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FS Investments, KKR to form business development platform


According to Market Intelligence, December 2022


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FS Investments, KKR to form business development platform

FS Investments and KKR & Co. LP have agreed to create a business development company platform, with $18 billion in combined assets under management.

The two companies will seek stockholder approval for the partnership to provide investment advisory services to BDCs that FS Investments sponsors, FS Investment Corp., FS Investment Corp. II, FS Investment Corp. III and FS Investment Corp. IV., and to the BDC that KKR currently advises, Corporate Capital Trust Inc. Corporate Capital Trust II, currently advised by CNL and subadvised by KKR, will be given the opportunity to be included. The FS Investments-sponsored funds will be able to co-invest with KKR's other funds and accounts.

The board has approved the investment advisory agreements for each FS Investments-sponsored fund and Corporate Capital Trust.

KKR will provide nonadvisory services to FS Investments through a sourcing and administrative services agreement until stockholder approvals for the investment advisory agreements are obtained.

As part of the transaction, FS Investments and Blackstone Group LP's credit platform, GSO Capital Partners LP, have agreed to conclude its relationship with respect to all of FS Investments' sponsored funds that it subadvised, effective April 9, 2018.

During the interim, GSO Capital will continue to provide investment services to the FS Investments funds. GSO Capital will receive payments totaling $640 million from FS Investments, substantially all of which are expected to be paid in 2018. Blackstone anticipates utilizing those cash proceeds for the benefit of its shareholders.

GSO Capital plans to launch an internal direct lending business, which is expected to fully replace, and ultimately surpass, the current revenues and earnings to Blackstone shareholders from the FS Investments-sponsored funds.

Separately, FS Investments has agreed to create a joint venture with EIG Global Energy Partners LLC, a global alternative investment company focused on energy and energy-related infrastructure.

The FS Investments and EIG joint venture will offer energy and infrastructure companies financing solutions across the capital structure. After the joint venture's formation, the FS Investments/EIG team expects to generate enhanced deal flow, particularly directly originated deals, that positions the portfolio to create long-term value for FS Energy and Power Fund investors.

Under the terms of the agreement, following shareholder approval, FS Investments and EIG will provide investment advisory services to FS Energy and Power Fund. In addition, EIG has filed an application for a new exemptive relief order that will allow FS Energy and Power Fund to co-invest with EIG's other funds and accounts.

The board of trustees of FS Energy and Power Fund has approved the investment advisory agreement with the joint venture.

The funds plan to solicit stockholder approval of the investment advisory agreements in January 2018.