity as of June 30, 2020
- Net debt to equity ratio(7) of 75%, based on
$3.4 billion in total debt
outstanding, $295 million of cash and
foreign currency and $29 million of
net payable for investments purchased and stockholders' equity of
$4.2 billion. FSKR's weighted average
effective interest rate (including the effect of non-usage fees)
was 3.54%.
- Cash and foreign currency of $295
million and availability under its financing arrangements of
$1,685 million, subject to borrowing
base and other limitations.
Conference Call Information
FSKR will host a
conference call at 10:00 a.m. (Eastern Time)
on Tuesday, August 11, 2020, to discuss its second quarter
2020 financial and operating results. All interested parties are
welcome to participate. Interested parties can access the
conference call by dialing (833) 519-1290 and using the conference
ID 8794087 approximately 10 minutes prior to the call. The
conference call also will be webcast, which can be accessed from
the Investor Relations section of FSKR's website at
www.fskkradvisor.com/fskr under Events + presentations.
A replay of the call will be available shortly after the end of
the call for a period of 30 days following the call by visiting the
Investor Relations section of FSKR's website at
www.fskkradvisor.com/fskr under Events +
presentations.
Supplemental Information
An investor presentation
containing financial and operating information will be made
available prior to the call in the Investor Relations section of
FSKR's website at www.fskkradvisor.com/fskr under Events +
presentations.
About FS KKR Capital Corp. II
FS KKR Capital Corp. II
(NYSE: FSKR) is a leading publicly traded business development
company (BDC) focused on providing customized credit solutions to
private middle market U.S. companies. FSKR seeks to invest
primarily in the senior secured debt and, to a lesser extent, the
subordinated debt of private middle market companies. FSKR is
advised by FS/KKR Advisor, LLC. For more information, please
visit www.fskkradvisor.com/fskr.
About FS/KKR Advisor, LLC
FS/KKR Advisor, LLC (FS/KKR)
is a partnership between FS Investments and KKR Credit that serves
as the investment adviser to BDCs with approximately $15 billion in assets under management as of
June 30, 2020. The BDCs managed by
FS/KKR are FS KKR Capital Corp. (NYSE: FSK) and FSKR.
FS Investments is a leading asset manager dedicated to helping
individuals, financial professionals and institutions design better
portfolios. The firm provides access to alternative sources of
income and growth, and focuses on setting industry standards for
investor protection, education and transparency. FS Investments is
headquartered in Philadelphia, PA
with offices in New York, NY,
Orlando, FL, Washington, DC and Leawood, KS. Visit www.fsinvestments.com to
learn more.
KKR Credit is a subsidiary of KKR & Co. Inc., a leading
global investment firm that manages multiple alternative asset
classes, including private equity, energy, infrastructure, real
estate and credit, with strategic manager partnerships that manage
hedge funds. KKR aims to generate attractive investment returns for
its fund investors by following a patient and disciplined
investment approach, employing world-class people, and driving
growth and value creation with KKR portfolio companies. KKR invests
its own capital alongside the capital it manages for fund investors
and provides financing solutions and investment opportunities
through its capital markets business. References to KKR's
investments may include the activities of its sponsored funds. For
additional information about KKR & Co. Inc. (NYSE: KKR), please
visit KKR's website at www.kkr.com and on Twitter @KKR_Co.
Forward-Looking Statements and Important Disclosure
Notice
This announcement may contain certain forward-looking
statements, including statements with regard to future events or
the future performance or operations of FSKR. Words such as
"believes," "expects," "projects," and "future" or similar
expressions are intended to identify forward-looking statements.
These forward-looking statements are subject to the inherent
uncertainties in predicting future results and conditions. Certain
factors could cause actual results to differ materially from those
projected in these forward-looking statements. Factors that could
cause actual results to differ materially include changes in the
economy, risks associated with possible disruption in FSKR's
operations or the economy generally due to terrorism, natural
disasters or pandemics such as COVID-19, future changes in laws or
regulations and conditions in FSKR's operating area, and the price
at which shares of FSKR's common stock trade on the New York Stock
Exchange. Some of these factors are enumerated in the filings FSKR
makes with the SEC. FSKR undertakes no obligation to update or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
The press release above contains summaries of certain financial
and statistical information about FSKR. The information contained
in this press release is summary information that is intended to be
considered in the context of FSKR's SEC filings and other public
announcements that FSKR may make, by press release or otherwise,
from time to time. FSKR undertakes no duty or obligation to update
or revise the information contained in this press release. In
addition, information related to past performance, while helpful as
an evaluative tool, is not necessarily indicative of future
results, the achievement of which cannot be assured. Investors
should not view the past performance of FSKR, or information about
the market, as indicative of FSKR's future results.
