UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): March 11, 2014
FS Investment Corporation
(Exact name of Registrant as specified in its charter)
| Maryland | 814-00757 | 26-1630040 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
Cira Centre 2929 Arch Street, Suite 675 Philadelphia, Pennsylvania | 19104 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (215) 495-1150
None
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 2.02. | Results of Operations and Financial Condition. |
Selected Financial and Portfolio Information as of February 28, 2014 and December 31, 2013 and Results of Operations for the Two-Month Period Ended February 28, 2014 and the Year Ended December 31, 2013
As previously announced, FS Investment Corporation (the “Company” or “FSIC”) has applied to list its shares of common stock on the New York Stock Exchange LLC (“NYSE”) under the symbol “FSIC”. Subject to NYSE approval, the Company currently anticipates that its shares of common stock will commence trading on the NYSE (the “Listing”) in April 2014, subject to market conditions and other factors. However, there can be no assurance that the Company will be able to complete the Listing within this time frame or at all.
In connection with the Listing, FSIC is providing selected financial and portfolio information as of February 28, 2014 and December 31, 2013 and the results of its operations for the two-month period ended February 28, 2014 and the year ended December 31, 2013.
The selected financial and portfolio information as of and for the two-month period ended February 28, 2014 that is contained in Item 2.02 of this Current Report on Form 8-K is unaudited. Certain of the selected financial and portfolio information as of and for the year ended December 31, 2013 is derived from the audited consolidated financial information contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013, which the Company filed with the Securities and Exchange Commission (the “SEC”) on February 28, 2014.
Selected Financial Information (Unaudited)
(in thousands, except share and per share amounts)
Condensed Consolidated Balance Sheets
| February 28, 2014 | December 31, 2013 | |||||||
Assets | ||||||||
Investments, at fair value (amortized cost—$4,040,654 and $4,054,085, respectively) | $ | 4,141,835 | $ | 4,137,581 | ||||
Cash | 240,655 | 227,328 | ||||||
Other assets | 166,986 | 79,668 | ||||||
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Total assets | $ | 4,549,476 | $ | 4,444,577 | ||||
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Liabilities | ||||||||
Credit facilities payable | $ | 738,482 | $ | 723,682 | ||||
Repurchase agreement payable | 950,000 | 950,000 | ||||||
Other accrued expenses and liabilities | 187,025 | 129,903 | ||||||
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Total liabilities | 1,875,507 | 1,803,585 | ||||||
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Total stockholders’ equity | $ | 2,673,969 | $ | 2,640,992 | ||||
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Shares issued and outstanding | 260,351,067 | 259,320,161 | ||||||
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Net asset value per share of common stock at period end | $ | 10.27 | $ | 10.18 | ||||
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Condensed Consolidated Statements of Operations
| Two Months Ended February 28, 2014 | ||||
Investment income | ||||
Interest income | $ | 69,077 | ||
Fee income | 8,497 | |||
Dividend income | — | |||
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Total investment income | 77,574 | |||
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Operating expenses | ||||
Management fees | 15,078 | |||
Capital gains incentive fees(1) | 4,666 | |||
Subordinated income incentive fees | 10,294 | |||
Interest expense | 8,430 | |||
Other general and administrative expenses | 2,597 | |||
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Total operating expenses | 41,065 | |||
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Net investment income | 36,509 | |||
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Realized and unrealized gain/loss | ||||
Net realized gain (loss) on investments and foreign currency | 5,612 | |||
Net change in unrealized appreciation (depreciation) on investments | 17,685 | |||
