FS KKR Capital Corp. II - FORM 10-Q - November 14, 2018

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EX-32.1 - EXHIBIT 32.1 - FS KKR Capital Corp. IItv506911_ex32-1.htm
EX-31.2 - EXHIBIT 31.2 - FS KKR Capital Corp. IItv506911_ex31-2.htm
EX-31.1 - EXHIBIT 31.1 - FS KKR Capital Corp. IItv506911_ex31-1.htm
EX-10.8 - EXHIBIT 10.8 - FS KKR Capital Corp. IItv506911_ex10-8.htm
EX-10.7 - EXHIBIT 10.7 - FS KKR Capital Corp. IItv506911_ex10-7.htm
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​
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
​
FORM 10-Q
​
☑
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
​
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2018
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
​
FOR THE TRANSITION PERIOD FROM             TO          
COMMISSION FILE NUMBER: 814-00926
​
FS Investment Corporation II
(Exact name of registrant as specified in its charter)
​
​
Maryland
​ ​
80-0741103
 ​
​
(State or other jurisdiction of
incorporation or organization)
​ ​
(I.R.S. Employer
Identification No.)
​
​
201 Rouse Boulevard
Philadelphia, Pennsylvania
​ ​
19112
 ​
​
(Address of principal executive offices)
 ​ ​
(Zip Code)
 ​
Registrant’s telephone number, including area code: (215) 495-1150
​
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☐ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of  “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
​ Large accelerated filer ​ ​ ☐ ​ ​ Accelerated filer ​ ​ ☐ ​
​ Non-accelerated filer ​ ​ ☑ ​ ​ Smaller reporting company ​ ​ ☐ ​
​ ​ ​ ​ ​ ​ ​ Emerging growth company ​ ​ ☐ ​
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
The issuer had 324,295,212 shares of common stock outstanding as of November 9, 2018.
​
​
TABLE OF CONTENTS
​ ​ ​
Page
​
PART I—FINANCIAL INFORMATION ​ ​ ​ ​ ​ ​ ​
ITEM 1.
FINANCIAL STATEMENTS
​
 ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ 1 ​ ​
​ ​ ​ ​ 2 ​ ​
​ ​ ​ ​ 3 ​ ​
​ ​ ​ ​ 4 ​ ​
​ ​ ​ ​ 5 ​ ​
​ ​ ​ ​ 26 ​ ​
​
​ ​ ​ ​ 53 ​ ​
​
​ ​ ​ ​ 70 ​ ​
​
​ ​ ​ ​ 71 ​ ​
PART II—OTHER INFORMATION ​ ​ ​ ​ ​ ​ ​
​
​ ​ ​ ​ 72 ​ ​
​
​ ​ ​ ​ 72 ​ ​
​
​ ​ ​ ​ 72 ​ ​
​
​ ​ ​ ​ 72 ​ ​
​
​ ​ ​ ​ 72 ​ ​
​
​ ​ ​ ​ 72 ​ ​
​
​ ​ ​ ​ 73 ​ ​
​ ​ ​ ​ 76 ​ ​
PART I—FINANCIAL INFORMATION
Item 1.
Financial Statements.
​
FS Investment Corporation II
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
​
​ ​ ​
September 30, 2018
(Unaudited)
​ ​
December 31, 2017
​
Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Investments, at fair value ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Non-controlled/unaffiliated investments (amortized cost—$4,243,543 and $4,397,304, respectively)
​ ​ ​ $ 4,118,376 ​ ​ ​ ​ $ 4,374,076 ​ ​
Non-controlled/affiliated investments (amortized cost—$242,088 and $206,404, respectively)
​ ​ ​ ​ 215,168 ​ ​ ​ ​ ​ 223,518 ​ ​
Total investments, at fair value (amortized cost—$4,485,631 and $4,603,708, respectively)
​ ​ ​ ​ 4,333,544 ​ ​ ​ ​ ​ 4,597,594 ​ ​
Cash
​ ​ ​ ​ 286,780 ​ ​ ​ ​ ​ 449,215 ​ ​
Foreign currency, at fair value (cost—$594 and $10,938, respectively)
​ ​ ​ ​ 594 ​ ​ ​ ​ ​ 11,194 ​ ​
Receivable for investments sold and repaid
​ ​ ​ ​ 5,419 ​ ​ ​ ​ ​ 682 ​ ​
Interest receivable
​ ​ ​ ​ 42,978 ​ ​ ​ ​ ​ 45,247 ​ ​
Deferred financing costs
​ ​ ​ ​ 6,181 ​ ​ ​ ​ ​ 5,284 ​ ​
Prepaid expenses and other assets
​ ​ ​ ​ 146 ​ ​ ​ ​ ​ 865 ​ ​
Total assets
 ​ ​ ​ $ 4,675,642 ​ ​ ​ ​ $ 5,110,081 ​ ​
Liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Payable for investments purchased
​ ​ ​ $ 36,492 ​ ​ ​ ​ $ 3,688 ​ ​
Credit facilities payable (net of deferred financing costs of  $3,447 and $5,125, respectively)(1)
 ​ ​ ​ ​ 1,889,947 ​ ​ ​ ​ ​ 2,179,354 ​ ​
Stockholder distributions payable
​ ​ ​ ​ 11,439 ​ ​ ​ ​ ​ 10,561 ​ ​
Management fees payable
​ ​ ​ ​ 17,567 ​ ​ ​ ​ ​ 22,595 ​ ​
Subordinated income incentive fees payable(2)
 ​ ​ ​ ​ 11,939 ​ ​ ​ ​ ​ 19,129 ​ ​
Administrative services expense payable
​ ​ ​ ​ 747 ​ ​ ​ ​ ​ 568 ​ ​
Interest payable
​ ​ ​ ​ 16,866 ​ ​ ​ ​ ​ 16,842 ​ ​
Directors’ fees payable
​ ​ ​ ​ 300 ​ ​ ​ ​ ​ 277 ​ ​
Other accrued expenses and liabilities
​ ​ ​ ​ 2,219 ​ ​ ​ ​ ​ 4,046 ​ ​
Total liabilities
 ​ ​ ​ ​ 1,987,516 ​ ​ ​ ​ ​ 2,257,060 ​ ​
Commitments and contingencies(3)
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Stockholders’ equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Preferred stock, $0.001 par value, 50,000,000 shares authorized, none issued and
outstanding
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Common stock, $0.001 par value, 450,000,000 shares authorized, 326,478,291 and 326,748,337 shares issued and outstanding, respectively
​ ​ ​ ​ 326 ​ ​ ​ ​ ​ 327 ​ ​
Capital in excess of par value
​ ​ ​ ​ 3,002,165 ​ ​ ​ ​ ​ 3,004,948 ​ ​
Accumulated earnings (loss)
​ ​ ​ ​ (314,365) ​ ​ ​ ​ ​ (152,254) ​ ​
Total stockholders’ equity
 ​ ​ ​ ​ 2,688,126 ​ ​ ​ ​ ​ 2,853,021 ​ ​
Total liabilities and stockholders’ equity
 ​ ​ ​ $ 4,675,642 ​ ​ ​ ​ $ 5,110,081 ​ ​
Net asset value per share of common stock at period end
​ ​ ​ $ 8.23 ​ ​ ​ ​ $ 8.73 ​ ​
​
(1)
See Note 8 for a discussion of the Company’s financing arrangements.
​
(2)
See Note 2 for a discussion of the methodology employed by the Company in calculating the subordinated income incentive fees.
​
(3)
See Note 9 for a discussion of the Company’s commitments and contingencies.
​
​
See notes to unaudited consolidated financial statements.
1
FS Investment Corporation II
Unaudited Consolidated Statements of Operations
(in thousands, except share and per share amounts)
​
​ ​ ​
Three Months Ended
September 30,
​ ​
Nine Months Ended
September 30,
​
​ ​ ​
2018
​ ​
2017
​ ​
2018
​ ​
2017
​
Investment income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
From non-controlled/unaffiliated investments: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Interest income
​ ​ ​ $ 92,684 ​ ​ ​ ​ $ 97,122 ​ ​ ​ ​ $ 282,218 ​ ​ ​ ​ $ 290,519 ​ ​
Paid-in-kind interest income
​ ​ ​ ​ 2,491 ​ ​ ​ ​ ​ 8,863 ​ ​ ​ ​ ​ 6,467 ​ ​ ​ ​ ​ 17,121 ​ ​
Fee income
​ ​ ​ ​ 14,181 ​ ​ ​ ​ ​ 5,874 ​ ​ ​ ​ ​ 22,641 ​ ​ ​ ​ ​ 44,974 ​ ​
Dividend income
​ ​ ​ ​ 468 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 7,962 ​ ​ ​ ​ ​ 11 ​ ​
From non-controlled/affiliated investments: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Interest income
​ ​ ​ ​ 4,697 ​ ​ ​ ​ ​ 7,301 ​ ​ ​ ​ ​ 15,699 ​ ​ ​ ​ ​ 18,448 ​ ​
Paid-in-kind interest income
​ ​ ​ ​ 2,865 ​ ​ ​ ​ ​ 393 ​ ​ ​ ​ ​ 7,080 ​ ​ ​ ​ ​ 3,067 ​ ​
Fee income
​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,349 ​ ​ ​ ​ ​ 1,123 ​ ​ ​ ​ ​ 1,349 ​ ​
From controlled/affiliated investments: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Interest income
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,217 ​ ​
Total investment income
​ ​ ​ ​ 117,386 ​ ​ ​ ​ ​ 120,902 ​ ​ ​ ​ ​ 343,190 ​ ​ ​ ​ ​ 376,706 ​ ​
Operating expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Management fees(1)
 ​ ​ ​ ​ 17,567 ​ ​ ​ ​ ​ 25,769 ​ ​ ​ ​ ​ 61,739 ​ ​ ​ ​ ​ 77,005 ​ ​
Subordinated income incentive fees(2)
 ​ ​ ​ ​ 11,939 ​ ​ ​ ​ ​ 10,137 ​ ​ ​ ​ ​ 18,994 ​ ​ ​ ​ ​ 42,352 ​ ​
Administrative services expenses
​ ​ ​ ​ 799 ​ ​ ​ ​ ​ 799 ​ ​ ​ ​ ​ 2,371 ​ ​ ​ ​ ​ 2,530 ​ ​
Stock transfer agent fees
​ ​ ​ ​ 506 ​ ​ ​ ​ ​ 506 ​ ​ ​ ​ ​ 1,502 ​ ​ ​ ​ ​ 1,502 ​ ​
Accounting and administrative fees
​ ​ ​ ​ 395 ​ ​ ​ ​ ​ 434 ​ ​ ​ ​ ​ 1,227 ​ ​ ​ ​ ​ 1,303 ​ ​
Interest expense
​ ​ ​ ​ 26,924 ​ ​ ​ ​ ​ 22,786 ​ ​ ​ ​ ​ 77,958 ​ ​ ​ ​ ​ 62,971 ​ ​
Directors’ fees
​ ​ ​ ​ 254 ​ ​ ​ ​ ​ 278 ​ ​ ​ ​ ​ 1,053 ​ ​ ​ ​ ​ 849 ​ ​
Other general and administrative expenses
​ ​ ​ ​ 1,217 ​ ​ ​ ​ ​ 1,102 ​ ​ ​ ​ ​ 3,539 ​ ​ ​ ​ ​ 2,978 ​ ​
Operating expenses
​ ​ ​ ​ 59,601 ​ ​ ​ ​ ​ 61,811 ​ ​ ​ ​ ​ 168,383 ​ ​ ​ ​ ​ 191,490 ​ ​
Management fee waiver(1)
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ (3,222) ​ ​ ​ ​ ​ (3,432) ​ ​ ​ ​ ​ (9,626) ​ ​
Net expenses
​ ​ ​ ​ 59,601 ​ ​ ​ ​ ​ 58,589 ​ ​ ​ ​ ​ 164,951 ​ ​ ​ ​ ​ 181,864 ​ ​
Net investment income
​ ​ ​ ​ 57,785 ​ ​ ​ ​ ​ 62,313 ​ ​ ​ ​ ​ 178,239 ​ ​ ​ ​ ​ 194,842 ​ ​
Realized and unrealized gain/loss ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Net realized gain (loss) on investments: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Non-controlled/unaffiliated investments
​ ​ ​ ​ 18,501 ​ ​ ​ ​ ​ (13,262) ​ ​ ​ ​ ​ 14,901 ​ ​ ​ ​ ​ (56,519) ​ ​
Non-controlled/affiliated investments
​ ​ ​ ​ 3 ​ ​ ​ ​ ​ 7,320 ​ ​ ​ ​ ​ (25,706) ​ ​ ​ ​ ​ 7,320 ​ ​
Net realized gain (loss) on foreign currency
​ ​ ​ ​ 446 ​ ​ ​ ​ ​ 122 ​ ​ ​ ​ ​ (220) ​ ​ ​ ​ ​ 439 ​ ​
Net change in unrealized appreciation (depreciation) on investments:
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Non-controlled/unaffiliated investments
​ ​ ​ ​ (42,337) ​ ​ ​ ​ ​ 14,895 ​ ​ ​ ​ ​ (101,939) ​ ​ ​ ​ ​ 84,385 ​ ​
Non-controlled/affiliated investments
​ ​ ​ ​ 2,298 ​ ​ ​ ​ ​ 8,323 ​ ​ ​ ​ ​ (44,034) ​ ​ ​ ​ ​ 1,991 ​ ​
Controlled/affiliated investments
​ ​ ​ ​ — ​ ​ ​ ​ ​ (18,217) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (29,646) ​ ​
Net change in unrealized appreciation (depreciation) on secured borrowing(3)
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ 10 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (26) ​ ​
Net change in unrealized gain (loss) on foreign currency
​ ​ ​ ​ (693) ​ ​ ​ ​ ​ (186) ​ ​ ​ ​ ​ 84 ​ ​ ​ ​ ​ (370) ​ ​
Total net realized and unrealized gain (loss)
​ ​ ​ ​ (21,782) ​ ​ ​ ​ ​ (995) ​ ​ ​ ​ ​ (156,914) ​ ​ ​ ​ ​ 7,574 ​ ​
Net increase (decrease) in net assets resulting from operations
 ​ ​ ​ $ 36,003 ​ ​ ​ ​ $ 61,318 ​ ​ ​ ​ $ 21,325 ​ ​ ​ ​ $ 202,416 ​ ​
Per share information—basic and diluted ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Net increase (decrease) in net assets resulting from operations (Earnings per Share)
​ ​ ​ $ 0.11 ​ ​ ​ ​ $ 0.19 ​ ​ ​ ​ $ 0.07 ​ ​ ​ ​ $ 0.62 ​ ​
Weighted average shares outstanding
​ ​ ​ ​ 324,359,144 ​ ​ ​ ​ ​ 324,993,290 ​ ​ ​ ​ ​ 324,577,481 ​ ​ ​ ​ ​ 325,613,608 ​ ​
​
​
(1)
See Note 4 for a discussion of the waiver by FSIC II Advisor, LLC, the Company’s former investment adviser, of certain management fees to which it was otherwise entitled during the applicable period.
