FS KKR Capital Corp (FS Investment Corporation) - 8-K Summary
Business Context and Reporting Period
This Form 8-K Current Report, dated December 3, 2014, discloses a material definitive agreement entered into by FS Investment Corporation (the "Company"). The filing details the issuance of new debt securities and the use of proceeds to restructure existing financing.
Key Financial Metrics and Transaction Details
- Debt Issuance: $325,000,000 aggregate principal amount of 4.250% Notes due 2020.
- Interest Rate: 4.250% per annum, payable semi-annually starting July 15, 2015.
- Maturity Date: January 15, 2020.
- Net Proceeds: Approximately $320.5 million.
- Transaction Costs: Underwriting discounts and commissions of approximately $2.9 million; estimated offering expenses of approximately $350,000.
- Use of Proceeds: Repayment of outstanding indebtedness under existing financing facilities.
- Seniority: General unsecured obligations ranking pari passu with existing unsecured unsubordinated indebtedness and structurally junior to subsidiary indebtedness.
Material Changes
The primary material change is the creation of a new direct financial obligation via the Second Supplemental Indenture. The Company has utilized the net proceeds from this offering to reduce its outstanding debt under prior financing facilities, thereby altering its capital structure and debt maturity profile.
Guidance, Risks, and Covenants
- Covenants: The Indenture requires compliance with asset coverage requirements under Section 18(a)(1)(A) of the Investment Company Act of 1940, as modified by Section 61(a)(1).
- Change of Control: In the event of a "change of control repurchase event," the Company must offer to purchase the Notes at 100% of the principal amount plus accrued interest.
- Redemption: The Notes may be redeemed in whole or in part at the Company's option at redemption prices set forth in the Indenture.
- Reporting: The Company must provide financial information to Note holders if it ceases to be subject to Exchange Act reporting requirements.
Investor Verification Checklist
- Verify the exact amount of outstanding indebtedness repaid with the $320.5 million net proceeds.
- Review the full text of the Second Supplemental Indenture (Exhibit 4.1) for specific limitations and exceptions to covenants.
- Confirm the Company's current asset coverage ratio to ensure compliance with Investment Company Act requirements.
- Assess the impact of the new 4.250% interest rate on future cash flow compared to the cost of the debt being retired.