Other Information
The information in this press release is summary information
only and should be read in conjunction with FSKR's quarterly report
on Form 10-Q for the quarter ended June 30,
2020, which FSKR filed with the U.S. Securities and Exchange
Commission (the SEC) on August 10,
2020, as well as FSKR's other reports filed with the SEC. A
copy of FSKR's quarterly report on Form 10-Q for the quarter ended
June 30, 2020 and FSKR's other
reports filed with the SEC can be found on FSKR's website at
www.fskkradvisor.com/fskr and the SEC's website at
www.sec.gov.
Certain Information About Distributions
The determination of the tax attributes of FSKR's distributions
is made annually as of the end of its fiscal year based upon its
taxable income and distributions paid, in each case, for the full
year. Therefore, a determination as to the tax attributes of the
distributions made on a quarterly basis may not be representative
of the actual tax attributes for a full year. FSKR intends to
update stockholders quarterly with an estimated percentage of its
distributions that resulted from taxable ordinary income. The
actual tax characteristics of distributions to stockholders will be
reported to stockholders annually on Form 1099-DIV.
The timing and amount of any future distributions on FSKR's
shares of common stock are subject to applicable legal restrictions
and the sole discretion of its board of directors. There can be no
assurance as to the amount or timing of any such future
distributions.
FSKR may fund its cash distributions to stockholders from any
sources of funds legally available to it, including net investment
income from operations, capital gains proceeds from the sale of
assets, non-capital gains proceeds from the sale of assets,
dividends or other distributions paid to it on account of preferred
and common equity investments in portfolio companies, proceeds from
the sale of shares of FSKR's common stock, and borrowings. FSKR has
not established limits on the amount of funds it may use from
available sources to make distributions. There can be no assurance
that FSK will be able to pay distributions at a specific rate or at
all.
Contact Information:
Investor Relations Contact
Robert Paun
Robert.Paun@fsinvestments.com
FS Investments Media Team
Melanie Hemmert
media@fsinvestments.com
Income Statement
($ amounts in millions, except per share
data)
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
|
June
30,
|
|
June
30,
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Investment
income
|
|
|
|
|
|
|
|
|
Interest
income
|
|
$
|
113
|
|
|
$
|
96
|
|
|
$
|
258
|
|
|
$
|
199
|
|
Paid-in-kind interest
income
|
|
10
|
|
|
2
|
|
|
21
|
|
|
4
|
|
Fee income
|
|
7
|
|
|
6
|
|
|
22
|
|
|
13
|
|
Dividend and other
income
|
|
—
|
|
|
—
|
|
|
2
|
|
|
0
|
|
From
non-controlled/affiliated investments:
|
|
|
|
|
|
|
|
|
Interest
income
|
|
13
|
|
|
6
|
|
|
16
|
|
|
11
|
|
Paid-in-kind interest
income
|
|
5
|
|
|
2
|
|
|
8
|
|
|
5
|
|
Fee income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0
|
|
From
controlled/affiliated investments:
|
|
|
|
|
|
|
|
|
Interest
income
|
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
Paid-in-kind interest
income
|
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
Dividend and other
income
|
|
19
|
|
|
—
|
|
|
32
|
|
|
—
|
|
Total investment
income
|
|
168
|
|
|
112
|
|
|
363
|
|
|
232
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