​
(2)
See Note 2 for a discussion of the methodology employed by the Company in calculating the subordinated income incentive fees.
​
(3)
See Note 8 for a discussion of the Company’s financing arrangements.
​
​
See notes to unaudited consolidated financial statements.
2
FS Investment Corporation II
Unaudited Consolidated Statements of Changes in Net Assets
(in thousands)
​
​ ​ ​
Nine Months Ended
September 30,
​
​ ​ ​
2018
​ ​
2017
​
Operations ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Net investment income
​ ​ ​ $ 178,239 ​ ​ ​ ​ $ 194,842 ​ ​
Net realized gain (loss) on investments and foreign currency
​ ​ ​ ​ (11,025) ​ ​ ​ ​ ​ (48,760) ​ ​
Net change in unrealized appreciation (depreciation) on investments
​ ​ ​ ​ (145,973) ​ ​ ​ ​ ​ 56,730 ​ ​
Net change in unrealized appreciation (depreciation) on secured borrowing(1)
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ (26) ​ ​
Net change in unrealized gain (loss) on foreign currency
​ ​ ​ ​ 84 ​ ​ ​ ​ ​ (370) ​ ​
Net increase (decrease) in net assets resulting from operations
​ ​ ​ ​ 21,325 ​ ​ ​ ​ ​ 202,416 ​ ​
Stockholder distributions(2) ​ ​ ​
Distributions to stockholders
​ ​ ​ ​ (183,436) ​ ​ ​ ​ ​ (184,218) ​ ​
Net decrease in net assets resulting from stockholder distributions
​ ​ ​ ​ (183,436) ​ ​ ​ ​ ​ (184,218) ​ ​
Capital share transactions(3) ​ ​ ​
Reinvestment of stockholder distributions
​ ​ ​ ​ 84,192 ​ ​ ​ ​ ​ 92,907 ​ ​
Repurchases of common stock
​ ​ ​ ​ (86,976) ​ ​ ​ ​ ​ (92,570) ​ ​
Net increase in net assets resulting from capital share transactions
​ ​ ​ ​ (2,784) ​ ​ ​ ​ ​ 337 ​ ​
Total increase (decrease) in net assets
​ ​ ​ ​ (164,895) ​ ​ ​ ​ ​ 18,535 ​ ​
Net assets at beginning of period
​ ​ ​ ​ 2,853,021 ​ ​ ​ ​ ​ 2,909,860 ​ ​
Net assets at end of period
​ ​ ​ $ 2,688,126 ​ ​ ​ ​ $ 2,928,395 ​ ​
​
(1)
See Note 8 for a discussion of the Company’s financing arrangements.
​
(2)
See Note 5 for a discussion of the sources of distributions paid by the Company.
​
(3)
See Note 3 for a discussion of the Company’s capital share transactions.
​
​
See notes to unaudited consolidated financial statements.
3
FS Investment Corporation II
Unaudited Consolidated Statements of Cash Flows
(in thousands)
​
​ ​ ​
Nine Months Ended
September 30,
​
​ ​ ​
2018
​ ​
2017
​
Cash flows from operating activities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Net increase (decrease) in net assets resulting from operations
​ ​ ​ $ 21,325 ​ ​ ​ ​ $ 202,416 ​ ​
Adjustments to reconcile net increase (decrease) in net assets resulting from operations
to net cash provided by (used in) operating activities:
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Purchases of investments
​ ​ ​ ​ (1,331,866) ​ ​ ​ ​ ​ (1,490,626) ​ ​
Paid-in-kind interest
​ ​ ​ ​ (13,547) ​ ​ ​ ​ ​ (20,188) ​ ​
Proceeds from sales and repayments of investments
​ ​ ​ ​ 1,458,900 ​ ​ ​ ​ ​ 1,409,656 ​ ​
Net realized (gain) loss on investments
​ ​ ​ ​ 10,805 ​ ​ ​ ​ ​ 49,199 ​ ​
Net change in unrealized (appreciation) depreciation on investments
​ ​ ​ ​ 145,973 ​ ​ ​ ​ ​ (56,730) ​ ​
Net change in unrealized (appreciation) depreciation on secured borrowing
​ ​ ​ ​ — ​ ​ ​ ​ ​ 26 ​ ​
Accretion of discount
​ ​ ​ ​ (6,215) ​ ​ ​ ​ ​ (19,542) ​ ​
Amortization of deferred financing costs and discount
​ ​ ​ ​ 5,192 ​ ​ ​ ​ ​ 3,982 ​ ​
Unrealized (gain) loss on borrowings in foreign currency
​ ​ ​ ​ 186 ​ ​ ​ ​ ​ 1,114 ​ ​
(Increase) decrease in receivable for investments sold and repaid
​ ​ ​ ​ (4,737) ​ ​ ​ ​ ​ 71,635 ​ ​
(Increase) decrease in interest receivable
​ ​ ​ ​ 2,269 ​ ​ ​ ​ ​ (11,628) ​ ​
(Increase) decrease in prepaid expenses and other assets
​ ​ ​ ​ 719 ​ ​ ​ ​ ​ (176) ​ ​
Increase (decrease) in payable for investments purchased
​ ​ ​ ​ 32,804 ​ ​ ​ ​ ​ 29,856 ​ ​
Increase (decrease) in management fees payable
​ ​ ​ ​ (5,028) ​ ​ ​ ​ ​ 937 ​ ​
Increase (decrease) in subordinated income incentive fees payable
​ ​ ​ ​ (7,190) ​ ​ ​ ​ ​ (6,356) ​ ​
Increase (decrease) in administrative services expense payable
​ ​ ​ ​ 179 ​ ​ ​ ​ ​ 170 ​ ​
Increase (decrease) in interest payable
​ ​ ​ ​ 24 ​ ​ ​ ​ ​ 2,348 ​ ​
Increase (decrease) in directors’ fees payable
​ ​ ​ ​ 23 ​ ​ ​ ​ ​ 16 ​ ​
Increase (decrease) in other accrued expenses and liabilities
​ ​ ​ ​ (1,827) ​ ​ ​ ​ ​ (2,181) ​ ​
Net cash provided by (used in) operating activities
​ ​ ​ ​ 307,989 ​ ​ ​ ​ ​ 163,928 ​ ​
Cash flows from financing activities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Reinvestment of stockholder distributions
​ ​ ​ ​ 84,192 ​ ​ ​ ​ ​ 92,907 ​ ​
Repurchases of common stock
​ ​ ​ ​ (86,976) ​ ​ ​ ​ ​ (92,570) ​ ​
Stockholder distributions
​ ​ ​ ​ (182,558) ​ ​ ​ ​ ​ (183,574) ​ ​
Borrowings under credit facilities(1)
 ​ ​ ​ ​ 436,346 ​ ​ ​ ​ ​ 777,821 ​ ​
Repayments of credit facilities(1)
 ​ ​ ​ ​ (727,617) ​ ​ ​ ​ ​ (172,967) ​ ​
Repayments of repurchase agreement
​ ​ ​ ​ — ​ ​ ​ ​ ​ (400,000) ​ ​
Deferred financing costs paid
​ ​ ​ ​ (4,411) ​ ​ ​ ​ ​ (2,804) ​ ​
Net cash provided by financing activities
​ ​ ​ ​ (481,024) ​ ​ ​ ​ ​ 18,813 ​ ​
Total increase (decrease) in cash
​ ​ ​ ​ (173,035) ​ ​ ​ ​ ​ 182,741 ​ ​
Cash and foreign currency at beginning of period
​ ​ ​ ​ 460,409 ​ ​ ​ ​ ​ 347,076 ​ ​
Cash and foreign currency at end of period
​ ​ ​ $ 287,374 ​ ​ ​ ​ $ 529,817 ​ ​
Supplemental disclosure ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Local and excise taxes paid
​ ​ ​ $ 2,584 ​ ​ ​ ​ $ 1,826 ​ ​
​
(1)
See Note 8 for a discussion of the Company’s financing arrangements. During the nine months ended September 30, 2018 and 2017, the Company paid $72,742 and $56,294 respectively, in interest expense on the credit facilities. During the nine months ended September 30, 2017, the Company paid $347 in interest expense on the secured borrowing.
​
​
See notes to unaudited consolidated financial statements.
4
FS Investment Corporation II
Unaudited Consolidated Schedule of Investments
As of September 30, 2018
(in thousands, except share amounts)
​
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Rate(b)
 ​ ​
Floor
​ ​
Maturity
​ ​
Principal
Amount(c)
 ​ ​
Amortized
Cost
​ ​
Fair
Value(d)
 ​ ​
Senior Secured Loans—First Lien—123.3% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
5 Arch Income Fund 2, LLC
​ ​
(m)(q)
​ ​ Diversified Financials ​ ​
9.0%
​ ​ ​ ​ ​ ​ ​ ​
11/18/21
​ ​ ​ $ 28,555 ​ ​ ​ ​ $ 28,577 ​ ​ ​ ​ $ 28,555 ​ ​ ​
5 Arch Income Fund 2, LLC
​ ​
(m)(n)(q)
​ ​ Diversified Financials ​ ​
9.0%
​ ​ ​ ​ ​ ​ ​ ​
11/18/21
​ ​ ​ ​ 45,445 ​ ​ ​ ​ ​ 45,445 ​ ​ ​ ​ ​ 45,445 ​ ​ ​
Abaco Energy Technologies LLC
​ ​
(h)(i)(u)
​ ​ Energy ​ ​
L+950
​ ​ ​ ​ 1.0% ​ ​ ​
11/20/20
​ ​ ​ ​ 24,781 ​ ​ ​ ​ ​ 24,231 ​ ​ ​ ​ ​ 24,843 ​ ​ ​
ABB/Con-Cise Optical Group LLC
​ ​
(u)
​ ​
Health Care Equipment & Services
​ ​
L+500
​ ​ ​ ​ 1.0% ​ ​ ​
6/15/23
​ ​ ​ ​ 2,776 ​ ​ ​ ​ ​ 2,786 ​ ​ ​ ​ ​ 2,791 ​ ​ ​
Accuride Corporation
​ ​
(u)
​ ​ Automobiles & Components ​ ​
L+525
​ ​ ​ ​ 1.0% ​ ​ ​
11/17/23
​ ​ ​ ​ 165 ​ ​ ​ ​ ​ 167 ​ ​ ​ ​ ​ 167 ​ ​ ​
Acosta, Inc.
​ ​
(h)(u)
​ ​ Media ​ ​
L+325
​ ​ ​ ​ 1.0% ​ ​ ​
9/26/21
​ ​ ​ ​ 6,661 ​ ​ ​ ​ ​ 5,397 ​ ​ ​ ​ ​ 5,025 ​ ​ ​
Advanced Lighting Technologies, Inc.
​ ​
(h)(v)
​ ​ Materials ​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​
10/4/22
​ ​ ​ ​ 9,149 ​ ​ ​ ​ ​ 7,899 ​ ​ ​ ​ ​ 9,149 ​ ​ ​
Advantage Sales & Marketing Inc.
​ ​
(i)(j)(u)
​ ​ Media ​ ​
L+325
​ ​ ​ ​ 1.0% ​ ​ ​
7/23/21
​ ​ ​ ​ 14,772 ​ ​ ​ ​ ​ 14,076 ​ ​ ​ ​ ​ 13,731 ​ ​ ​
AG Group Merger Sub, Inc.
​ ​
(f)(g)(h)(i)
​ ​
Commercial & Professional Services
​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​
12/29/23
​ ​ ​ ​ 61,240 ​ ​ ​ ​ ​ 61,240 ​ ​ ​ ​ ​ 61,546 ​ ​ ​
Aleris International, Inc.
​ ​
(h)(u)
​ ​ Materials ​ ​
L+475
​ ​ ​ ​ ​ ​ ​ ​
2/27/23
​ ​ ​ ​ 1,370 ​ ​ ​ ​ ​ 1,357 ​ ​ ​ ​ ​ 1,397 ​ ​ ​ ​ ​
All Systems Holding LLC
​ ​
(g)(h)(i)
​ ​
Commercial & Professional Services
​ ​
L+767
​ ​ ​ ​ 1.0% ​ ​ ​
10/31/23
​ ​ ​ ​ 111,623 ​ ​ ​ ​ ​ 111,623 ​ ​ ​ ​ ​ 112,739 ​ ​ ​
Altus Power America, Inc.
