FS/KKR Business Development Company $15 Billion Merger

FS KKR Capital Corp. and FS KKR Capital Corp. II  Plan to Merge

According to reports on Tuesday, two business development companies managed by a FS/KKR Advisor LLC (a  joint venture of FS Investments and KKR & Co.) FS KKR Capital Corp. and FS KKR Capital Corp. II  are  planning to merge, creating a $15 billion lending vehicle that will reportedly be one of the largest providers of financing to mid sized firms in the U.S.

The merger between FS KKR Capital Corp. and FS KKR Capital Corp. II will reportedly create an entity with more than $3 billion of committed capital available for new investments, according to a press announcement. 

The new BDC, which will continue under the name FS KKR Capital Corp., will reportedly continue to focus mainly on senior secured debt investments. The merger, which is expected to close during the second or third quarter of 2021, has reportedly been approved by both boards. 

As we reported earlier this year, shares of FS KKR Capital Corp. II began trading on the New York Stock Exchange in June, after a 2019 merger between four FS Investments entities. The company said it was looking to take advantage of dislocations in the market caused by the coronavirus global pandemic. 

The White Law Group continues to  investigate potential securities claims involving broker-dealers who may have unsuitably recommended FS KKR Capital Corp. II (FSKR) to investors.

 Due to a 4 to 1reverse stock split, FSKR’s net asset value per share as of March 31, 2020 would have been $24.68, instead of $6.17 per share. Unfortunately for investors, shares of FSKR closed at $17.51 per share yesterday.

How Does a Merger Affect Shareholders?

Companies often merge as part of a strategic effort to boost shareholder value, often by creating new business lines and/or gaining  greater market share. However, the economic environment at the time of the merger,  size of the companies and management of the merger process all play a part in future returns for shareholders. 

Shareholders may experience a significant loss of voting power, and while the spike in trading volume tends to inflate share prices, if economic conditions are not favorable at the time of the merger, shareholders may see significant losses.

Risks of Investing in Business Development Companies (BDCs)

Broker dealers are required to inform clients of the risks associated with investment recommendations and to ensure that those recommendations are suitable for the investor in light of the investor’s age, risk tolerance, net worth, and investment experience.

Unfortunately, some brokers may have downplayed the risks associated with these non-traded BDCs. They have misled investors into thinking that they are “safe” investment products.  

The high sales commission brokers earned for selling such products may provide some brokers with enough incentive to push the product to unsuspecting investors. Your typical stock or mutual fund offers 1%-2% commission. The commission for non-traded BDCs like, are often 7% – 10%. 

If you have suffered losses investing in FS KKR Capital Corp. II you may be able to file a complaint against your brokerage firm. Please contact The White Law Group at 1-888-637-5510 for a free consultation.

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm. The firm has offices in Chicago, Illinois. 

For more information on The White Law Group, please visit our website at www.whitesecuritieslaw.com.