FS KKR Capital Corp (FS Investment Corporation) - 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K, dated November 1, 2016, details a material refinancing transaction executed by FS Investment Corporation (the "Company") and its wholly-owned special-purpose financing subsidiaries, Locust Street Funding LLC and Race Street Funding LLC. The filing reports the termination of a prior $650 million repurchase facility with JPMorgan Chase Bank, N.A., London Branch, and its replacement with a new senior-secured term loan.
Key Financial Metrics and Transaction Details
- New Debt Facility: A $625 million senior-secured term loan (Locust Street Term Loan Facility) with JPMorgan Chase Bank, National Association ("JPM").
- Interest Rate: LIBOR (3-month) plus a spread of 2.6833% per annum.
- Repayment Terms: Mandatory prepayment of $200 million principal on or before January 31, 2017. The remaining balance matures on November 1, 2020.
- Interest Payments: Payable in arrears beginning January 15, 2017, and quarterly thereafter.
- Leverage Constraint: Outstanding advances must not exceed 53% of the net asset value of Locust Street's portfolio.
- Security: The loan is secured by a first-priority security interest in substantially all assets of Locust Street Funding LLC.
- Recourse: Obligations are non-recourse to the Company; exposure is limited to the Company's investment in Locust Street.
Material Changes Versus Prior Period
The Company replaced a $650 million repurchase facility (JPM Repurchase Facility) with a $625 million term loan, resulting in a $25 million reduction in the principal financing amount. The structure shifted from a repurchase agreement to a direct term loan with specific mandatory prepayment requirements and a fixed maturity date of November 1, 2020. The prior facility was terminated via the redemption of Class A Notes and the termination of the Global Master Repurchase Agreement.
Guidance, Risks, and Contingencies
The filing outlines specific "Events of Default" that could trigger immediate repayment or lender control over asset sales, including:
- Failure to make principal or interest payments within two business days of the due date.
- Insolvency or bankruptcy of Locust Street or the Company.
- A "Change of Control" of Locust Street.
- Material amendments to transaction documents without JPM's consent.
- Cessation of GSO/Blackstone Debt Funds Management LLC (or an affiliate) as the Company's investment sub-advisor.
Upon an Event of Default or "Coverage Event," JPM may direct the sale of portfolio assets at its sole discretion. The filing does not provide specific revenue, profit, or cash flow figures for the reporting period, as this is a transactional filing rather than a periodic financial report.
Key Facts for Investor Verification
- Verify the impact of the $200 million mandatory prepayment due January 31, 2017, on the Company's liquidity position.
- Confirm the current net asset value of Locust Street's portfolio to ensure compliance with the 53% leverage cap.
- Monitor the status of GSO/Blackstone Debt Funds Management LLC as the investment sub-advisor to avoid triggering a default event.
- Review the attached Loan Agreement (Exhibit 10.1) for detailed covenants and fee structures not fully enumerated in the summary.