Net change in unrealized gain (loss) on foreign currency | 30 | |||
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Total net realized and unrealized gain (loss) on investments | 23,327 | |||
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Net increase (decrease) in net assets resulting from operations | $ | 59,836 | ||
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Per share information—basic and diluted | ||||
Net increase (decrease) in net assets resulting from operations (Earnings per Share) | $ | 0.23 | ||
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Weighted average shares outstanding | 259,720,057 | |||
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| (1) | For the two months ended February 28, 2014, $1,358 of accrued capital gains incentive fees were based on unrealized gains. No capital gains incentive fees are actually payable by FSIC with respect to unrealized gains unless and until those gains are actually realized. |
The following table reflects the cash distributions per share that FSIC has declared and paid on its common stock during the two months ended February 28, 2014:
| Distribution | ||||||||
For the Two Months Ended | Per Share | Amount | ||||||
Fiscal 2014 | ||||||||
February 28, 2014 | $ | 0.1440 | $ | 37,423 | ||||
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Selected Portfolio Information (Unaudited)
(in thousands, except share and per share amounts)
Total Portfolio Activity
The following tables present certain selected information regarding the portfolio investment activity for the two-month period ended February 28, 2014 and the year ended December 31, 2013:
New Investment Activity | For the Two Months Ended February 28, 2014 | For the Year Ended December 31, 2013 | ||||||
Purchases | $ | 330,198 | $ | 2,641,733 | ||||
Sales and Redemptions | (354,803 | ) | (2,510,887 | ) | ||||
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Net Portfolio Activity | $ | (24,605 | ) | $ | 130,846 | |||
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| For the Two Months Ended February 28, 2014 | For the Year Ended December 31, 2013 | |||||||||||||||
New Investment Activity by Asset Class | Purchases | Percentage | Purchases | Percentage | ||||||||||||
Senior Secured Loans—First Lien | $ | 76,914 | 23 | % | $ | 1,646,725 | 62 | % | ||||||||
Senior Secured Loans—Second Lien | 172,155 | 52 | % | 446,626 | 17 | % | ||||||||||
Senior Secured Bonds | 52,313 | 16 | % | 231,539 | 9 | % | ||||||||||
Subordinated Debt | 12,288 | 4 | % | 239,201 | 9 | % | ||||||||||
Collateralized Securities | — | — | 47,340 | 2 | % | |||||||||||
Equity/Other | 16,528 | 5 | % | 30,302 | 1 | % | ||||||||||
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Total | $ | 330,198 | 100 | % | $ | 2,641,733 | 100 | % | ||||||||
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The following table summarizes the composition of FSIC’s investment portfolio at cost and fair value as of February 28, 2014 and December 31, 2013:
| February 28, 2014 | December 31, 2013 | |||||||||||||||||||||||
| Amortized Cost(1) | Fair Value | Percentage of Portfolio | Amortized Cost(1) | Fair Value | Percentage of Portfolio | |||||||||||||||||||
Senior Secured Loans—First Lien | $ | 2,055,066 | $ | 2,101,750 | 51 | % | $ | 2,080,228 | $ | 2,123,608 | 51 | % | ||||||||||||
Senior Secured Loans—Second Lien | 893,240 | 917,184 | 22 | % | 875,276 | 897,845 | 22 | % | ||||||||||||||||
Senior Secured Bonds | 414,112 | 393,441 | 10 | % | 414,297 | 385,548 | 9 | % | ||||||||||||||||
Subordinated Debt | 402,015 | 413,576 | 10 | % | 421,964 | 426,728 | 10 | % | ||||||||||||||||
Collateralized Securities | 116,500 | 135,691 | 3 | % | 120,206 | 140,508 | 4 | % | ||||||||||||||||
Equity/Other | 159,721 | 180,193 | 4 | % | 142,114 | 163,344 | 4 | % | ||||||||||||||||
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Total | $ | 4,040,654 | $ | 4,141,835 | 100 | % | $ | 4,054,085 | $ | 4,137,581 | 100 | % | ||||||||||||
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| (1) | Amortized cost represents the original cost adjusted for the amortization of premiums and/or accretion of discounts, as applicable, on investments. |
| February 28, 2014 | December 31, 2013 | |||||||
Number of Portfolio Companies | 159 | 165 | ||||||
% Variable Rate (based on fair value) | 72.1 | % | 72.2 | % | ||||
