PHILADELPHIA, Nov. 9, 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 September 30, 2020, and that its board of
directors has declared a fourth quarter 2020 distribution totaling
$0.55 per share.
Financial and Operating Highlights for the Quarter Ended
September 30,
2020(1)
- Net investment income of $0.52
per share, compared to $0.44 per
share for the quarter ended June 30,
2020
- Total net realized and unrealized gain of $0.35 per share, compared to a total net realized
and unrealized loss of $0.31 per
share for the quarter ended June 30,
2020
- Paid cash distributions to stockholders totaling
$0.55 per
share(2)
- Total purchases of $264
million versus $309 million of
sales and repayments, including $95
million of sales to its joint venture Credit Opportunities
Partners, LLC, or COP
- Net asset value of $24.66 per
share, compared to $24.22 per share
as of June 30, 2020
Commenting on the company's performance, CEO & Chairman
Michael C. Forman stated, "As our
investment pipeline continues to build we are pleased to have
closed approximately $743 million of
new investments between July and November resulting in continued
growth in our net investment income on a per share basis. As such,
our board has declared a fourth quarter dividend of $0.55 per share. In addition to our strong
operating performance, we are pleased with our quarter-over-quarter
increase in net asset value per share of 1.8%. As we move
into the fourth quarter we are encouraged by the performance
metrics we are seeing across our investment portfolio."
Declaration of Distribution for Fourth Quarter 2020
FSKR's board of directors has declared a cash distribution for
the fourth quarter of $0.55 per
share, which will be paid on or about January 5, 2021 to stockholders of record as of
the close of business on December 16,
2020.
Summary Consolidated Results
|
Three Months
Ended
|
(dollars in
millions, except per share data)
(all per share amounts are basic and
diluted)(1)
|
September 30,
2020
|
June 30,
2020
|
March 31,
2020
|
Total investment
income
|
$172
|
$168
|
$195
|
Net investment
income
|
90
|
75
|
93
|
Net increase
(decrease) in net assets resulting from operations
|
149
|
22
|
(708)
|
|
|
|
|
Net investment income
per share
|
$0.52
|
$0.44
|
$0.55
|
Total net realized
and unrealized gain (loss) per share
|
$0.35
|
$(0.31)
|
$(4.72)
|
Net increase
(decrease) in net assets resulting from operations
(Earnings per Share)
|
$0.87
|
$0.13
|
$(4.17)
|
Stockholder
distributions per share(2)
|
$0.55
|
$0.60
|
$0.60
|
Net asset value per
share at period end
|
$24.66
|
$24.22
|
$24.68
|
Weighted average
shares outstanding
|
171,801,325
|
171,598,176
|
169,594,825
|
Shares outstanding,
end of period
|
170,597,301
|
172,862,454
|
169,594,825
|
|
(dollar amounts in
millions)
|
|
As
of September 30,
2020
|
As
of December 31,
2019
|
Total fair value of
investments
|
|
$7,331
|
$8,591
|
Total
assets
|
|
7,750
|
8,970
|
Total stockholders'
equity
|
|
4,207
|
4,996
|
Portfolio Highlights as of September 30,
2020
- Total fair value of investments was $7.3
billion of which 77% was invested in senior secured
securities.
- Weighted average annual yield on accruing debt
investments(4) was 8.6%, compared to 8.7% as of
June 30, 2020.
- Weighted average annual yield on all debt
investments(4) was 7.5%, compared to 7.4% as of
June 30, 2020.
- Exposure to the top ten largest portfolio companies by fair
value was 26% as of September 30,
2020, compared to 26% as of June 30,
2020.