​ ​
(i)
​ ​ Energy ​ ​
L+750
​ ​ ​ ​ 1.5% ​ ​ ​
9/30/21
​ ​ ​ ​ 3,110 ​ ​ ​ ​ ​ 3,110 ​ ​ ​ ​ ​ 3,016 ​ ​ ​
Altus Power America, Inc.
​ ​
(n)
​ ​ Energy ​ ​
L+750
​ ​ ​ ​ 1.5% ​ ​ ​
9/30/21
​ ​ ​ ​ 213 ​ ​ ​ ​ ​ 213 ​ ​ ​ ​ ​ 207 ​ ​ ​
American Tire Distributors, Inc.
​ ​
(u)
​ ​ Retailing ​ ​
L+425
​ ​ ​ ​ 1.0% ​ ​ ​
9/1/21
​ ​ ​ ​ 3,590 ​ ​ ​ ​ ​ 3,154 ​ ​ ​ ​ ​ 3,125 ​ ​ ​
APX Group Inc.
​ ​
(i)(u)
​ ​ Consumer Services ​ ​
L+500
​ ​ ​ ​ ​ ​ ​ ​
4/1/24
​ ​ ​ ​ 14,791 ​ ​ ​ ​ ​ 14,742 ​ ​ ​ ​ ​ 14,791 ​ ​ ​
Aspect Software, Inc.
​ ​ ​ ​ ​ Software & Services ​ ​
L+400, 6.5% PIK (6.5% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
5/25/20
​ ​ ​ ​ 4,594 ​ ​ ​ ​ ​ 4,594 ​ ​ ​ ​ ​ 4,072 ​ ​ ​
Aspect Software, Inc.
​ ​
(h)
​ ​ Software & Services ​ ​
L+1050
​ ​ ​ ​ 1.0% ​ ​ ​
5/25/20
​ ​ ​ ​ 3,621 ​ ​ ​ ​ ​ 3,621 ​ ​ ​ ​ ​ 3,209 ​ ​ ​
Atlas Aerospace LLC
​ ​
(f)(h)(i)
​ ​ Capital Goods ​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​
12/29/22
​ ​ ​ ​ 86,857 ​ ​ ​ ​ ​ 86,857 ​ ​ ​ ​ ​ 88,594 ​ ​ ​
ATX Networks Corp.
​ ​
(f)(m)(u)
​ ​
Technology Hardware & Equipment
​ ​
L+600, 1.0% PIK (1.0% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​
6/11/21
​ ​ ​ ​ 1,867 ​ ​ ​ ​ ​ 1,853 ​ ​ ​ ​ ​ 1,774 ​ ​ ​
ATX Networks Corp.
​ ​
(f)(i)(m)(u)
​ ​
Technology Hardware & Equipment
​ ​
L+600, 1.0% PIK (1.0% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​
6/11/21
​ ​ ​ ​ 24,936 ​ ​ ​ ​ ​ 24,456 ​ ​ ​ ​ ​ 23,689 ​ ​ ​
AVF Parent, LLC
​ ​
(f)(h)(i)
​ ​ Retailing ​ ​
L+725
​ ​ ​ ​ 1.3% ​ ​ ​
3/1/24
​ ​ ​ ​ 74,941 ​ ​ ​ ​ ​ 74,941 ​ ​ ​ ​ ​ 70,819 ​ ​ ​
BCP Raptor, LLC
​ ​
(i)(u)
​ ​ Energy ​ ​
L+425
​ ​ ​ ​ 1.0% ​ ​ ​
6/24/24
​ ​ ​ ​ 5,121 ​ ​ ​ ​ ​ 4,957 ​ ​ ​ ​ ​ 5,055 ​ ​ ​
Belk, Inc.
​ ​
(j)(u)
​ ​ Retailing ​ ​
L+475
​ ​ ​ ​ 1.0% ​ ​ ​
12/12/22
​ ​ ​ ​ 20,826 ​ ​ ​ ​ ​ 18,139 ​ ​ ​ ​ ​ 18,281 ​ ​ ​
Borden Dairy Co.
​ ​
(g)(h)
​ ​ Food, Beverage & Tobacco ​ ​
L+819
​ ​ ​ ​ 1.0% ​ ​ ​
7/6/23
​ ​ ​ ​ 52,500 ​ ​ ​ ​ ​ 52,500 ​ ​ ​ ​ ​ 51,135 ​ ​ ​
Cimarron Energy Inc.
​ ​
(k)(l)
​ ​ Energy ​ ​
L+1150 PIK (L+1150 Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​
12/15/19
​ ​ ​ ​ 25,491 ​ ​ ​ ​ ​ 24,841 ​ ​ ​ ​ ​ 13,606 ​ ​ ​
ConnectiveRx, LLC
​ ​
(f)(h)
​ ​
Health Care Equipment & Services
​ ​
L+827
​ ​ ​ ​ 1.0% ​ ​ ​
11/25/21
​ ​ ​ ​ 56,025 ​ ​ ​ ​ ​ 55,980 ​ ​ ​ ​ ​ 56,098 ​ ​ ​
CSafe Acquisition Co., Inc.
​ ​
(j)
​ ​ Capital Goods ​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​
11/1/21
​ ​ ​ ​ 626 ​ ​ ​ ​ ​ 626 ​ ​ ​ ​ ​ 626 ​ ​ ​
CSafe Acquisition Co., Inc.
​ ​
(n)
​ ​ Capital Goods ​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​
11/1/21
​ ​ ​ ​ 5,635 ​ ​ ​ ​ ​ 5,635 ​ ​ ​ ​ ​ 5,635 ​ ​ ​
CSafe Acquisition Co., Inc.
​ ​
(f)(g)(h)
​ ​ Capital Goods ​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​
10/31/23
​ ​ ​ ​ 53,734 ​ ​ ​ ​ ​ 53,733 ​ ​ ​ ​ ​ 53,733 ​ ​ ​
CSafe Acquisition Co., Inc.
​ ​
(n)
​ ​ Capital Goods ​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​
10/31/23
​ ​ ​ ​ 22,620 ​ ​ ​ ​ ​ 22,620 ​ ​ ​ ​ ​ 22,620 ​ ​ ​
CSM Bakery Solutions LLC
​ ​
(i)(u)
​ ​ Food, Beverage & Tobacco ​ ​
L+400
​ ​ ​ ​ 1.0% ​ ​ ​
7/3/20
​ ​ ​ ​ 4,968 ​ ​ ​ ​ ​ 4,813 ​ ​ ​ ​ ​ 4,820 ​ ​ ​
Dade Paper & Bag, LLC
​ ​
(f)(g)(h)
​ ​ Capital Goods ​ ​
L+700
​ ​ ​ ​ 1.0% ​ ​ ​
6/10/24
​ ​ ​ ​ 17,356 ​ ​ ​ ​ ​ 17,356 ​ ​ ​ ​ ​ 16,987 ​ ​ ​
Dade Paper & Bag, LLC
​ ​
(f)(g)(h)
​ ​ Capital Goods ​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​
6/10/24
​ ​ ​ ​ 136,078 ​ ​ ​ ​ ​ 136,078 ​ ​ ​ ​ ​ 136,078 ​ ​ ​
Dayton Superior Corp.
​ ​
(i)(u)
​ ​ Materials ​ ​
L+800, 6.0% PIK (6.0% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​
11/15/21
​ ​ ​ ​ 11,462 ​ ​ ​ ​ ​ 11,223 ​ ​ ​ ​ ​ 10,030 ​ ​ ​
Diamond Resorts International, Inc.
​ ​
(i)(u)
​ ​ Consumer Services ​ ​
L+375
​ ​ ​ ​ 1.0% ​ ​ ​
9/2/23
​ ​ ​ ​ 14,121 ​ ​ ​ ​ ​ 13,959 ​ ​ ​ ​ ​ 13,815 ​ ​ ​
Distribution International, Inc.
​ ​
(j)(u)
​ ​ Capital Goods ​ ​
L+500
​ ​ ​ ​ 1.0% ​ ​ ​
12/15/21
​ ​ ​ ​ 3,415 ​ ​ ​ ​ ​ 3,254 ​ ​ ​ ​ ​ 3,244 ​ ​ ​
Eagle Family Foods Group LLC
​ ​
(n)
​ ​ Food, Beverage & Tobacco ​ ​
L+650
​ ​ ​ ​ 1.0% ​ ​ ​
6/14/23
​ ​ ​ ​ 4,126 ​ ​ ​ ​ ​ 4,082 ​ ​ ​ ​ ​ 3,684 ​ ​ ​
Eagle Family Foods Group LLC
​ ​
(g)(h)
​ ​ Food, Beverage & Tobacco ​ ​
L+650
​ ​ ​ ​ 1.0% ​ ​ ​
6/14/24
​ ​ ​ ​ 27,437 ​ ​ ​ ​ ​ 27,140 ​ ​ ​ ​ ​ 27,073 ​ ​ ​
Eastman Kodak Co.
​ ​
(f)(j)(u)
​ ​ Consumer Durables & Apparel ​ ​
L+625
​ ​ ​ ​ 1.0% ​ ​ ​
9/3/19
​ ​ ​ ​ 4,575 ​ ​ ​ ​ ​ 4,559 ​ ​ ​ ​ ​ 4,415 ​ ​ ​
See notes to unaudited consolidated financial statements.
5
FS Investment Corporation II
Unaudited Consolidated Schedule of Investments (continued)
As of September 30, 2018
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Rate(b)
 ​ ​
Floor
​ ​
Maturity
​ ​
Principal
Amount(c)
 ​ ​
Amortized
Cost
​ ​
Fair
Value(d)
 ​ ​
Empire Today, LLC
​ ​
(f)(g)(h)(i)
​ ​ Retailing ​ ​
L+800
​ ​ ​ ​ 1.0% ​ ​ ​
11/17/22
​ ​ ​ $ 88,425 ​ ​ ​ ​ $ 88,425 ​ ​ ​ ​ $ 88,867 ​ ​ ​
Evergreen AcqCo 1 LP
​ ​
(u)
​ ​ Retailing ​ ​
L+375
​ ​ ​ ​ 1.3% ​ ​ ​
7/9/19
​ ​ ​ ​ 1,543 ​ ​ ​ ​ ​ 1,530 ​ ​ ​ ​ ​ 1,503 ​ ​ ​
Fairway Group Acquisition Co.
​ ​
(h)
​ ​ Food & Staples Retailing ​ ​
12.0% PIK (12.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
1/3/20
​ ​ ​ ​ 2,951 ​ ​ ​ ​ ​ 2,951 ​ ​ ​ ​ ​ 2,870 ​ ​ ​
Fairway Group Acquisition Co.
​ ​
(u)
​ ​ Food & Staples Retailing ​ ​
10.0% PIK (10.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
1/3/20
​ ​ ​ ​ 1,915 ​ ​ ​ ​ ​ 1,749 ​ ​ ​ ​ ​ 211 ​ ​ ​
Fairway Group Acquisition Co.
​ ​
(j)
​ ​ Food & Staples Retailing ​ ​
4.0%, 11.0% PIK (11.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
8/28/23
​ ​ ​ ​ 207 ​ ​ ​ ​ ​ 204 ​ ​ ​ ​ ​ 207 ​ ​ ​
Fairway Group Acquisition Co.
​ ​
(n)
​ ​ Food & Staples Retailing ​ ​
4.0%, 11.0% PIK (11.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
8/28/23
​ ​ ​ ​ 455 ​ ​ ​ ​ ​ 455 ​ ​ ​ ​ ​ 455 ​ ​ ​
Fairway Group Acquisition Co.
​ ​
(j)
​ ​ Food & Staples Retailing ​ ​
4.0%, 11.0% PIK (11.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
8/28/23
​ ​ ​ ​ 1,041 ​ ​ ​ ​ ​ 1,026 ​ ​ ​ ​ ​ 1,041 ​ ​ ​
Foresight Energy LLC
​ ​
(h)(i)(j)(m)(u)
​ ​ Energy ​ ​
L+575
​ ​ ​ ​ 1.0% ​ ​ ​
3/28/22
​ ​ ​ ​ 10,591 ​ ​ ​ ​ ​ 10,574 ​ ​ ​ ​ ​ 10,608 ​ ​ ​
Fox Head, Inc.
​ ​
(h)(i)
​ ​ Consumer Durables & Apparel ​ ​
L+850
​ ​ ​ ​ 1.0% ​ ​ ​
12/19/20
​ ​ ​ ​ 8,273 ​ ​ ​ ​ ​ 8,273 ​ ​ ​ ​ ​ 8,227 ​ ​ ​
FullBeauty Brands Holdings Corp.
​ ​
(i)
​ ​ Retailing ​ ​
L+800
​ ​ ​ ​ 1.0% ​ ​ ​
10/14/20
​ ​ ​ ​ 55,000 ​ ​ ​ ​ ​ 55,000 ​ ​ ​ ​ ​ 55,000 ​ ​ ​
FullBeauty Brands Holdings Corp.
​ ​
(i)(u)
​ ​ Retailing ​ ​
L+475
​ ​ ​ ​ 1.0% ​ ​ ​
10/14/22
​ ​ ​ ​ 4,923 ​ ​ ​ ​ ​ 4,586 ​ ​ ​ ​ ​ 1,504 ​ ​ ​
GC Agile Intermediate Holdings Ltd.
​ ​
(m)(n)
​ ​
Commercial & Professional Services
​ ​
L+650
​ ​ ​ ​ ​ ​ ​ ​
6/15/23
​ ​ ​ ​ 2,302 ​ ​ ​ ​ ​ 2,234 ​ ​ ​ ​ ​ 2,061 ​ ​ ​ ​ ​
GC Agile Intermediate Holdings Ltd.
​ ​
(f)(g)(m)
​ ​
Commercial & Professional Services
​ ​
L+650
​ ​ ​ ​ 1.0% ​ ​ ​
6/15/25
​ ​ ​ ​ 15,604 ​ ​ ​ ​ ​ 15,301 ​ ​ ​ ​ ​ 15,440 ​ ​ ​
GC Agile Intermediate Holdings Ltd.