% Fixed Rate (based on fair value) | 23.6 | % | 23.5 | % | ||||
% Income Producing Preferred Equity (based on fair value) | 2.4 | % | 2.4 | % | ||||
% Non-Income Producing Equity or Other Investments (based on fair value) | 1.9 | % | 1.9 | % | ||||
Average Annual EBITDA of Portfolio Companies | $ | 191,100 | $ | 190,700 | ||||
Weighted Average Purchase Price of Investments (as a % of par or stated value) | 97.3 | % | 97.3 | % | ||||
Weighted Average Credit Rating of Investments that were Rated | B3 | B3 | ||||||
% of Investments on Non-Accrual | — | — | ||||||
Gross Portfolio Yield Prior to Leverage (based on amortized cost) | 10.1 | % | 10.1 | % | ||||
Gross Portfolio Yield Prior to Leverage (based on amortized cost)—Excluding Non-Income Producing Assets | 10.3 | % | 10.2 | % | ||||
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Direct Originations
The following tables present certain selected information regarding our direct originations for the two months ended February 28, 2014 and the year ended December 31, 2013:
New Direct Originations | For the Two Months Ended February 28, 2014 | For the Year Ended December 31, 2013 | ||||||
Total Commitments (including Unfunded Commitments) | $ | 289,619 | $ | 1,559,115 | ||||
Exited Investments (including partial paydowns) | (113,142 | ) | (519,894 | ) | ||||
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Net Direct Originations | $ | 176,477 | $ | 1,039,221 | ||||
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| For the Two Months Ended February 28, 2014 | For the Year Ended December 31, 2013 | |||||||||||||||
New Direct Originations by Asset Class | Commitment Amount | Percentage | Commitment Amount | Percentage | ||||||||||||
Senior Secured Loans—First Lien | $ | 48,173 | 17 | % | $ | 1,105,046 | 71 | % | ||||||||
Senior Secured Loans—Second Lien | 200,332 | 69 | % | 232,000 | 15 | % | ||||||||||
Senior Secured Bonds | 15,750 | 5 | % | — | — | |||||||||||
Subordinated Debt | 7,500 | 3 | % | 175,000 | 11 | % | ||||||||||
Collateralized Securities | — | — | 16,740 | 1 | % | |||||||||||
Equity/Other | 17,864 | 6 | % | 30,329 | 2 | % | ||||||||||
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Total | $ | 289,619 | 100 | % | $ | 1,559,115 | 100 | % | ||||||||
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| For the Two Months Ended February 28, 2014 | For the Year Ended December 31, 2013 | |||||||
Average New Direct Origination Commitment Amount | $ | 26,329 | $ | 55,683 | ||||
Weighted Average Maturity for New Direct Originations | 11/22/20 | 1/1/19 | ||||||
Gross Portfolio Yield Prior to Leverage (based on amortized cost) of New Direct Originations during Period | 9.2 | % | 10.5 | % | ||||
Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Investments Exited during Period | 9.5 | % | 14.0 | % | ||||
Characteristics of All Direct Originations held in Portfolio | February 28, 2014 | December 31, 2013 | ||||||
Number of Portfolio Companies | 39 | 35 | ||||||
Average Annual EBITDA of Portfolio Companies | $ | 39,000 | $ | 34,900 | ||||
Average Leverage through Tranche of Portfolio Companies—Excluding Equity/Other and Collateralized Securities | 4.1x | 4.0x | ||||||
% of Investments on Non-Accrual | — | — | ||||||
Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Funded Direct Originations | 9.8 | % | 9.9 | % | ||||
Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Funded Direct Originations—Excluding Non-Income Producing Assets | 10.0 | % | 10.0 | % | ||||
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Portfolio Composition by Strategy
The table below summarizes the composition of FSIC’s investment portfolio by strategy and enumerates the percentage, by fair value, of the total portfolio assets in such strategies as of February 28, 2014 and December 31, 2013:
| February 28, 2014 | December 31, 2013 | |||||||||||||||
Portfolio Composition by Strategy | Fair Value | Percentage of Portfolio | Fair Value | Percentage of Portfolio | ||||||||||||
Direct Originations | $ | 2,223,706 | 54 | % | $ | 2,096,806 | 51 | % | ||||||||
Opportunistic | 1,108,005 | 27 | % | 1,155,322 | 28 | % | ||||||||||
Broadly Syndicated/Other | 810,124 | 19 | % | 885,453 | 21 | % | ||||||||||
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Total | $ | 4,141,835 | 100 | % | $ | 4,137,581 | 100 | % | ||||||||