Total Portfolio Activity
|
Three Months
Ended
|
|
|
(dollar amounts in
millions)
|
September 30,
2020
|
June 30,
2020
|
March 31,
2020
|
|
Purchases
|
$264
|
$150
|
$1,317
|
|
Sales and
redemptions
|
(309)
|
(335)
|
(1,643)
|
|
Net portfolio
activity
|
$(45)
|
$(185)
|
$(326)
|
|
Sales to
COP
|
95
|
—
|
253
|
|
Adjusted net
portfolio activity
|
$50
|
$(185)
|
$(73)
|
|
|
|
Portfolio
Data
|
As of
September 30, 2020
|
As of
December 31, 2019
|
|
Total fair value of
investments
|
$7,331
|
$8,591
|
|
Number of Portfolio
Companies
|
160
|
213
|
|
% of Investments on
Non-Accrual
(based on fair
value)(5)
|
4.2%
|
2.1%
|
|
|
|
|
Asset Class
(based on fair value)
|
|
|
Senior Secured Loans
— First Lien
|
66.9%
|
66.6%
|
|
Senior Secured Loans
— Second Lien
|
8.6%
|
9.4%
|
|
Other Senior Secured
Debt
|
1.0%
|
2.7%
|
|
Subordinated
Debt
|
2.3%
|
5.7%
|
|
Asset Based
Finance
|
8.8%
|
5.6%
|
|
Credit Opportunities
Partners, LLC
|
8.2%
|
5.9%
|
|
Equity/Other
|
4.2%
|
4.1%
|
|
|
|
|
|
Interest Rate
Type (based on fair value)
|
|
|
|
% Variable Rate Debt
Investments
|
72.3%
|
72.9%
|
|
% Fixed Rate Debt
Investments
|
9.1%
|
14.7%
|
|
% Other Income
Producing Investments
|
10.6%
|
6.9%
|
|
% Non-Income
Producing Investments(6)
|
3.8%
|
3.4%
|
|
% of Investments on
Non-Accrual(5)
|
4.2%
|
2.1%
|
|
|
|
|
|
Leverage and Liquidity as of September 30, 2020
- Net debt to equity ratio(7) of 73%, based on
$3.3 billion in total debt
outstanding, $140 million of cash and
foreign currency and $78 million of
net receivable for investments sold and repaid and stockholders'
equity of $4.2 billion. FSKR's
weighted average effective interest rate (including the effect of
non-usage fees) was 3.11%.
- Cash and foreign currency of $140
million and availability under its financing arrangements of
$1,622 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, November 10, 2020, to
discuss its third 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 6695499 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 September
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, credit and real assets, 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 September
30, 2020, which FSKR filed with the U.S. Securities and
Exchange Commission (the SEC) on November 9,
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
September 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
Media (FS Investments)
media@fsinvestments.com
Income Statement
($ amounts in millions, except per share
data)
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
September
30,
|
|
September
30,
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Investment
income
|
|
|
|
|
|
|
|
|
Interest
income
|
|
$
|
117
|
|
|
$
|
89
|
|
|
$
|
385
|
|
|
$
|
288
|
|
Paid-in-kind interest
income
|
|
12
|
|
|
5
|
|
|
33
|
|
|
9
|
|
Fee income
|
|
5
|
|
|
5
|
|
|
27
|
|
|
19
|
|
Dividend and other
income
|
|
10
|
|
|
1
|
|
|
12
|
|
|
1
|
|
From
non-controlled/affiliated investments:
|
|
|
|
|
|
|
|
|
Interest
income
|
|
2
|
|
|
6
|
|
|
8
|
|
|
16
|
|