​ ​
(m)(n)
​ ​
Commercial & Professional Services
​ ​
L+650
​ ​ ​ ​ 1.0% ​ ​ ​
6/15/25
​ ​ ​ ​ 7,509 ​ ​ ​ ​ ​ 7,365 ​ ​ ​ ​ ​ 7,430 ​ ​ ​
GC Agile Intermediate Holdings Ltd.
​ ​
(m)(n)
​ ​
Commercial & Professional Services
​ ​
L+650
​ ​ ​ ​ 1.0% ​ ​ ​
6/15/25
​ ​ ​ ​ 6,257 ​ ​ ​ ​ ​ 6,150 ​ ​ ​ ​ ​ 6,191 ​ ​ ​
Greystone Equity Member Corp.
​ ​
(j)(m)
​ ​ Diversified Financials ​ ​
L+725
​ ​ ​ ​ 3.8% ​ ​ ​
4/1/26
​ ​ ​ ​ 36,524 ​ ​ ​ ​ ​ 36,523 ​ ​ ​ ​ ​ 36,614 ​ ​ ​
Greystone Equity Member Corp.
​ ​
(m)(n)
​ ​ Diversified Financials ​ ​
L+725
​ ​ ​ ​ 3.8% ​ ​ ​
4/1/26
​ ​ ​ ​ 8,476 ​ ​ ​ ​ ​ 8,476 ​ ​ ​ ​ ​ 8,498 ​ ​ ​
Gulf Finance, LLC
​ ​
(i)(u)
​ ​ Energy ​ ​
L+525
​ ​ ​ ​ 1.0% ​ ​ ​
8/25/23
​ ​ ​ ​ 4,699 ​ ​ ​ ​ ​ 4,592 ​ ​ ​ ​ ​ 3,965 ​ ​ ​
H.M. Dunn Co., Inc.
​ ​
(h)(k)(l)(v)
​ ​ Capital Goods ​ ​
L+875 PIK (L+875 Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
6/30/21
​ ​ ​ ​ 42,645 ​ ​ ​ ​ ​ 38,571 ​ ​ ​ ​ ​ 9,595 ​ ​ ​
Harrison Gypsum, LLC
​ ​
(h)
​ ​ Materials ​ ​
L+700
​ ​ ​ ​ 1.0% ​ ​ ​
4/29/24
​ ​ ​ ​ 21,039 ​ ​ ​ ​ ​ 20,846 ​ ​ ​ ​ ​ 20,636 ​ ​ ​
Harrison Gypsum, LLC
​ ​
(n)
​ ​ Materials ​ ​
L+700
​ ​ ​ ​ 1.0% ​ ​ ​
4/29/24
​ ​ ​ ​ 6,749 ​ ​ ​ ​ ​ 6,749 ​ ​ ​ ​ ​ 6,620 ​ ​ ​
Hudson Technologies Co.
​ ​
(h)(i)(m)
​ ​
Commercial & Professional Services
​ ​
L+1025
​ ​ ​ ​ 1.0% ​ ​ ​
10/10/23
​ ​ ​ ​ 50,974 ​ ​ ​ ​ ​ 50,524 ​ ​ ​ ​ ​ 40,014 ​ ​ ​
Hybrid Promotions, LLC
​ ​
(h)(i)
​ ​ Consumer Durables & Apparel ​ ​
L+850
​ ​ ​ ​ 1.0% ​ ​ ​
12/19/20
​ ​ ​ ​ 47,375 ​ ​ ​ ​ ​ 47,375 ​ ​ ​ ​ ​ 47,114 ​ ​ ​
Icynene U.S. Acquisition Corp.
​ ​
(f)(h)(m)
​ ​ Materials ​ ​
L+700
​ ​ ​ ​ 1.0% ​ ​ ​
11/30/24
​ ​ ​ ​ 35,730 ​ ​ ​ ​ ​ 35,730 ​ ​ ​ ​ ​ 35,998 ​ ​ ​
Industrial Group Intermediate Holdings, LLC
​ ​
(f)(g)(h)(i)
​ ​ Materials ​ ​
L+800
​ ​ ​ ​ 1.3% ​ ​ ​
5/31/20
​ ​ ​ ​ 118,840 ​ ​ ​ ​ ​ 118,840 ​ ​ ​ ​ ​ 118,989 ​ ​ ​
Industry City TI Lessor, L.P.
​ ​
(h)
​ ​ Consumer Services ​ ​
10.8%, 1.0% PIK (1.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
6/30/26
​ ​ ​ ​ 11,731 ​ ​ ​ ​ ​ 11,731 ​ ​ ​ ​ ​ 12,229 ​ ​ ​
J.C. Penney Corp., Inc.
​ ​
(m)(u)
​ ​ Retailing ​ ​
L+425
​ ​ ​ ​ 1.0% ​ ​ ​
6/23/23
​ ​ ​ ​ 1,213 ​ ​ ​ ​ ​ 1,154 ​ ​ ​ ​ ​ 1,118 ​ ​ ​
JAKKS Pacific, Inc.
​ ​
(h)
​ ​ Consumer Durables & Apparel ​ ​
L+900
​ ​ ​ ​ 1.5% ​ ​ ​
6/14/21
​ ​ ​ ​ 2,793 ​ ​ ​ ​ ​ 2,773 ​ ​ ​ ​ ​ 2,770 ​ ​ ​
JMC Acquisition Merger Corp.
​ ​
(f)(g)(h)
​ ​ Capital Goods ​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​
1/29/24
​ ​ ​ ​ 121,947 ​ ​ ​ ​ ​ 121,946 ​ ​ ​ ​ ​ 121,946 ​ ​ ​
JMC Acquisition Merger Corp.
​ ​
(n)
​ ​ Capital Goods ​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​
1/29/24
​ ​ ​ ​ 35,269 ​ ​ ​ ​ ​ 35,269 ​ ​ ​ ​ ​ 35,269 ​ ​ ​
Jo-Ann Stores, LLC
​ ​
(j)(u)
​ ​ Retailing ​ ​
L+500
​ ​ ​ ​ 1.0% ​ ​ ​
10/16/23
​ ​ ​ ​ 4,247 ​ ​ ​ ​ ​ 4,270 ​ ​ ​ ​ ​ 4,274 ​ ​ ​
JSS Holdings, Inc.
​ ​
(f)(h)(i)
​ ​ Capital Goods ​ ​
L+800, 0.0% PIK (2.5% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​
3/31/23
​ ​ ​ ​ 72,638 ​ ​ ​ ​ ​ 72,052 ​ ​ ​ ​ ​ 76,197 ​ ​ ​
Kodiak BP, LLC
​ ​
(g)(h)(i)
​ ​ Capital Goods ​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​
12/1/24
​ ​ ​ ​ 110,282 ​ ​ ​ ​ ​ 110,282 ​ ​ ​ ​ ​ 109,041 ​ ​ ​
Kodiak BP, LLC
​ ​
(n)
​ ​ Capital Goods ​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​
12/1/24
​ ​ ​ ​ 10,504 ​ ​ ​ ​ ​ 10,504 ​ ​ ​ ​ ​ 10,386 ​ ​ ​
Latham Pool Products, Inc.
​ ​
(f)(h)
​ ​ Consumer Durables & Apparel ​ ​
L+775
​ ​ ​ ​ 1.0% ​ ​ ​
6/29/21
​ ​ ​ ​ 28,092 ​ ​ ​ ​ ​ 28,091 ​ ​ ​ ​ ​ 28,091 ​ ​ ​
LD Intermediate Holdings, Inc.
​ ​
(i)(u)
​ ​ Software & Services ​ ​
L+588
​ ​ ​ ​ 1.0% ​ ​ ​
12/9/22
​ ​ ​ ​ 16,256 ​ ​ ​ ​ ​ 15,091 ​ ​ ​ ​ ​ 15,769 ​ ​ ​
Logan’s Roadhouse, Inc.
​ ​
(v)
​ ​ Consumer Services ​ ​
L+1300 PIK (L+1300 Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​
5/5/19
​ ​ ​ ​ 5,899 ​ ​ ​ ​ ​ 5,899 ​ ​ ​ ​ ​ 5,899 ​ ​ ​
Logan’s Roadhouse, Inc.
​ ​
(v)
​ ​ Consumer Services ​ ​
L+1300 PIK (L+1300 Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​
5/5/19
​ ​ ​ ​ 1,326 ​ ​ ​ ​ ​ 1,326 ​ ​ ​ ​ ​ 1,326 ​ ​ ​
See notes to unaudited consolidated financial statements.
6
FS Investment Corporation II
Unaudited Consolidated Schedule of Investments (continued)
As of September 30, 2018
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Rate(b)
 ​ ​
Floor
​ ​
Maturity
​ ​
Principal
Amount(c)
 ​ ​
Amortized
Cost
​ ​
Fair
Value(d)
 ​
Logan’s Roadhouse, Inc.
​ ​
(n)(v)
​ ​ Consumer Services ​ ​
L+1300 PIK (L+1300 Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​
5/5/19
​ ​ ​ $ 818 ​ ​ ​ ​ $ 818 ​ ​ ​ ​ $ 818 ​ ​
MB Precision Holdings LLC
​ ​
(g)(h)(k)(l)
​ ​ Capital Goods ​ ​
L+725, 2.3% PIK (2.3% Max PIK)
​ ​ ​ ​ 1.3% ​ ​ ​
1/23/21
​ ​ ​ ​ 62,431 ​ ​ ​ ​ ​ 62,078 ​ ​ ​ ​ ​ 27,314 ​ ​
Mitel US Holdings, Inc.
​ ​
(i)(j)(u)
​ ​ Software & Services ​ ​
L+450
​ ​ ​ ​ ​ ​ ​ ​
7/11/25
​ ​ ​ ​ 4,559 ​ ​ ​ ​ ​ 4,548 ​ ​ ​ ​ ​ 4,612 ​ ​
Moxie Patriot LLC
​ ​
(f)(g)(u)
​ ​ Energy ​ ​
L+650
​ ​ ​ ​ 1.0% ​ ​ ​
8/21/20
​ ​ ​ ​ 11,545 ​ ​ ​ ​ ​ 11,557 ​ ​ ​ ​ ​ 10,737 ​ ​
Murray Energy Corp.
​ ​
(h)
​ ​ Energy ​ ​
L+900
​ ​ ​ ​ 1.0% ​ ​ ​
2/12/21
​ ​ ​ ​ 10,891 ​ ​ ​ ​ ​ 10,817 ​ ​ ​ ​ ​ 10,804 ​ ​
naviHealth, Inc.
​ ​
(i)(u)
​ ​
Health Care Equipment & Services
​ ​
L+500
​ ​ ​ ​ ​ ​ ​ ​
8/1/25
​ ​ ​ ​ 9,376 ​ ​ ​ ​ ​ 8,853 ​ ​ ​ ​ ​ 9,048 ​ ​
North Haven Cadence Buyer, Inc.
​ ​
(n)
​ ​ Consumer Services ​ ​
L+500
​ ​ ​ ​ 1.0% ​ ​ ​
9/2/21
​ ​ ​ ​ 2,625 ​ ​ ​ ​ ​ 2,625 ​ ​ ​ ​ ​ 2,625 ​ ​
North Haven Cadence Buyer, Inc.
​ ​
(h)(i)
​ ​ Consumer Services ​ ​
L+823
​ ​ ​ ​ 1.0% ​ ​ ​
9/2/22
​ ​ ​ ​ 61,884 ​ ​ ​ ​ ​ 61,884 ​ ​ ​ ​ ​ 61,807 ​ ​
Nova Wildcat Amerock, LLC
​ ​
(f)(h)
​ ​ Consumer Durables & Apparel ​ ​
L+750
​ ​ ​ ​ 1.3% ​ ​ ​
9/10/19
​ ​ ​ ​ 11,914 ​ ​ ​ ​ ​ 11,843 ​ ​ ​ ​ ​ 11,914 ​ ​
PHRC License, LLC
​ ​
(g)(h)
​ ​ Consumer Services ​ ​
L+850
​ ​ ​ ​ 1.5% ​ ​ ​
4/28/22
​ ​ ​ ​ 67,186 ​ ​ ​ ​ ​ 67,186 ​ ​ ​ ​ ​ 69,202 ​ ​
Power Distribution, Inc.
​ ​
(f)(i)
​ ​ Capital Goods ​ ​
L+725
​ ​ ​ ​ 1.3% ​ ​ ​
1/25/23
​ ​ ​ ​ 44,134 ​ ​ ​ ​ ​ 44,134 ​ ​ ​ ​ ​ 44,851 ​ ​
Production Resource Group, LLC
​ ​
(f)(g)(h)(i)
​ ​ Media ​ ​
L+700
​ ​ ​ ​ 1.0% ​ ​ ​
8/21/24
​ ​ ​ ​ 207,992 ​ ​ ​ ​ ​ 207,992 ​ ​ ​ ​ ​ 207,992 ​ ​
Propulsion Acquisition, LLC
​ ​
(f)(h)(i)(u)
​ ​ Capital Goods ​ ​
L+600
​ ​ ​ ​ 1.0% ​ ​ ​
7/13/21
​ ​ ​ ​ 58,417 ​ ​ ​ ​ ​ 56,757 ​ ​ ​ ​ ​ 57,833 ​ ​
Relation Insurance, Inc.
​ ​
(f)(g)(h)
​ ​ Insurance ​ ​
L+825
​ ​ ​ ​ 1.3% ​ ​ ​
3/5/19
​ ​ ​ ​ 77,818 ​ ​ ​ ​ ​ 77,682 ​ ​ ​ ​ ​ 77,818 ​ ​
Relation Insurance, Inc.
