FSK Completes Public Offering of $600 million 6.875% Unsecured Notes Due 2029

Rhea-AI Summary

FS KKR Capital Corp. (NYSE: FSK) announced the completion of its $600 million public offering of 6.875% unsecured notes due 2029. The offering was managed by a consortium of financial institutions including BofA Securities, BMO Capital Markets, J.P. Morgan, KKR Capital Markets, and others. The company plans to use the net proceeds for general corporate purposes, potentially including repaying existing debts. This move does not represent an offer to sell or buy the notes in any jurisdiction where such offers are prohibited.

Positive

• $600 million in capital raised.
• 6.875% interest rate on notes due 2029.
• Strong consortium of financial institutions managed the offering.
• Potential to repay existing debts and strengthen financial position.
• Diversification of funding sources.

Negative

• Increased financial liabilities with $600 million in new notes.
• Obligation to pay 6.875% interest, impacting future cash flows.
• Potential market skepticism about the necessity of raising additional capital.
• Risk associated with repaying outstanding indebtedness.

Insights

Financial Analyst

FS KKR Capital Corp.'s recent completion of a $600 million public offering of unsecured notes due in 2029 at a rate of 6.875% is a significant event for investors. This move is noteworthy because it allows the company to secure a substantial amount of funding at a fixed interest rate over a five-year period. The use of multiple major financial institutions to manage the offering underscores the market's confidence in FSK's financial health and its ability to meet future obligations.

This funding provides FSK with increased liquidity and flexibility to manage its debt and potentially invest in growth opportunities. However, the relatively high interest rate of 6.875% could be a point of concern, indicating that the market perceives some level of risk in FSK's creditworthiness. For retail investors, the high interest rate may imply higher future interest expenses, which could impact profitability if the company does not effectively deploy the capital to generate higher returns.

To put this in context, the average yield for investment-grade corporate bonds is typically lower, suggesting that FSK might be viewed by the market as a higher risk compared to its peers. Investors should monitor how FSK utilizes the proceeds and whether it leads to substantial growth or improved financial stability.

Corporate Strategy Expert

From a strategic perspective, issuing unsecured notes can be a double-edged sword. On one hand, it provides FSK with immediate capital without diluting shareholder equity, which is a significant advantage. This capital can be used for various corporate purposes, including repaying existing debt, which may reduce interest expenses in the short term if the repaid debt has a higher interest rate than the new notes.

However, the nature of these notes being unsecured means they are not backed by any specific assets. This could make them riskier for bondholders and may reflect on FSK's overall debt strategy. The decision to issue notes instead of equity signals confidence in the company's future cash flows and operational stability, as they believe they can meet these obligations without additional asset backing.

Retail investors should consider the potential implications of this increased leverage on FSK's balance sheet. An increase in debt can lead to higher debt servicing costs, which, if not managed properly, could strain financial resources. Nevertheless, if the proceeds are used wisely, such as for high-return investments or efficient debt restructuring, it could enhance long-term profitability and shareholder value.

PHILADELPHIA and NEW YORK, June 6, 2024 /PRNewswire/ -- FS KKR Capital Corp. (NYSE: FSK) today announced that it has completed its previously announced offering of $600 million in aggregate principal amount of its 6.875% unsecured notes due 2029 (the "Notes"). BofA Securities, Inc., BMO Capital Markets Corp., J.P. Morgan Securities LLC, KKR Capital Markets LLC, SMBC Nikko Securities America, Inc., Truist Securities, Inc., ING Financial Markets LLC, MUFG Securities Americas Inc., HSBC Securities (USA) Inc., Mizuho Securities USA LLC, RBC Capital Markets, LLC and TD Securities (USA) LLC are acting as joint book-running managers for this offering. Barclays Capital Inc., BNP Paribas Securities Corp., Citigroup Global Markets Inc., Deutsche Bank Securities Inc., Goldman Sachs & Co. LLC, Morgan Stanley & Co. LLC and SG Americas Securities, LLC are acting as joint lead managers for this offering. ICBC Standard Bank Plc, Keefe, Bruyette & Woods, Inc., R. Seelaus & Co., LLC, U.S. Bancorp Investments, Inc., B. Riley Securities, Inc., and Compass Point Research & Trading, LLC are acting as co-managers for this offering.

FSK intends to use the net proceeds of this offering for general corporate purposes, including potentially repaying outstanding indebtedness under credit facilities and certain notes.

This announcement does not constitute an offer to sell or a solicitation of an offer to buy any of the Notes, nor shall there be any offer, solicitation or sale in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful.

About FS KKR Capital Corp.

FSK is a leading publicly traded business development company (BDC) focused on providing customized credit solutions to private middle market U.S. companies. FSK seeks to invest primarily in the senior secured debt and, to a lesser extent, the subordinated debt of private middle market companies. FSK is advised by FS/KKR Advisor, LLC.

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 FSK and other business development companies.

FS Investments is a global alternative asset manager dedicated to delivering superior performance and innovative investment and capital solutions. The firm manages over $79 billion in assets for a wide range of clients, including institutional investors, financial professionals and individual investors. FS Investments provides access to a broad suite of alternative asset classes and strategies through its best-in-class investment teams and partners. With its diversified platform and flexible capital solutions, the firm is a valued partner to general partners, asset owners and portfolio companies. FS Investments is grounded in its high-performance culture and guided by its commitment to building value for its clients, investing in its colleagues and giving back to its communities. The firm has more than 500 employees across offices in the U.S., Europe and Asia and is headquartered in Philadelphia.

KKR is a leading global investment firm that offers alternative asset management as well as capital markets and insurance solutions. KKR aims to generate attractive investment returns by following a patient and disciplined investment approach, employing world-class people, and supporting growth in its portfolio companies and communities. KKR sponsors investment funds that invest in private equity, credit and real assets and has strategic partners that manage hedge funds. KKR's insurance subsidiaries offer retirement, life and reinsurance products under the management of Global Atlantic Financial Group. References to KKR's investments may include the activities of its sponsored funds and insurance subsidiaries.

Forward-Looking Statements and Important Disclosure Notice 

This announcement may contain certain forward-looking statements, including statements with regard to future events or future performance or operations of FSK. 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 FSK's operations or the economy generally due to terrorism, geo-political risks, natural disasters or pandemics such as COVID-19, future changes in laws or regulations and conditions in FSK's operating area and the price at which shares of FSK's common stock trade on the New York Stock Exchange. Some of these factors are enumerated in the filings FSK makes with the SEC. FSK undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Contact Information:

Investor Relations Contact

Robert Paun
Robert.Paun@fsinvestments.com 

Media Contact

Melanie Hemmert
media@fsinvestments.com

 

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SOURCE FS Investments

FAQ

What is the amount raised in FSK's public offering?

FS KKR Capital Corp. raised $600 million in its public offering.

What is the interest rate on FSK's new notes?

The interest rate on the new notes is 6.875%.

When are the FSK notes due?

The notes are due in 2029.

What will FSK use the net proceeds for?

FSK intends to use the net proceeds for general corporate purposes, including potentially repaying existing debts.

Which financial institutions managed FSK's offering?

The offering was managed by institutions like BofA Securities, BMO Capital Markets, J.P. Morgan, and others.