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Financial Condition, Liquidity and Capital Resources (Unaudited)
(in thousands)
As of February 28, 2014, FSIC had $240,655 in cash, which was held in a custodial account, and $186,518 in borrowings available under its financing facilities. Below is a summary of its outstanding financing facilities as of February 28, 2014:
Facility | Type of Facility | Rate | Amount Outstanding | Amount Available | Maturity Date | |||||||||||
Arch Street Credit Facility | Revolving | L + 1.75% | $ | 373,682 | $ | 176,318 | August 29, 2015 | |||||||||
Broad Street Credit Facility | Revolving | L + 1.50% | $ | 125,000 | $ | — | December 20, 2014 | |||||||||
JPM Facility | Repurchase | 3.25% | $ | 950,000 | $ | — | April 15, 2017 | |||||||||
Walnut Street Credit Facility | Revolving | L + 1.50% to 2.75% | $ | 239,800 | $ | 10,200 | May 17, 2017 | |||||||||
Other Information
The information in this Current Report on Form 8-K is summary information only and should be read in conjunction with FSIC’s Annual Report on Form 10-K for the year ended December 31, 2013, which FSIC filed with the Securities and Exchange Commission (the “SEC”) on February 28, 2014, as well as FSIC’s other reports filed with the SEC. A copy of FSIC’s Annual Report on Form 10-K for the year ended December 31, 2013 and FSIC’s other reports filed with the SEC can be found on FSIC’s website at www.fsinvestmentcorp.com and the SEC’s website at www.sec.gov.
FSIC’s gross annual portfolio yield, prior to leverage, represents the expected yield to be generated by FSIC on its investment portfolio based on the composition of its portfolio as of February 28, 2014. The portfolio yield does not represent an actual investment return to stockholders.
Investor Presentation
On March 12, 2014, the Company is hosting a stockholder conference call to discuss its financial results for the fiscal year ended December 31, 2013 and selected financial and portfolio information as of and for the two-month period ended February 28, 2014. In connection therewith, the Company made available an investor presentation on its website (www.fsinvestmentcorp.com). A copy of the presentation is attached hereto as Exhibit 99.1.
Forward-Looking Statements
This Current Report on Form 8-K may contain certain forward-looking statements, including statements with regard to future events or the future performance or operations of FSIC. 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 FSIC’s operations or the economy due generally to terrorism or natural disasters, future changes in laws or regulations and conditions in FSIC’s operating area, the
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ability of FSIC to complete the listing of its shares of common stock on the NYSE, and the price at which shares of common stock may trade on the NYSE. Some of these factors are enumerated in the filings FSIC makes with the SEC. FSIC undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
This Current Report on Form 8-K contains summaries of certain financial and statistical information about FSIC. The information contained in this Current Report on Form 8-K is summary information that is intended to be considered in the context of FSIC’s SEC filings and other public announcements that FSIC may make, by press release or otherwise, from time to time. FSIC undertakes no duty or obligation to publicly update or revise the information contained in this Current Report on Form 8-K other than as required by law. 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 FSIC, or information about the market, as indicative of FSIC’s future results.
The information in this Item 2.02, including Exhibit 99.1 and the information set forth therein, is deemed to have been furnished to, and shall not be deemed to be “filed” with, the SEC.
| Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits.
EXHIBIT | DESCRIPTION | |
| 99.1 | FS Investment Corporation Investor Presentation. | |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| FS Investment Corporation | ||||||
| Date: March 11, 2014 | By: | /s/ Michael C. Forman | ||||
| Michael C. Forman | ||||||
| Chief Executive Officer | ||||||
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EXHIBIT INDEX
EXHIBIT | DESCRIPTION | |
| 99.1 | FS Investment Corporation Investor Presentation. | |
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