Paid-in-kind interest
income
|
|
3
|
|
|
2
|
|
|
11
|
|
|
7
|
|
Fee income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0
|
|
From
controlled/affiliated investments:
|
|
|
|
|
|
|
|
|
Interest
income
|
|
1
|
|
|
—
|
|
|
4
|
|
|
—
|
|
Paid-in-kind interest
income
|
|
1
|
|
|
—
|
|
|
2
|
|
|
—
|
|
Dividend and other
income
|
|
21
|
|
|
—
|
|
|
53
|
|
|
—
|
|
Total investment
income
|
|
172
|
|
|
108
|
|
|
535
|
|
|
340
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
Management
fees
|
|
28
|
|
|
17
|
|
|
90
|
|
|
52
|
|
Subordinated income
incentive fees
|
|
22
|
|
|
5
|
|
|
64
|
|
|
25
|
|
Administrative
services expenses
|
|
2
|
|
|
2
|
|
|
5
|
|
|
3
|
|
Stock transfer agent
fees
|
|
0
|
|
|
0
|
|
|
2
|
|
|
2
|
|
Accounting and
administrative fees
|
|
1
|
|
|
0
|
|
|
2
|
|
|
1
|
|
Interest
expense
|
|
26
|
|
|
24
|
|
|
101
|
|
|
79
|
|
Listing advisory
fees
|
|
—
|
|
|
—
|
|
|
7
|
|
|
—
|
|
Other general and
administrative expenses
|
|
3
|
|
|
1
|
|
|
6
|
|
|
3
|
|
Total operating
expenses
|
|
82
|
|
|
49
|
|
|
277
|
|
|
165
|
|
Net investment
income
|
|
90
|
|
|
59
|
|
|
258
|
|
|
175
|
|
|
|
|
|
|
|
|
|
|
Realized and
unrealized gain/loss
|
|
|
|
|
|
|
|
|
Net realized gain
(loss) on investments:
|
|
|
|
|
|
|
|
|
Non-controlled/unaffiliated investments
|
|
(131)
|
|
|
(8)
|
|
|
(382)
|
|
|
(49)
|
|
Non-controlled/affiliated investments
|
|
(120)
|
|
|
0
|
|
|
(229)
|
|
|
0
|
|
Controlled/affiliated
investments
|
|
(1)
|
|
|
—
|
|
|
(1)
|
|
|
—
|
|
Net realized gain
(loss) on total return swap
|
|
(1)
|
|
|
—
|
|
|
(2)
|
|
|
—
|
|
Net realized gain
(loss) on foreign currency forward contracts
|
|
—
|
|
|
—
|
|
|
0
|
|
|
—
|
|
Net realized gain
(loss) on interest rate swaps
|
|
(5)
|
|
|
0
|
|
|
(11)
|
|
|
0
|
|
Net realized gain
(loss) on foreign currency
|
|
(13)
|
|
|
1
|
|
|
(12)
|
|
|
1
|
|
Net change in
unrealized appreciation (depreciation) on investments:
|
|
|
|
|
|
|
|
|
Non-controlled/unaffiliated investments
|
|
275
|
|
|
(80)
|
|
|
(176)
|
|
|
(38)
|
|
Non-controlled/affiliated investments
|
|
26
|
|
|
5
|
|
|
14
|
|
|
14
|
|
Controlled/affiliated
investments
|
|
28
|
|
|
—
|
|
|
7
|
|
|
—
|
|
Net change in
unrealized appreciation (depreciation) on total return
swap
|
|
2
|
|
|
—
|
|
|
4
|
|
|
—
|
|
Net change in
unrealized appreciation (depreciation) on foreign
currency forward contracts
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
Net change in
unrealized appreciation (depreciation) on interest rate
swaps
|
|
5
|
|
|
(2)
|
|
|
(25)
|
|
|
(12)
|
|
Net change in
unrealized gain (loss) on foreign currency
|
|
(6)
|
|
|
3
|
|
|
17
|
|
|
1
|
|
Total net realized and
unrealized gain (loss)
|
|
$
|
59
|
|
|
$
|
(81)
|
|
|
$
|
(795)
|
|
|
$
|
(83)
|
|
Net increase
(decrease) in net assets resulting from operations
|
|
$
|
149
|
|
|
$
|
(22)
|
|
|
$
|
(537)
|
|
|
$
|
92
|
|
|
|
|
|
|
|
|
|
|
Per share
information—basic and diluted
|
|
|
|
|
|
|
|
|
Net increase
(decrease) in net assets resulting from operations
(Earnings per
Share)(1)
|
|
$
|
0.87
|
|
|
$
|