​ ​
(n)
​ ​ Insurance ​ ​
L+825
​ ​ ​ ​ 1.3% ​ ​ ​
3/5/19
​ ​ ​ ​ 27,800 ​ ​ ​ ​ ​ 27,800 ​ ​ ​ ​ ​ 27,800 ​ ​
Reliant Acquisitions Holdings, Inc.
​ ​
(h)
​ ​
Health Care Equipment & Services
​ ​
L+675
​ ​ ​ ​ 1.0% ​ ​ ​
8/30/24
​ ​ ​ ​ 55,153 ​ ​ ​ ​ ​ 54,610 ​ ​ ​ ​ ​ 54,932 ​ ​
Roadrunner Intermediate Acquisition Co., LLC
​ ​
(f)
​ ​
Health Care Equipment & Services
​ ​
L+675
​ ​ ​ ​ 1.0% ​ ​ ​
3/15/23
​ ​ ​ ​ 7,215 ​ ​ ​ ​ ​ 7,215 ​ ​ ​ ​ ​ 6,789 ​ ​
Rogue Wave Software, Inc.
​ ​
(h)
​ ​ Software & Services ​ ​
L+844
​ ​ ​ ​ 1.0% ​ ​ ​
9/25/21
​ ​ ​ ​ 24,413 ​ ​ ​ ​ ​ 24,413 ​ ​ ​ ​ ​ 24,413 ​ ​
Safariland, LLC
​ ​
(g)(h)
​ ​ Capital Goods ​ ​
L+778
​ ​ ​ ​ 1.1% ​ ​ ​
11/18/23
​ ​ ​ ​ 70,234 ​ ​ ​ ​ ​ 70,234 ​ ​ ​ ​ ​ 63,913 ​ ​
Schenectady International Group, Inc.
 ​ ​
(j)(u)
​ ​ Materials ​ ​
L+475
​ ​ ​ ​ 1.0% ​ ​ ​
8/17/25
​ ​ ​ ​ 1,356 ​ ​ ​ ​ ​ 1,302 ​ ​ ​ ​ ​ 1,365 ​ ​
Sequa Mezzanine Holdings L.L.C.
​ ​
(i)(j)(u)
​ ​ Capital Goods ​ ​
L+500
​ ​ ​ ​ 1.0% ​ ​ ​
11/28/21
​ ​ ​ ​ 18,184 ​ ​ ​ ​ ​ 17,913 ​ ​ ​ ​ ​ 17,919 ​ ​
Sequel Youth and Family Services,
LLC
​ ​
(f)(h)(i)
​ ​
Health Care Equipment & Services
​ ​
L+755
​ ​ ​ ​ 1.0% ​ ​ ​
9/1/22
​ ​ ​ ​ 82,260 ​ ​ ​ ​ ​ 82,260 ​ ​ ​ ​ ​ 83,330 ​ ​
Sequential Brands Group, Inc.
​ ​
(g)(h)(i)
​ ​ Consumer Durables & Apparel ​ ​
L+875
​ ​ ​ ​ ​ ​ ​ ​
2/7/24
​ ​ ​ ​ 119,725 ​ ​ ​ ​ ​ 117,651 ​ ​ ​ ​ ​ 119,725 ​ ​
SGS Cayman, L.P.
​ ​
(h)(m)(u)
​ ​
Commercial & Professional Services
​ ​
L+538
​ ​ ​ ​ 1.0% ​ ​ ​
4/23/21
​ ​ ​ ​ 1,771 ​ ​ ​ ​ ​ 1,707 ​ ​ ​ ​ ​ 1,699 ​ ​
SIRVA Worldwide Inc
​ ​
(i)(u)
​ ​ Transportation ​ ​
L+550
​ ​ ​ ​ ​ ​ ​ ​
7/31/25
​ ​ ​ ​ 2,776 ​ ​ ​ ​ ​ 2,736 ​ ​ ​ ​ ​ 2,787 ​ ​
Sorenson Communications, Inc.
​ ​
(f)(g)(h)(u)
​ ​ Telecommunication Services ​ ​
L+575
​ ​ ​ ​ 2.3% ​ ​ ​
4/30/20
​ ​ ​ ​ 97,675 ​ ​ ​ ​ ​ 97,526 ​ ​ ​ ​ ​ 98,203 ​ ​
SSC (Lux) Limited S.à r.l.
​ ​
(g)(h)(i)(m)
​ ​
Health Care Equipment & Services
​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​
9/10/24
​ ​ ​ ​ 104,545 ​ ​ ​ ​ ​ 104,545 ​ ​ ​ ​ ​ 107,290 ​ ​
Staples Canada, ULC
​ ​
(m)(t)
​ ​ Retailing ​ ​
CDOR+700
​ ​ ​ ​ 1.0% ​ ​ ​
9/12/24
​ ​ ​ C$ 50,792 ​ ​ ​ ​ ​ 50,956 ​ ​ ​ ​ ​ 51,402 ​ ​
Strike, LLC
​ ​
(i)(u)
​ ​ Energy ​ ​
L+800
​ ​ ​ ​ 1.0% ​ ​ ​
11/30/22
​ ​ ​ $ 4,344 ​ ​ ​ ​ ​ 4,244 ​ ​ ​ ​ ​ 4,409 ​ ​
SunGard Availability Services Capital,
Inc.
​ ​
(f)(u)
​ ​ Software & Services ​ ​
L+700
​ ​ ​ ​ 1.0% ​ ​ ​
9/30/21
​ ​ ​ ​ 10,534 ​ ​ ​ ​ ​ 10,457 ​ ​ ​ ​ ​ 9,797 ​ ​
SunGard Availability Services Capital,
Inc.
​ ​
(u)
​ ​ Software & Services ​ ​
L+1000
​ ​ ​ ​ 1.0% ​ ​ ​
10/1/22
​ ​ ​ ​ 980 ​ ​ ​ ​ ​ 934 ​ ​ ​ ​ ​ 965 ​ ​
Sutherland Global Services Inc.
​ ​
(h)(u)
​ ​
Commercial & Professional Services
​ ​
L+538
​ ​ ​ ​ 1.0% ​ ​ ​
4/23/21
​ ​ ​ ​ 7,608 ​ ​ ​ ​ ​ 7,332 ​ ​ ​ ​ ​ 7,300 ​ ​
Swift Worldwide Resources US Holdings Corp.
​ ​
(f)(g)
​ ​ Energy ​ ​
L+1000, 1.0% PIK (1.0% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​
7/20/21
​ ​ ​ ​ 19,490 ​ ​ ​ ​ ​ 19,490 ​ ​ ​ ​ ​ 19,880 ​ ​
Trace3, LLC
​ ​
(f)(g)(h)(i)
​ ​ Software & Services ​ ​
L+675
​ ​ ​ ​ 1.0% ​ ​ ​
6/6/23
​ ​ ​ ​ 161,990 ​ ​ ​ ​ ​ 161,990 ​ ​ ​ ​ ​ 161,990 ​ ​
VP Parent Holdings, Inc.
​ ​
(h)(i)
​ ​ Software & Services ​ ​
L+650
​ ​ ​ ​ 1.0% ​ ​ ​
5/22/25
​ ​ ​ ​ 64,509 ​ ​ ​ ​ ​ 63,891 ​ ​ ​ ​ ​ 63,862 ​ ​
See notes to unaudited consolidated financial statements.
7
FS Investment Corporation II
Unaudited Consolidated Schedule of Investments (continued)
As of September 30, 2018
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Rate(b)
 ​ ​
Floor
​ ​
Maturity
​ ​
Principal
Amount(c)
 ​ ​
Amortized
Cost
​ ​
Fair
Value(d)
 ​ ​
Warren Resources, Inc.
​ ​
(h)(v)
​ ​ Energy ​ ​
L+1000
​ ​ ​ ​ 1.0% ​ ​ ​
5/22/20
​ ​ ​ $ 14,623 ​ ​ ​ ​ $ 14,623 ​ ​ ​ ​ $ 14,623 ​ ​ ​
York Risk Services Holding Corp.
​ ​
(u)
​ ​ Insurance ​ ​
L+375
​ ​ ​ ​ 1.0% ​ ​ ​
10/1/21
​ ​ ​ ​ 982 ​ ​ ​ ​ ​ 977 ​ ​ ​ ​ ​ 954 ​ ​ ​
Zeta Interactive Holdings Corp.
​ ​
(f)(h)
​ ​ Software & Services ​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​
7/29/22
​ ​ ​ ​ 37,112 ​ ​ ​ ​ ​ 37,112 ​ ​ ​ ​ ​ 37,853 ​ ​ ​
Zeta Interactive Holdings Corp.
​ ​
(n)
​ ​ Software & Services ​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​
7/29/22
​ ​ ​ ​ 6,571 ​ ​ ​ ​ ​ 6,571 ​ ​ ​ ​ ​ 6,703 ​ ​ ​
Total Senior Secured Loans—First Lien
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 3,593,534 ​ ​ ​ ​ ​ 3,506,870 ​ ​ ​
Unfunded Loan Commitments
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (193,011) ​ ​ ​ ​ ​ (193,011) ​ ​ ​
Net Senior Secured Loans—First Lien
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 3,400,523 ​ ​ ​ ​ ​ 3,313,859 ​ ​ ​
Senior Secured Loans—Second Lien—10.4%
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Access CIG LLC
​ ​
(u)
​ ​ Software & Services ​ ​
L+775
​ ​ ​ ​ ​ ​ ​ ​
2/27/26
​ ​ ​ ​ 1,258 ​ ​ ​ ​ ​ 1,274 ​ ​ ​ ​ ​ 1,265 ​ ​ ​
Access CIG LLC
​ ​
(n)(u)
​ ​ Software & Services ​ ​
L+775
​ ​ ​ ​ ​ ​ ​ ​
2/27/26
​ ​ ​ ​ 68 ​ ​ ​ ​ ​ 68 ​ ​ ​ ​ ​ 68 ​ ​ ​ ​ ​
Advantage Sales & Marketing Inc.
​ ​
(u)
​ ​ Media ​ ​
L+650
​ ​ ​ ​ 1.0% ​ ​ ​
7/25/22
​ ​ ​ ​ 2,291 ​ ​ ​ ​ ​ 2,027 ​ ​ ​ ​ ​ 1,951 ​ ​ ​
American Bath Group, LLC
​ ​
(i)(u)
​ ​ Capital Goods ​ ​
L+975
​ ​ ​ ​ 1.0% ​ ​ ​
9/30/24
​ ​ ​ ​ 7,000 ​ ​ ​ ​ ​ 6,532 ​ ​ ​ ​ ​ 7,105 ​ ​ ​
Ammeraal Beltech Holding BV
​ ​
(m)
​ ​ Capital Goods ​ ​
L+800
​ ​ ​ ​ ​ ​ ​ ​
9/28/26
​ ​ ​ ​ 52,309 ​ ​ ​ ​ ​ 51,263 ​ ​ ​ ​ ​ 51,263 ​ ​ ​
Arena Energy, LP
​ ​
(f)(h)
​ ​ Energy ​ ​
L+900, 4.0% PIK (4.0% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​
1/24/21
​ ​ ​ ​ 25,605 ​ ​ ​ ​ ​ 25,605 ​ ​ ​ ​ ​ 25,605 ​ ​ ​
Bellatrix Exploration Ltd.
​ ​
(m)
​ ​ Energy ​ ​
8.5%
​ ​ ​ ​ ​ ​ ​ ​
7/26/23
​ ​ ​ ​ 4,500 ​ ​ ​ ​ ​ 4,002 ​ ​ ​ ​ ​ 3,983 ​ ​ ​
Bellatrix Exploration Ltd.
​ ​
(m)
​ ​ Energy ​ ​
8.5%
​ ​ ​ ​ ​ ​ ​ ​
7/26/23
​ ​ ​ ​ 936 ​ ​ ​ ​ ​ 936 ​ ​ ​ ​ ​ 938 ​ ​ ​
Bellatrix Exploration Ltd.
​ ​
(m)(n)
​ ​ Energy ​ ​
8.5%
​ ​ ​ ​ ​ ​ ​ ​
7/26/23
​ ​ ​ ​ 1,560 ​ ​ ​ ​ ​ 1,560 ​ ​ ​ ​ ​ 1,564 ​ ​ ​
Byrider Finance, LLC
​ ​ ​ ​ ​ Automobiles & Components ​ ​
L+1000, 0.5% PIK (4.0% Max PIK)
​ ​ ​ ​ 1.3% ​ ​ ​
8/22/20
​ ​ ​ ​ 29,656 ​ ​ ​ ​ ​ 29,656 ​ ​ ​ ​ ​ 29,026 ​ ​ ​
Checkout Holding Corp.
​ ​
(i)(k)(l)(u)
​ ​ Media ​ ​
L+675
​ ​ ​ ​ 1.0% ​ ​ ​
4/11/22
​ ​ ​ ​ 10,000 ​ ​ ​ ​ ​ 9,958 ​ ​ ​ ​ ​ 1,044 ​ ​ ​
Chisholm Oil and Gas Operating, LLC
​ ​
(h)
​ ​ Energy ​ ​
L+800
​ ​ ​ ​ 1.0% ​ ​ ​
3/21/24
​ ​ ​ ​ 16,000 ​ ​ ​ ​ ​ 16,000 ​ ​ ​ ​ ​ 15,883 ​ ​ ​
Crossmark Holdings, Inc.
​ ​
(i)(k)(l)(u)
​ ​ Media ​ ​
L+750
​ ​ ​ ​ 1.3% ​ ​ ​
12/21/20
​ ​ ​ ​ 7,778 ​ ​ ​ ​ ​ 7,786 ​ ​ ​ ​ ​ 752 ​ ​ ​
Envigo Laboratories, Inc.
