By Leela Parker Deo
NEW YORK, April 1 Philadelphia-based alternative
investment manager Franklin Square Capital Partners is planning
to list FS Investment Corporation, its $4.5 billion business
development company, on the New York Stock Exchange in order to
provide liquidity to existing investors as well as enable new
investors to access the fund, Franklin Square Chairman and Chief
Executive Officer Michael Forman told Thomson Reuters LPC in an
FSIC Tuesday said it expects to list its common stock on the
NYSE on April 16, under the symbol FSIC, according to a
Business development companies are closed-end investment
funds that lend to and invest in small and mid-sized private
U.S. companies. The funds raise equity capital from retail and
institutional investors and in turn deploy that capital to
borrowers that typically have more limited access to the capital
The BDC universe includes both non-traded vehicles, as well
as publicly traded funds.
With the listing, FSIC, which is managed by Franklin Square
and sub-advised by GSO Capital Partners, the credit platform of
investment firm Blackstone, will shift from a non-traded,
or unlisted, fund to a publicly traded one.
FSIC offers mainstream, or retail, investors, exposure to
private companies, an investment typically available to large
With a portfolio of $4.5 billion in assets, as of February
28, FSIC's forthcoming listing marks the largest initial listing
of a BDC, and puts FSIC among some of the largest BDCs in the
By comparison, according to Wells Fargo, Ares Capital Corp
has an approximately $7.5 billion portfolio, American
Capital Ltd is $5.5 billion in size and Prospect
Capital Corp's portfolio is about $4.97 billion.
FSIC's size, the quality and uniqueness of the portfolio,
and the strength of the Franklin Square and GSO / Blackstone
partnership distinguish the fund from its peers, said Forman.
FSIC invests primarily in the floating rate, senior secured
debt of private U.S. companies. As of February 28, FSIC is
invested across 159 portfolio companies, with 83 percent of the
portfolio comprising senior secured investments, including
first- and second-lien loans, as well as senior secured bonds.
The portfolio is a mix of direct origination senior debt
investments alongside private equity investors in leveraged
buyouts and private companies, as well as event driven
transactions and syndicated loan investments. In 2013, FSIC's
average direct origination commitment amount was $55.7 million.
Fifty-four percent of the portfolio was directly originated
as of February 28. Opportunistic investments comprised 27
percent and investments in broadly syndicated loans made up 19
Unlike with an initial public offering, in which shares are
sold to the public to raise new capital, FSIC will not raise new
equity in conjunction with the listing.
However, as previously announced, FSIC will conduct a
post-listing tender offer to purchase up to $250 million in
shares of common stock from existing investors.
GSO Capital Partners is considering the purchase of up to
$50 million in FSIC shares following the listing and completion
of the tender offer, FSIC said in today's statement. Likewise,
Franklin Square and members of FSIC and Franklin Square
management are considering the purchase of up to $100 million
and $25 million, respectively, of FSIC shares after the listing
and tender offer are complete.
The listing comes as BDCs are competing with other
alternative capital providers for a larger share of the middle
market lending pie as banks are increasingly constrained by new
regulatory requirements that could meaningfully curb leveraged
lending. BDCs have seen significant growth and are widely
expected to benefit from the evolving lender landscape.
BDC loan balances peaked in 4Q13 at almost $40 billion up
from $15.4 billion in 4Q07 ahead of the financial crisis. And
since 2009, more than $27 billion in cumulative BDC equity has
"I think over time the BDC industry will grow to meet the
lending needs of middle market companies that many banks no
longer serve. If that is the case, I believe BDCs will be a
corporate analog to the role REITs have played in the Real
Estate space," said Forman.
(Editing By Jon Methven)