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