​ ​
(h)(u)
​ ​
Health Care Equipment & Services
​ ​
L+775
​ ​ ​ ​ ​ ​ ​ ​
4/29/20
​ ​ ​ ​ 3,272 ​ ​ ​ ​ ​ 3,175 ​ ​ ​ ​ ​ 3,076 ​ ​ ​
Fairway Group Acquisition Co.
​ ​
(u)
​ ​ Food & Staples Retailing ​ ​
11.0% PIK (11.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
10/3/21
​ ​ ​ ​ 1,697 ​ ​ ​ ​ ​ 1,536 ​ ​ ​ ​ ​ 187 ​ ​ ​
Gruden Acquisition, Inc.
​ ​
(h)(u)
​ ​ Transportation ​ ​
L+850
​ ​ ​ ​ 1.0% ​ ​ ​
8/18/23
​ ​ ​ ​ 15,000 ​ ​ ​ ​ ​ 14,491 ​ ​ ​ ​ ​ 15,000 ​ ​ ​
Inmar, Inc.
​ ​
(i)(u)
​ ​ Software & Services ​ ​
L+800
​ ​ ​ ​ 1.0% ​ ​ ​
5/1/25
​ ​ ​ ​ 2,615 ​ ​ ​ ​ ​ 2,582 ​ ​ ​ ​ ​ 2,628 ​ ​ ​
Jazz Acquisition, Inc.
​ ​
(f)(u)
​ ​ Capital Goods ​ ​
L+675
​ ​ ​ ​ 1.0% ​ ​ ​
6/19/22
​ ​ ​ ​ 3,700 ​ ​ ​ ​ ​ 3,730 ​ ​ ​ ​ ​ 3,561 ​ ​ ​
LBM Borrower, LLC
​ ​
(f)(i)(u)
​ ​ Capital Goods ​ ​
L+925
​ ​ ​ ​ 1.0% ​ ​ ​
8/20/23
​ ​ ​ ​ 23,332 ​ ​ ​ ​ ​ 23,221 ​ ​ ​ ​ ​ 23,507 ​ ​ ​
Logan’s Roadhouse, Inc.
​ ​
(k)(l)(v)
​ ​ Consumer Services ​ ​
L+850 PIK (L+850 Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​
11/23/20
​ ​ ​ ​ 15,927 ​ ​ ​ ​ ​ 14,840 ​ ​ ​ ​ ​ 4,109 ​ ​ ​
One Call Corp.
​ ​
(h)
​ ​
Health Care Equipment & Services
​ ​
L+375, 6.0% PIK (6.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
4/11/24
​ ​ ​ ​ 12,281 ​ ​ ​ ​ ​ 12,167 ​ ​ ​ ​ ​ 12,115 ​ ​ ​
P2 Upstream Acquisition Co.
​ ​
(i)(u)
​ ​ Energy ​ ​
L+800
​ ​ ​ ​ 1.0% ​ ​ ​
4/30/21
​ ​ ​ ​ 14,500 ​ ​ ​ ​ ​ 14,624 ​ ​ ​ ​ ​ 13,612 ​ ​ ​
Peak 10 Holding Corp.
​ ​
(i)(j)(u)
​ ​ Software & Services ​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​
8/1/25
​ ​ ​ ​ 2,865 ​ ​ ​ ​ ​ 2,838 ​ ​ ​ ​ ​ 2,796 ​ ​ ​
Sequa Mezzanine Holdings L.L.C.
​ ​
(i)(u)
​ ​ Capital Goods ​ ​
L+900
​ ​ ​ ​ 1.0% ​ ​ ​
4/28/22
​ ​ ​ ​ 7,462 ​ ​ ​ ​ ​ 7,413 ​ ​ ​ ​ ​ 7,359 ​ ​ ​
SIRVA Worldwide Inc
​ ​
(i)(u)
​ ​ Transportation ​ ​
L+950
​ ​ ​ ​ ​ ​ ​ ​
7/31/26
​ ​ ​ ​ 2,494 ​ ​ ​ ​ ​ 2,309 ​ ​ ​ ​ ​ 2,319 ​ ​ ​
SMG US Midco 2, Inc.
​ ​
(u)
​ ​ Consumer Services ​ ​
L+700
​ ​ ​ ​ ​ ​ ​ ​
1/23/26
​ ​ ​ ​ 831 ​ ​ ​ ​ ​ 841 ​ ​ ​ ​ ​ 840 ​ ​ ​
Spencer Gifts LLC
​ ​
(i)(u)
​ ​ Retailing ​ ​
L+825
​ ​ ​ ​ 1.0% ​ ​ ​
6/29/22
​ ​ ​ ​ 20,000 ​ ​ ​ ​ ​ 20,067 ​ ​ ​ ​ ​ 15,050 ​ ​ ​
Titan Energy Operating, LLC
​ ​
(h)(k)(l)
​ ​ Energy ​ ​
L+1300 PIK (L+1300 Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​
2/23/20
​ ​ ​ ​ 86,822 ​ ​ ​ ​ ​ 67,595 ​ ​ ​ ​ ​ 13,371 ​ ​ ​
Ultimate Baked Goods Midco LLC
​ ​
(i)
​ ​ Food & Staples Retailing ​ ​
L+800
​ ​ ​ ​ 1.0% ​ ​ ​
8/9/26
​ ​ ​ ​ 17,990 ​ ​ ​ ​ ​ 17,814 ​ ​ ​ ​ ​ 17,779 ​ ​ ​
See notes to unaudited consolidated financial statements.
8
FS Investment Corporation II
Unaudited Consolidated Schedule of Investments (continued)
As of September 30, 2018
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Rate(b)
 ​ ​
Floor
​ ​
Maturity
​ ​
Principal
Amount(c)
 ​ ​
Amortized
Cost
​ ​
Fair
Value(d)
 ​ ​
WireCo WorldGroup, Inc.
​ ​
(j)(u)
​ ​ Materials ​ ​
L+900
​ ​ ​ ​ 1.0% ​ ​ ​
9/30/24
​ ​ ​ $ 2,014 ​ ​ ​ ​ $ 2,039 ​ ​ ​ ​ $ 2,034 ​ ​ ​
Total Senior Secured Loans—Second Lien
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 367,949 ​ ​ ​ ​ ​ 279,790 ​ ​ ​
Unfunded Loan Commitments
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (1,628) ​ ​ ​ ​ ​ (1,628) ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 366,321 ​ ​ ​ ​ ​ 278,162 ​ ​ ​
Senior Secured Bonds—6.6% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Advanced Lighting Technologies, Inc.
​ ​
(k)(l)(v)
​ ​ Materials ​ ​
L+700, 10.0% PIK (10.0% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​
10/4/23
​ ​ ​ ​ 11,342 ​ ​ ​ ​ ​ 10,664 ​ ​ ​ ​ ​ 5,076 ​ ​ ​
Altice France SA
​ ​
(m)(u)
​ ​ Telecommunication Services ​ ​
8.1%
​ ​ ​ ​ ​ ​ ​ ​
2/1/27
​ ​ ​ ​ 917 ​ ​ ​ ​ ​ 917 ​ ​ ​ ​ ​ 946 ​ ​ ​
APX Group, Inc.
​ ​
(h)(u)
​ ​ Consumer Services ​ ​
7.9%
​ ​ ​ ​ ​ ​ ​ ​
12/1/22
​ ​ ​ ​ 3,931 ​ ​ ​ ​ ​ 3,903 ​ ​ ​ ​ ​ 4,015 ​ ​ ​
Artesyn Embedded Technologies Inc.
​ ​
(u)
​ ​ Capital Goods ​ ​
9.8%
​ ​ ​ ​ ​ ​ ​ ​
10/15/20
​ ​ ​ ​ 1,052 ​ ​ ​ ​ ​ 1,011 ​ ​ ​ ​ ​ 1,010 ​ ​ ​
Black Swan Energy Ltd.
​ ​
(m)
​ ​ Energy ​ ​
9.0%
​ ​ ​ ​ ​ ​ ​ ​
1/20/24
​ ​ ​ ​ 1,333 ​ ​ ​ ​ ​ 1,333 ​ ​ ​ ​ ​ 1,333 ​ ​ ​
Boyne USA Inc.
​ ​
(u)
​ ​ Consumer Services ​ ​
7.3%
​ ​ ​ ​ ​ ​ ​ ​
5/1/25
​ ​ ​ ​ 44 ​ ​ ​ ​ ​ 46 ​ ​ ​ ​ ​ 47 ​ ​ ​
DJO Finance LLC
​ ​
(u)
​ ​
Health Care Equipment & Services
​ ​
8.1%
​ ​ ​ ​ ​ ​ ​ ​
6/15/21
​ ​ ​ ​ 1,563 ​ ​ ​ ​ ​ 1,575 ​ ​ ​ ​ ​ 1,602 ​ ​ ​
Eagle Intermediate Global Holding B.V.
​ ​
(m)(u)
​ ​ Consumer Durables & Apparel ​ ​
7.5%
​ ​ ​ ​ ​ ​ ​ ​
5/1/25
​ ​ ​ ​ 3,659 ​ ​ ​ ​ ​ 3,688 ​ ​ ​ ​ ​ 3,590 ​ ​ ​
FourPoint Energy, LLC
​ ​
(h)(i)
​ ​ Energy ​ ​
9.0%
​ ​ ​ ​ ​ ​ ​ ​
12/31/21
​ ​ ​ ​ 46,313 ​ ​ ​ ​ ​ 44,990 ​ ​ ​ ​ ​ 46,776 ​ ​ ​
Genesys Telecommunications Laboratories, Inc.
​ ​
(u)
​ ​ Software & Services ​ ​
10.0%
​ ​ ​ ​ ​ ​ ​ ​
11/30/24
​ ​ ​ ​ 144 ​ ​ ​ ​ ​ 160 ​ ​ ​ ​ ​ 160 ​ ​ ​
Global A&T Electronics Ltd.
​ ​
(i)(m)(u)
​ ​ Semiconductors & Semiconductor Equipment ​ ​
8.5%
​ ​ ​ ​ ​ ​ ​ ​
1/12/23
​ ​ ​ ​ 15,949 ​ ​ ​ ​ ​ 16,081 ​ ​ ​ ​ ​ 15,511 ​ ​ ​
J.C. Penney Corp., Inc.
​ ​
(j)(m)(u)
​ ​ Retailing ​ ​
5.7%
​ ​ ​ ​ ​ ​ ​ ​
6/1/20
​ ​ ​ ​ 126 ​ ​ ​ ​ ​ 118 ​ ​ ​ ​ ​ 112 ​ ​ ​
JW Aluminum Co.
​ ​
(h)(u)(v)
​ ​ Materials ​ ​
10.3%
​ ​ ​ ​ ​ ​ ​ ​
6/1/26
​ ​ ​ ​ 33,001 ​ ​ ​ ​ ​ 33,001 ​ ​ ​ ​ ​ 33,042 ​ ​ ​
Mood Media Corp.
​ ​
(h)(m)(v)
​ ​ Media ​ ​
L+1400 PIK (L+1400 Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​
6/28/24
​ ​ ​ ​ 28,478 ​ ​ ​ ​ ​ 28,377 ​ ​ ​ ​ ​ 28,478 ​ ​ ​
Pattonair Holdings, Ltd.
​ ​
(m)(u)
​ ​ Capital Goods ​ ​
9.0%
​ ​ ​ ​ ​ ​ ​ ​
11/1/22
​ ​ ​ ​ 4,111 ​ ​ ​ ​ ​ 4,261 ​ ​ ​ ​ ​ 4,259 ​ ​ ​
Pisces Midco Inc.
​ ​
(u)
​ ​ Capital Goods ​ ​
8.0%
​ ​ ​ ​ ​ ​ ​ ​
4/15/26
​ ​ ​ ​ 2,014 ​ ​ ​ ​ ​ 1,981 ​ ​ ​ ​ ​ 2,030 ​ ​ ​
Sorenson Communications, Inc.
​ ​
(h)(u)
​ ​ Telecommunication Services ​ ​
9.0%, 0.0% PIK (9.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
10/31/20
​ ​ ​ ​ 7,058 ​ ​ ​ ​ ​ 6,939 ​ ​ ​ ​ ​ 6,987 ​ ​ ​
Starfruit Finco B.V.
​ ​
(u)
​ ​ Materials ​ ​
8.0%
​ ​ ​ ​ ​ ​ ​ ​
10/1/26
​ ​ ​ ​ 2,019 ​ ​ ​ ​ ​ 2,019 ​ ​ ​ ​ ​ 2,052 ​ ​ ​
Sunnova Energy Corp.
​ ​ ​ ​ ​ Energy ​ ​
6.0%, 6.0% PIK (6.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
1/24/19
​ ​ ​ ​ 1,660 ​ ​ ​ ​ ​ 1,660 ​ ​ ​ ​ ​ 1,658 ​ ​ ​ ​ ​
Talos Production LLC
​ ​
(h)(u)
​ ​ Energy ​ ​
11.0%
​ ​ ​ ​ ​ ​ ​ ​
4/3/22
​ ​ ​ ​ 4,500 ​ ​ ​ ​ ​ 4,715 ​ ​ ​ ​ ​ 4,832 ​ ​ ​
Velvet Energy Ltd.
​ ​
(i)(m)
​ ​ Energy ​ ​
9.0%
​ ​ ​ ​ ​ ​ ​ ​
10/5/23
​ ​ ​ ​ 15,000 ​ ​ ​ ​ ​ 15,000 ​ ​ ​ ​ ​ 15,675 ​ ​ ​
Total Senior Secured Bonds
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 182,439 ​ ​ ​ ​ ​ 179,191 ​ ​ ​
Subordinated Debt—9.6% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
APX Group, Inc.
​ ​
(h)(u)
​ ​ Consumer Services ​ ​
8.8%
​ ​ ​ ​ ​ ​ ​ ​
12/1/20
​ ​ ​ ​ 3,839 ​ ​ ​ ​ ​ 3,684 ​ ​ ​ ​ ​ 3,841 ​ ​ ​
APX Group, Inc.