Management
fees
|
|
29
|
|
|
17
|
|
|
62
|
|
|
35
|
|
Subordinated income
incentive fees
|
|
19
|
|
|
9
|
|
|
42
|
|
|
20
|
|
Administrative
services expenses
|
|
1
|
|
|
1
|
|
|
3
|
|
|
2
|
|
Stock transfer agent
fees
|
|
1
|
|
|
—
|
|
|
2
|
|
|
1
|
|
Accounting and
administrative fees
|
|
—
|
|
|
1
|
|
|
1
|
|
|
1
|
|
Interest
expense
|
|
35
|
|
|
25
|
|
|
75
|
|
|
55
|
|
Listing advisory
fees
|
|
7
|
|
|
—
|
|
|
7
|
|
|
—
|
|
Other general and
administrative expenses
|
|
1
|
|
|
1
|
|
|
3
|
|
|
2
|
|
Total operating
expenses
|
|
93
|
|
|
54
|
|
|
195
|
|
|
116
|
|
Net
investment income
|
|
75
|
|
|
58
|
|
|
168
|
|
|
116
|
|
|
|
|
|
|
|
|
|
|
Realized and
unrealized gain/loss
|
|
|
|
|
|
|
|
|
Net realized gain
(loss) on investments:
|
|
|
|
|
|
|
|
|
Non-controlled/unaffiliated investments
|
|
(34)
|
|
|
(22)
|
|
|
(251)
|
|
|
(41)
|
|
Non-controlled/affiliated investments
|
|
(109)
|
|
|
—
|
|
|
(109)
|
|
|
0
|
|
Net realized gain
(loss) on total return swap
|
|
1
|
|
|
—
|
|
|
(1)
|
|
|
—
|
|
Net realized gain
(loss) on foreign currency forward contracts
|
|
—
|
|
|
—
|
|
|
0
|
|
|
—
|
|
Net realized gain
(loss) on interest rate swaps
|
|
(4)
|
|
|
—
|
|
|
(6)
|
|
|
—
|
|
Net realized gain
(loss) on foreign currency
|
|
—
|
|
|
—
|
|
|
1
|
|
|
0
|
|
Net change in
unrealized appreciation (depreciation) on investments:
|
|
|
|
|
|
|
|
|
Non-controlled/unaffiliated investments
|
|
(22)
|
|
|
6
|
|
|
(451)
|
|
|
43
|
|
Non-controlled/affiliated investments
|
|
84
|
|
|
9
|
|
|
(12)
|
|
|
9
|
|
Controlled/affiliated
investments
|
|
59
|
|
|
—
|
|
|
(21)
|
|
|
—
|
|
Net change in
unrealized appreciation (depreciation) on total return
swap
|
|
(1)
|
|
|
—
|
|
|
2
|
|
|
—
|
|
Net change in
unrealized appreciation (depreciation) on foreign currency forward
contracts
|
|
(1)
|
|
|
—
|
|
|
1
|
|
|
—
|
|
Net change in
unrealized appreciation (depreciation) on interest rate
swaps
|
|
—
|
|
|
(6)
|
|
|
(30)
|
|
|
(10)
|
|
Net change in
unrealized gain (loss) on foreign currency
|
|
(26)
|
|
|
(2)
|
|
|
23
|
|
|
(3)
|
|
Total net realized and
unrealized gain (loss)
|
|
$
|
(53)
|
|
|
$
|
(15)
|
|
|
$
|
(854)
|
|
|
$
|
(2)
|
|
Net increase
(decrease) in net assets resulting from operations
|
|
$
|
22
|
|
|
$
|
43
|
|
|
$
|
(686)
|
|
|
$
|
114
|
|
|
|
|
|
|
|
|
|
|
Per share
information—basic and diluted
|
|
|
|
|
|
|
|
|
Net increase
(decrease) in net assets resulting from operations (Earnings per
Share)(1)
|
|
$
|
0.13
|
|
|
$
|
0.53
|
|
|
$
|
(4.02)
|
|
|
$
|
1.41
|
|
Weighted average
shares outstanding(1)
|
|
171,598,176
|
|
|
81,060,591
|
|
|
170,602,035
|
|
|
81,068,885
|
|
Balance Sheet
($ amounts in millions, except per share
data)
|
|
June 30,
2020
|
|
|
|
|
(Unaudited)
|
|
December 31,
2019
|
Assets
|
|
|
|
|
Investments, at fair
value
|
|
|
|
|
Non-controlled/unaffiliated investments (amortized
cost—$7,087 and $8,004, respectively)
|
|
$
|
6,299
|
|
|
$
|
7,670
|
|
Non-controlled/affiliated investments (amortized
cost—$428 and $478, respectively)
|
|
296
|
|
|
356
|
|
Controlled/affiliated
investments (amortized cost—$700 and $559, respectively)
|
|
686
|
|
|
565
|
|
Total investments, at
fair value (amortized cost—$8,215 and $9,041,
respectively)
|
|
7,281
|
|
|
8,591
|
|
Cash
|
|
289
|
|
|
163
|
|
Foreign currency, at
fair value (cost—$7 and $4, respectively)
|
|
6
|
|
|
4
|
|
Collateral held at
broker for open interest rate swap contracts