(0.27)
|
|
|
$
|
(3.14)
|
|
|
$
|
1.13
|
|
Weighted average
shares outstanding(1)
|
|
171,801,325
|
|
|
81,836,620
|
|
|
171,012,966
|
|
|
81,325,701
|
|
Balance Sheet
($ amounts in millions, except per share
data)
|
|
September 30,
2020
|
|
|
|
|
(Unaudited)
|
|
December 31,
2019
|
Assets
|
|
|
|
|
Investments, at fair
value
|
|
|
|
|
Non-controlled/unaffiliated investments (amortized
cost—$6,862 and $8,004, respectively)
|
|
$
|
6,352
|
|
|
$
|
7,670
|
|
Non-controlled/affiliated investments (amortized
cost—$425 and $478, respectively)
|
|
317
|
|
|
356
|
|
Controlled/affiliated
investments (amortized cost—$649 and $559, respectively)
|
|
662
|
|
|
565
|
|
Total investments, at
fair value (amortized cost—$7,936 and $9,041,
respectively)
|
|
7,331
|
|
|
8,591
|
|
Cash
|
|
134
|
|
|
163
|
|
Foreign currency, at
fair value (cost—$6 and $4, respectively)
|
|
6
|
|
|
4
|
|
Collateral held at
broker for open interest rate swap contracts
|
|
54
|
|
|
44
|
|
Due from
counterparty
|
|
—
|
|
|
45
|
|
Receivable for
investments sold and repaid
|
|
110
|
|
|
23
|
|
Income
receivable
|
|
99
|
|
|
84
|
|
Deferred financing
costs
|
|
14
|
|
|
12
|
|
Unrealized
appreciation on foreign currency forward contracts
|
|
0
|
|
|
—
|
|
Prepaid expenses and
other assets
|
|
2
|
|
|
4
|
|
Total
assets
|
|
$
|
7,750
|
|
|
$
|
8,970
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Payable for
investments purchased
|
|
$
|
32
|
|
|
$
|
37
|
|
Debt (net of deferred
financing costs of $0 and $0, respectively)
|
|
3,288
|
|
|
3,809
|
|
Stockholder
distributions payable
|
|
94
|
|
|
—
|
|
Management fees
payable
|
|
28
|
|
|
35
|
|
Subordinated income
incentive fees payable
|
|
22
|
|
|
11
|
|
Administrative
services expense payable
|
|
2
|
|
|
3
|
|
Interest
payable
|
|
15
|
|
|
30
|
|
Unrealized
depreciation on foreign currency forward contracts
|
|
0
|
|
|
1
|
|
Unrealized
depreciation on total return swap
|
|
—
|
|
|
4
|
|
Unrealized
depreciation on interest rate swaps
|
|
54
|
|
|
29
|
|
Other accrued
expenses and liabilities
|
|
8
|
|
|
15
|
|
Total
liabilities
|
|
3,543
|
|
|
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, 170,597,301 and
169,594,825 shares
issued and outstanding,
respectively
|
|
—
|
|
|
1
|
|
Capital in excess of
par value
|
|
5,842
|
|
|
5,794
|
|
Retained earnings
(accumulated deficit)
|
|
(1,635)
|
|
|
(799)
|
|
Total
stockholders' equity
|
|
4,207
|
|
|
4,996
|
|
Total
liabilities and stockholders' equity
|
|
$
|
7,750
|
|
|
$
|
8,970
|
|
Net asset value per
share of common stock at period end(1)
|
|
$
|
24.66
|
|
|
$
|
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 on a retroactive basis to reflect FSKR's
4
to 1 reverse split of its shares of common stock (the Reverse Stock
Split), which became effective on June 10, 2020.
|
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 September 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 September 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 September 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