​ ​
(h)(u)
​ ​ Consumer Services ​ ​
7.6%
​ ​ ​ ​ ​ ​ ​ ​
9/1/23
​ ​ ​ ​ 5,712 ​ ​ ​ ​ ​ 5,179 ​ ​ ​ ​ ​ 5,272 ​ ​ ​
Ascent Resources Utica Holdings, LLC
​ ​
(h)(i)(u)
​ ​ Energy ​ ​
10.0%
​ ​ ​ ​ ​ ​ ​ ​
4/1/22
​ ​ ​ ​ 40,000 ​ ​ ​ ​ ​ 40,000 ​ ​ ​ ​ ​ 45,075 ​ ​ ​
Aurora Diagnostics, LLC
​ ​
(h)(u)
​ ​
Health Care Equipment & Services
​ ​
12.3%, 1.5% PIK (1.5% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
1/15/20
​ ​ ​ ​ 6,235 ​ ​ ​ ​ ​ 5,886 ​ ​ ​ ​ ​ 5,666 ​ ​ ​
Avantor, Inc.
​ ​
(i)(u)
​ ​ Materials ​ ​
9.0%
​ ​ ​ ​ ​ ​ ​ ​
10/1/25
​ ​ ​ ​ 20,000 ​ ​ ​ ​ ​ 20,000 ​ ​ ​ ​ ​ 20,670 ​ ​ ​
Byrider Holding Corp.
​ ​ ​ ​ ​ Automobiles & Components ​ ​
20.0% PIK (20.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
4/1/22
​ ​ ​ ​ 1,458 ​ ​ ​ ​ ​ 1,458 ​ ​ ​ ​ ​ 1,458 ​ ​ ​
CEC Entertainment, Inc.
​ ​
(u)
​ ​ Consumer Services ​ ​
8.0%
​ ​ ​ ​ ​ ​ ​ ​
2/15/22
​ ​ ​ ​ 18,715 ​ ​ ​ ​ ​ 18,594 ​ ​ ​ ​ ​ 17,148 ​ ​ ​
ClubCorp Holdings, Inc.
​ ​
(h)(u)
​ ​ Consumer Services ​ ​
8.5%
​ ​ ​ ​ ​ ​ ​ ​
9/15/25
​ ​ ​ ​ 4,679 ​ ​ ​ ​ ​ 4,515 ​ ​ ​ ​ ​ 4,466 ​ ​ ​
See notes to unaudited consolidated financial statements.
9
FS Investment Corporation II
Unaudited Consolidated Schedule of Investments (continued)
As of September 30, 2018
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Rate(b)
 ​ ​
Floor
​ ​
Maturity
​ ​
Principal
Amount(c)
 ​ ​
Amortized
Cost
​ ​
Fair
Value(d)
 ​
Diamond Resorts International, Inc.
​ ​
(u)
​ ​ Consumer Services ​ ​
10.8%
​ ​ ​ ​ ​ ​ ​ ​
9/1/24
​ ​ ​ $ 3,048 ​ ​ ​ ​ $ 3,197 ​ ​ ​ ​ $ 2,970 ​ ​
Eclipse Resources Corp.
​ ​
(u)
​ ​ Energy ​ ​
8.9%
​ ​ ​ ​ ​ ​ ​ ​
7/15/23
​ ​ ​ ​ 9,175 ​ ​ ​ ​ ​ 9,042 ​ ​ ​ ​ ​ 9,359 ​ ​
Global Jet Capital Inc.
​ ​ ​ ​ ​
Commercial & Professional Services
​ ​
15.0% PIK (15.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
1/30/25
​ ​ ​ ​ 950 ​ ​ ​ ​ ​ 950 ​ ​ ​ ​ ​ 941 ​ ​
Global Jet Capital Inc.
​ ​ ​ ​ ​
Commercial & Professional Services
​ ​
15.0% PIK (15.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
4/30/25
​ ​ ​ ​ 6,035 ​ ​ ​ ​ ​ 6,035 ​ ​ ​ ​ ​ 5,983 ​ ​
Global Jet Capital Inc.
​ ​ ​ ​ ​
Commercial & Professional Services
​ ​
15.0% PIK (15.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
9/3/25
​ ​ ​ ​ 1,247 ​ ​ ​ ​ ​ 1,247 ​ ​ ​ ​ ​ 1,235 ​ ​
Global Jet Capital Inc.
​ ​ ​ ​ ​
Commercial & Professional Services
​ ​
15.0% PIK (15.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
9/29/25
​ ​ ​ ​ 1,174 ​ ​ ​ ​ ​ 1,174 ​ ​ ​ ​ ​ 1,162 ​ ​
Global Jet Capital Inc.
​ ​
(e)(m)
​ ​
Commercial & Professional Services
​ ​
15.0% PIK (15.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
12/4/25
​ ​ ​ ​ 8,667 ​ ​ ​ ​ ​ 8,667 ​ ​ ​ ​ ​ 8,569 ​ ​
Global Jet Capital Inc.
​ ​
(e)(m)
​ ​
Commercial & Professional Services
​ ​
15.0% PIK (15.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
12/9/25
​ ​ ​ ​ 1,417 ​ ​ ​ ​ ​ 1,417 ​ ​ ​ ​ ​ 1,401 ​ ​
Global Jet Capital Inc.
​ ​
(e)(m)
​ ​
Commercial & Professional Services
​ ​
15.0% PIK (15.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
1/29/26
​ ​ ​ ​ 742 ​ ​ ​ ​ ​ 742 ​ ​ ​ ​ ​ 734 ​ ​
Global Jet Capital Inc.
​ ​ ​ ​ ​
Commercial & Professional Services
​ ​
15.0% PIK (15.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
12/2/26
​ ​ ​ ​ 2,246 ​ ​ ​ ​ ​ 2,246 ​ ​ ​ ​ ​ 2,218 ​ ​
Great Lakes Dredge & Dock Corp.
​ ​
(u)
​ ​ Capital Goods ​ ​
8.0%
​ ​ ​ ​ ​ ​ ​ ​
5/15/22
​ ​ ​ ​ 9,000 ​ ​ ​ ​ ​ 9,000 ​ ​ ​ ​ ​ 9,270 ​ ​
Greystone Mezzanine Equity Member Corp.
​ ​
(n)
​ ​ Diversified Financials ​ ​
L+650
​ ​ ​ ​ 4.5% ​ ​ ​
9/15/25
​ ​ ​ ​ 15,000 ​ ​ ​ ​ ​ 15,000 ​ ​ ​ ​ ​ 14,813 ​ ​
KGA Escrow LLC
​ ​
(u)
​ ​ Automobiles & Components ​ ​
7.5%
​ ​ ​ ​ ​ ​ ​ ​
8/15/23
​ ​ ​ ​ 6,004 ​ ​ ​ ​ ​ 6,057 ​ ​ ​ ​ ​ 6,254 ​ ​
P.F. Chang’s China Bistro, Inc.
​ ​
(h)(i)(u)
​ ​ Consumer Services ​ ​
10.3%
​ ​ ​ ​ ​ ​ ​ ​
6/30/20
​ ​ ​ ​ 29,790 ​ ​ ​ ​ ​ 29,036 ​ ​ ​ ​ ​ 28,863 ​ ​
Quorum Health Corp.
​ ​
(j)(u)
​ ​
Health Care Equipment & Services
​ ​
11.6%
​ ​ ​ ​ ​ ​ ​ ​
4/15/23
​ ​ ​ ​ 2,566 ​ ​ ​ ​ ​ 2,554 ​ ​ ​ ​ ​ 2,574 ​ ​
S1 Blocker Buyer Inc.
​ ​ ​ ​ ​
Commercial & Professional Services
​ ​
10.0% PIK (10.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
10/31/22
​ ​ ​ ​ 240 ​ ​ ​ ​ ​ 240 ​ ​ ​ ​ ​ 240 ​ ​
Sorenson Communications, Inc.
​ ​
(h)(u)
​ ​ Telecommunication Services ​ ​
13.9%, 0.0% PIK (13.9% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
10/31/21
​ ​ ​ ​ 5,364 ​ ​ ​ ​ ​ 5,156 ​ ​ ​ ​ ​ 5,645 ​ ​
SRS Distribution Inc.
​ ​
(h)(j)(u)
​ ​ Capital Goods ​ ​
8.3%
​ ​ ​ ​ ​ ​ ​ ​
7/1/26
​ ​ ​ ​ 11,224 ​ ​ ​ ​ ​ 11,052 ​ ​ ​ ​ ​ 10,985 ​ ​
Stars Group Holdings B.V.
​ ​
(m)(u)
​ ​ Consumer Services ​ ​
7.0%
​ ​ ​ ​ ​ ​ ​ ​
7/15/26
​ ​ ​ ​ 1,438 ​ ​ ​ ​ ​ 1,438 ​ ​ ​ ​ ​ 1,485 ​ ​
SunGard Availability Services Capital, Inc.
​ ​
(u)
​ ​ Software & Services ​ ​
8.8%
​ ​ ​ ​ ​ ​ ​ ​
4/1/22
​ ​ ​ ​ 5,900 ​ ​ ​ ​ ​ 4,801 ​ ​ ​ ​ ​ 2,852 ​ ​
Team Health Holdings Inc
​ ​
(u)
​ ​
Health Care Equipment & Services
​ ​
6.4%
​ ​ ​ ​ ​ ​ ​ ​
2/1/25
​ ​ ​ ​ 893 ​ ​ ​ ​ ​ 783 ​ ​ ​ ​ ​ 785 ​ ​
Vertiv Group Corp.
​ ​
(h)(u)
​ ​ Capital Goods ​ ​
9.3%
​ ​ ​ ​ ​ ​ ​ ​
10/15/24
​ ​ ​ ​ 15,746 ​ ​ ​ ​ ​ 15,570 ​ ​ ​ ​ ​ 16,460 ​ ​
York Risk Services Holding Corp.
​ ​
(h)(i)(u)
​ ​ Insurance ​ ​
8.5%
​ ​ ​ ​ ​ ​ ​ ​
10/1/22
​ ​ ​ ​ 38,070 ​ ​ ​ ​ ​ 35,583 ​ ​ ​ ​ ​ 33,629 ​ ​
Total Subordinated Debt
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 270,303 ​ ​ ​ ​ ​ 272,023 ​ ​
Unfunded Debt Commitments
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (15,000) ​ ​ ​ ​ ​ (15,000) ​ ​
Net Subordinated Debt
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 255,303 ​ ​ ​ ​ ​ 257,023 ​ ​
Collateralized Securities—0.9% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
CGMS CLO 2013-3A Class Subord.
​ ​
(m)
​ ​ Diversified Financials ​ ​
22.3%
​ ​ ​ ​ ​ ​ ​ ​
7/15/25
​ ​ ​ ​ 23,263 ​ ​ ​ ​ ​ 10,891 ​ ​ ​ ​ ​ 14,105 ​ ​
NewStar Clarendon 2014-1A Class D
​ ​
(m)
​ ​ Diversified Financials ​ ​
L+435
​ ​ ​ ​ ​ ​ ​ ​
1/25/27
​ ​ ​ ​ 1,060 ​ ​ ​ ​ ​ 1,013 ​ ​ ​ ​ ​ 1,063 ​ ​
NewStar Clarendon 2014-1A Class Subord. B
​ ​
(m)
​ ​ Diversified Financials ​ ​
9.7%
​ ​ ​ ​ ​ ​ ​ ​
1/25/27
​ ​ ​ ​ 12,140 ​ ​ ​ ​ ​ 7,848 ​ ​ ​ ​ ​ 8,267 ​ ​
Total Collateralized Securities
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 19,752 ​ ​ ​ ​ ​ 23,435 ​ ​
Equity/Other—10.5% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
5 Arches, LLC, Common Equity
​ ​
(m)(p)
​ ​ Diversified Financials ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 8,000 ​ ​ ​ ​ ​ 197 ​ ​ ​ ​ ​ 400 ​ ​
Abaco Energy Technologies LLC, Common Equity
​ ​
(l)
​ ​ Energy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 3,055,556 ​ ​ ​ ​ ​ 3,056 ​ ​ ​ ​ ​ 1,337 ​ ​
Abaco Energy Technologies LLC, Preferred Equity
​ ​
(l)
​ ​ Energy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 12,734,481 ​ ​ ​ ​ ​ 637 ​ ​ ​ ​ ​ 6,686 ​ ​
ACP FH Holdings GP, LLC, Common Equity
​ ​
(e)(l)
​ ​ Consumer Durables & Apparel ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 88,571 ​ ​ ​ ​ ​ 89 ​ ​ ​ ​ ​ 48 ​ ​
ACP FH Holdings, LP, Common Equity
​ ​
(e)(l)
​ ​ Consumer Durables & Apparel ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 8,768,572 ​ ​ ​ ​ ​ 8,768 ​ ​ ​ ​ ​ 4,757 ​ ​
See notes to unaudited consolidated financial statements.
