KBRA Assigns Issuer and Senior Unsecured Debt BBB Ratings to FS KKR Capital Corp. and Withdraws Corporate Capital Trust’s Issuer and Senior Unsecured Debt Ratings
NEW YORK--(BUSINESS WIRE)--Dec 20, 2018--Kroll Bond Rating Agency (KBRA) assigns Issuer and Senior Unsecured Debt ‘BBB’ ratings to FS KKR Capital Corp. and withdraws Corporate Capital Trust’s Issuer and Senior Unsecured Debt ‘BBB’ Ratings that were placed on Watch Developing following the announced merger agreement between Corporate Capital Trust (CCT) and FS Investment Corporation (FSIC). The ratings Outlook for FS KKR Capital Corp. is Stable. The merger was completed on December 19, 2018 and began trading today under the NYSE ticker symbol “FSK”.
The combined company has an investment portfolio of approximately $7.65 billion, creating the second largest business development company (BDC). The portfolio is diversified among 221 portfolio companies across 23 industries. The BDC will maintain its focus on investing primarily in the senior secured debt of middle market companies. On a pro-forma basis, the portfolio is comprised of approximately 74% senior secured loans. While FS Investments brings a weaker portfolio to the combined company in terms of credit quality with non-accruals of 2.7% at fair value compared with CCT’s non-accruals of 1.3%; on a combined basis, non-accruals were 1.9% as of September 30, 2018. FSIC’s subordinated debt portfolio has performed sub-par but credit quality should strengthen under the management of FS/KKR Advisor.
FSK is a closed-end business development company externally managed by FS/KKR Advisor, LLC, a partnership between FS Investments and KKR Credit that was formed in April 2018 and currently manages $17 billion in assets across five BDCs, including FSK. KKR Credit is a subsidiary of KKR & Co. L.P., a leading global alternate investment firm managing $194 billion in AUM as of September 30, 2018 and has a 41-year history with over 360 investment professionals working in 21 offices globally.
FSK’s BBB issuer and senior unsecured debt ratings reflect the Company’s appropriate leverage of 0.75 times, a diversified portfolio, a strong external investment advisor and comparatively low exposure to equity investments. The Company is considering, but has not yet indicated, any specific plans to lower asset coverage requirements following the changes introduced under the Small Business Credit Availability Act. Enacted earlier this year, the legislation allows BDCs to effectively double their leverage limit to two times. These strengths are counter-balanced by the potential risks related to FSK’s business as a regulated BDC, illiquid nature of the assets and the Company’s highly secured funding profile.
The ratings are based on KBRA’s , published November 28, 2017.
About KBRA and KBRA Europe
KBRA is a full service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus, is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider, and is a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.
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KEYWORD: UNITED STATES NORTH AMERICA NEW YORK
INDUSTRY KEYWORD: PROFESSIONAL SERVICES BANKING FINANCE OTHER PROFESSIONAL SERVICES
SOURCE: Kroll Bond Rating Agency
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PUB: 12/20/2018 12:44 PM/DISC: 12/20/2018 12:44 PM