|
|
59
|
|
|
44
|
|
Due from
counterparty
|
|
2
|
|
|
45
|
|
Receivable for
investments sold and repaid
|
|
13
|
|
|
23
|
|
Income
receivable
|
|
92
|
|
|
84
|
|
Deferred financing
costs
|
|
13
|
|
|
12
|
|
Prepaid expenses and
other assets
|
|
3
|
|
|
4
|
|
Total
assets
|
|
$
|
7,758
|
|
|
$
|
8,970
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Payable for
investments purchased
|
|
$
|
42
|
|
|
$
|
37
|
|
Debt (net of deferred
financing costs of $40 and $0, respectively)
|
|
3,382
|
|
|
3,809
|
|
Management fees
payable
|
|
29
|
|
|
35
|
|
Subordinated income
incentive fees payable
|
|
19
|
|
|
11
|
|
Administrative
services expense payable
|
|
2
|
|
|
3
|
|
Interest
payable
|
|
27
|
|
|
30
|
|
Unrealized
depreciation on foreign currency forward contracts
|
|
—
|
|
|
1
|
|
Unrealized
depreciation on total return swap
|
|
2
|
|
|
4
|
|
Unrealized
depreciation on interest rate swaps
|
|
59
|
|
|
29
|
|
Other accrued
expenses and liabilities
|
|
10
|
|
|
15
|
|
Total
liabilities
|
|
3,572
|
|
|
3,974
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
|
|
Preferred stock,
$0.001 par value, 50,000,000 shares authorized, none issued and
outstanding
|
|
—
|
|
|
—
|
|
Common stock, $0.001
par value, 900,000,000 shares authorized, 172,862,454 and
169,594,825 shares issued and outstanding, respectively
|
|
—
|
|
|
1
|
|
Capital in excess of
par value
|
|
5,875
|
|
|
5,794
|
|
Retained earnings
(accumulated deficit)
|
|
(1,689)
|
|
|
(799)
|
|
Total
stockholders' equity
|
|
4,186
|
|
|
4,996
|
|
Total
liabilities and stockholders' equity
|
|
$
|
7,758
|
|
|
$
|
8,970
|
|
Net asset value per
share of common stock at period end(1)
|
|
$
|
24.22
|
|
|
$
|
29.44
|
|
|
|
1)
|
Per share data was
derived by using the weighted average shares of FSKR's common stock
outstanding during the applicable period. Per share numbers may not
sum due to rounding. Share and per share amounts have been adjusted
to reflect the Reverse Stock Split on a retroactive
basis.
|
2)
|
The per share data
for distributions reflects the amount of distributions paid per
share of our common stock to stockholders of record during each
applicable period. The amount of each per share distribution has
been retroactively adjusted to reflect the Reverse Stock
Split.
|
3)
|
See FSKR's quarterly
report on Form 10-Q for the three months ended June 30, 2020 for a
description of FSKR's investment strategies, including its
definition of "direct originations."
|
4)
|
See FSKR's quarterly
report on Form 10-Q for the three months ended June 30, 2020 for
important information, including information related to the
calculation and definition of weighted average annual yield on
accruing debt investments, weighted average annual yield on all
debt investments, variable rate debt investments, fixed rate debt
investments, other income producing investments and non-income
producing investments.
|
5)
|
Interest income is
recorded on an accrual basis. See FSKR's quarterly report on Form
10-Q for the three months ended June 30, 2020 for a description of
FSKR's revenue recognition policy.
|
6)
|
Does not include
investments on non-accrual status.
|
7)
|
Net debt to equity
ratio is debt outstanding, net of cash and foreign currency and net
payable/receivable for investments purchased/sold and repaid,
divided by net assets.
|
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SOURCE FS KKR Capital Corp. II