10
FS Investment Corporation II
Unaudited Consolidated Schedule of Investments (continued)
As of September 30, 2018
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Rate(b)
 ​ ​
Floor
​ ​
Maturity
​ ​
Principal
Amount(c)
 ​ ​
Amortized
Cost
​ ​
Fair
Value(d)
 ​
Advanced Lighting Technologies, Inc., Common Equity
​ ​
(l)(v)
​ ​ Materials ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 265,747 ​ ​ ​ ​ $ 7,471 ​ ​ ​ ​ $ — ​ ​
Advanced Lighting Technologies, Warrants
​ ​
(l)(v)
​ ​ Materials ​ ​ ​ ​ ​ ​ ​ ​
10/4/27
​ ​ ​ ​ 4,189 ​ ​ ​ ​ ​ 39 ​ ​ ​ ​ ​ — ​ ​
Altus Power America Holdings, LLC, Common
Equity
​ ​
(l)
​ ​ Energy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 462,008 ​ ​ ​ ​ ​ 462 ​ ​ ​ ​ ​ 69 ​ ​
Altus Power America Holdings, LLC, Preferred
Equity
​ ​
(r)
​ ​ Energy ​ ​
9.0%, 5.0% PIK
​ ​ ​ ​ ​
10/3/23
​ ​ ​ ​ 1,036,585 ​ ​ ​ ​ ​ 1,037 ​ ​ ​ ​ ​ 1,000 ​ ​
Ascent Resources Utica Holdings, LLC, Common Equity
​ ​
(l)(o)
​ ​ Energy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 128,734,129 ​ ​ ​ ​ ​ 38,700 ​ ​ ​ ​ ​ 41,195 ​ ​
ASG Everglades Holdings, Inc., Common Equity
​ ​
(l)(v)
​ ​ Software & Services ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 625,178 ​ ​ ​ ​ ​ 13,475 ​ ​ ​ ​ ​ 32,666 ​ ​
ASG Everglades Holdings, Inc., Warrants
​ ​
(l)(v)
​ ​ Software & Services ​ ​ ​ ​ ​ ​ ​ ​
6/27/22
​ ​ ​ ​ 253,704 ​ ​ ​ ​ ​ 7,231 ​ ​ ​ ​ ​ 7,738 ​ ​
Aspect Software Parent, Inc., Common Equity
​ ​
(l)
​ ​ Software & Services ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 403,955 ​ ​ ​ ​ ​ 9,932 ​ ​ ​ ​ ​ — ​ ​
ATX Holdings, LLC, Common Equity
​ ​
(l)(m)
​ ​
Technology Hardware & Equipment
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 72,635 ​ ​ ​ ​ ​ 116 ​ ​ ​ ​ ​ 69 ​ ​
Aurora Diagnostics Holdings, LLC, Warrants
​ ​
(h)(l)
​ ​
Health Care Equipment & Services
​ ​ ​ ​ ​ ​ ​ ​
5/25/27
​ ​ ​ ​ 94,193 ​ ​ ​ ​ ​ 686 ​ ​ ​ ​ ​ 975 ​ ​
Byrider Holding Corp., Common Equity
​ ​
(l)
​ ​ Automobiles & Components ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1,389 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Chisholm Oil and Gas, LLC, Series A Units
​ ​
(l)(p)
​ ​ Energy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 75,000 ​ ​ ​ ​ ​ 75 ​ ​ ​ ​ ​ 70 ​ ​
Cimarron Energy Holdco Inc., Common Equity
​ ​
(l)
​ ​ Energy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 3,675 ​ ​ ​ ​ ​ 3,323 ​ ​ ​ ​ ​ — ​ ​
Cimarron Energy Holdco Inc., Preferred Equity
​ ​
(l)
​ ​ Energy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 626,806 ​ ​ ​ ​ ​ 627 ​ ​ ​ ​ ​ 172 ​ ​
CSF Group Holdings, Inc., Common Equity
​ ​
(l)
​ ​ Capital Goods ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 417,400 ​ ​ ​ ​ ​ 417 ​ ​ ​ ​ ​ 459 ​ ​
Eastman Kodak Co., Common Equity
​ ​
(l)(u)
​ ​ Consumer Durables & Apparel ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1,846 ​ ​ ​ ​ ​ 36 ​ ​ ​ ​ ​ 6 ​ ​
Envigo Laboratories, Inc., Series A Warrants
​ ​
(h)(l)(u)
​ ​
Health Care Equipment & Services
​ ​ ​ ​ ​ ​ ​ ​
4/29/24
​ ​ ​ ​ 10,924 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Envigo Laboratories, Inc., Series B Warrants
​ ​
(h)(l)(u)
​ ​
Health Care Equipment & Services
​ ​ ​ ​ ​ ​ ​ ​
4/29/24
​ ​ ​ ​ 17,515 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Escape Velocity Holdings, Inc., Common Equity
​ ​
(l)
​ ​ Software & Services ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 33,216 ​ ​ ​ ​ ​ 332 ​ ​ ​ ​ ​ 1,277 ​ ​
Fairway Group Holdings Corp., Common Equity
​ ​
(l)
​ ​ Food & Staples Retailing ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 31,626 ​ ​ ​ ​ ​ 1,016 ​ ​ ​ ​ ​ — ​ ​
FourPoint Energy, LLC, Common Equity, Class C-II-A Units
​ ​
(l)(p)
​ ​ Energy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 13,000 ​ ​ ​ ​ ​ 13,000 ​ ​ ​ ​ ​ 3,672 ​ ​
FourPoint Energy, LLC, Common Equity, Class D Units
​ ​
(l)(p)
​ ​ Energy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2,437 ​ ​ ​ ​ ​ 1,610 ​ ​ ​ ​ ​ 695 ​ ​
FourPoint Energy, LLC, Common Equity, Class E-II Units
​ ​
(l)(p)
​ ​ Energy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 29,730 ​ ​ ​ ​ ​ 7,432 ​ ​ ​ ​ ​ 8,361 ​ ​
FourPoint Energy, LLC, Common Equity, Class E-III
Units
​ ​
(l)(p)
​ ​ Energy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 43,875 ​ ​ ​ ​ ​ 10,969 ​ ​ ​ ​ ​ 12,395 ​ ​
Global Jet Capital Holdings, LP, Preferred Equity
​ ​
(e)(l)
​ ​
Commercial & Professional Services
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 6,228,866 ​ ​ ​ ​ ​ 6,229 ​ ​ ​ ​ ​ 2,273 ​ ​
H.I.G. Empire Holdco, Inc., Common Equity
​ ​
(l)
​ ​ Retailing ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 411 ​ ​ ​ ​ ​ 1,227 ​ ​ ​ ​ ​ 1,268 ​ ​
Harvest Oil & Gas Corp., Common Equity
​ ​
(e)(l)(u)
​ ​ Energy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 7,166 ​ ​ ​ ​ ​ 158 ​ ​ ​ ​ ​ 143 ​ ​
Harvey Holdings, LLC, Common Equity
​ ​
(l)
​ ​ Capital Goods ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 666,667 ​ ​ ​ ​ ​ 667 ​ ​ ​ ​ ​ 1,717 ​ ​
HM Dunn Aerosystems, Inc., Preferred Equity, Series A
​ ​
(h)(l)(v)
​ ​ Capital Goods ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 12,857 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
HM Dunn Aerosystems, Inc., Preferred Equity,
Series B
​ ​
(h)(l)(v)
​ ​ Capital Goods ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 12,857 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Industrial Group Intermediate Holdings, LLC, Common Equity
​ ​
(l)(p)
​ ​ Materials ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2,678,947 ​ ​ ​ ​ ​ 2,679 ​ ​ ​ ​ ​ 2,411 ​ ​
See notes to unaudited consolidated financial statements.
11
FS Investment Corporation II
Unaudited Consolidated Schedule of Investments (continued)
As of September 30, 2018
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Rate(b)
 ​ ​
Floor
​ ​
Maturity
​ ​
Principal
Amount(c)
 ​ ​
Amortized
Cost
​ ​
Fair
Value(d)
 ​
JMC Acquisition Holdings, LLC, Common
Equity
​ ​
(l)
​ ​ Capital Goods ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 1,449 ​ ​ ​ ​ $ 1,449 ​ ​ ​ ​ $ 1,681 ​ ​
JSS Holdco, LLC, Net Profits Interest
​ ​
(l)
​ ​ Capital Goods ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 720 ​ ​
JW Aluminum Co., Common Equity
​ ​
(e)(i)(l)(v)
​ ​ Materials ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 548 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 2,452 ​ ​
JW Aluminum Co., Preferred Equity
​ ​
(e)(i)(v)
​ ​ Materials ​ ​
12.5% PIK
​ ​ ​ ​ ​
11/17/25
​ ​ ​ ​ 4,869 ​ ​ ​ ​ ​ 30,226 ​ ​ ​ ​ ​ 33,063 ​ ​
MB Precision Investment Holdings LLC, Class A-2 Units
​ ​
(l)(p)
​ ​ Capital Goods ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2,287,659 ​ ​ ​ ​ ​ 2,288 ​ ​ ​ ​ ​ — ​ ​
Mood Media Corp., Common Equity
​ ​
(l)(m)(v)
​ ​ Media ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 17,400,835 ​ ​ ​ ​ ​ 12,644 ​ ​ ​ ​ ​ 18,941 ​ ​
North Haven Cadence TopCo, LLC, Common
Equity
​ ​
(l)
​ ​ Consumer Services ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2,916,667 ​ ​ ​ ​ ​ 2,917 ​ ​ ​ ​ ​ 4,594 ​ ​
PDI Parent LLC, Common Equity
​ ​
(l)
​ ​ Capital Goods ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2,076,923 ​ ​ ​ ​ ​ 2,077 ​ ​ ​ ​ ​ 1,713 ​ ​
Professional Plumbing Group, Inc., Common
Equity 
 ​ ​
(e)(l)
​ ​ Capital Goods ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 3,000,000 ​ ​ ​ ​ ​ 3,000 ​ ​ ​ ​ ​ 9,150 ​ ​
Ridgeback Resources Inc., Common Equity
​ ​
(e)(l)(m)(t)
​ ​ Energy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 817,308 ​ ​ ​ ​ ​ 5,022 ​ ​ ​ ​ ​ 5,644 ​ ​
Roadhouse Holding Inc., Common Equity
​ ​
(l)(v)
​ ​ Consumer Services ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 4,481,763 ​ ​ ​ ​ ​ 4,657 ​ ​ ​ ​ ​ — ​ ​
S1 Blocker Buyer Inc., Common Equity
​ ​ ​ ​ ​
Commercial & Professional Services
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 124 ​ ​ ​ ​ ​ 1,201 ​ ​ ​ ​ ​ 1,941 ​ ​
Sequential Brands Group, Inc., Common Equity
​ ​
(e)(l)(u)
​ ​ Consumer Durables & Apparel ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 408,685 ​ ​ ​ ​ ​ 5,517 ​ ​ ​ ​ ​ 683 ​ ​
Sorenson Communications, Inc., Common Equity
​ ​
(e)(l)
​ ​ Telecommunication Services ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 43,796 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 36,101 ​ ​
SSC Holdco Limited, Common Equity
​ ​
(l)(m)
​ ​
Health Care Equipment & Services
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 261,364 ​ ​ ​ ​ ​ 5,227 ​ ​ ​ ​ ​ 6,142 ​ ​
Sunnova Energy Corp., Common Equity
​ ​
(l)
​ ​ Energy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 384,746 ​ ​ ​ ​ ​ 1,444 ​ ​ ​ ​ ​ — ​ ​
Sunnova Energy Corp., Preferred Equity
​ ​
(l)
​ ​ Energy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 70,229 ​ ​ ​ ​ ​ 374 ​ ​ ​ ​ ​ 406 ​ ​
Swift Worldwide Resources Holdco Limited, Common
Equity
​ ​
(l)(m)
​ ​ Energy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1,250,000 ​ ​ ​ ​ ​ 2,010 ​ ​ ​ ​ ​ 875 ​ ​
TE Holdings, LLC, Common Equity
​ ​
(e)(l)(p)(u)
​ ​ Energy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 717,718 ​ ​ ​ ​ ​ 6,101 ​ ​ ​ ​ ​ 718 ​ ​
TE Holdings, LLC, Preferred Equity
​ ​
(e)(l)(u)
​ ​ Energy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 475,758 ​ ​ ​ ​ ​ 4,751 ​ ​ ​ ​ ​ 3,092 ​ ​
Titan Energy, LLC, Common Equity
​ ​
(e)(l)(u)
​ ​ Energy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 200,040 ​ ​ ​ ​ ​ 6,322 ​ ​ ​ ​ ​ 82 ​ ​
Warren Resources, Inc., Common Equity
​ ​
(l)(v)
​ ​ Energy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2,371,337 ​ ​ ​ ​ ​ 11,145 ​ ​ ​ ​ ​ 9,011 ​ ​
White Star Petroleum Holdings, LLC, Common
Equity
​ ​
(l)(p)
​ ​ Energy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1,613,753 ​ ​ ​ ​ ​ 1,372 ​ ​ ​ ​ ​ 686 ​ ​
Zeta Interactive Holdings Corp., Preferred Equity, Series E-1
​ ​
(l)
​ ​ Software & Services ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 620,025 ​ ​ ​ ​ ​ 4,928 ​ ​ ​ ​ ​ 6,388 ​ ​
Zeta Interactive Holdings Corp., Preferred Equity, Series F
​ ​
(l)
​ ​ Software & Services ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 563,932 ​ ​ ​ ​ ​ 4,928 ​ ​ ​ ​ ​ 5,671 ​ ​
Zeta Interactive Holdings Corp., Warrants
​ ​
(l)
​ ​ Software & Services ​ ​ ​ ​ ​ ​ ​ ​
4/20/27
​ ​ ​ ​ 84,590 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 261 ​ ​
Total Equity/Other
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 261,293 ​ ​ ​ ​ ​ 281,874 ​ ​
TOTAL INVESTMENTS—161.2%
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 4,485,631 ​ ​ ​ ​ ​ 4,333,544 ​ ​
LIABILITIES IN EXCESS OF OTHER ASSETS—(61.2%)
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​
(1,645,418)
 ​ ​
NET ASSETS—100.0%
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 2,688,126 ​ ​
​
​
(a)
Security may be an obligation of one or more entities affiliated with the named company.
​
​
See notes to unaudited consolidated financial statements.
12
FS Investment Corporation II
Unaudited Consolidated Schedule of Investments (continued)
As of September 30, 2018
(in thousands, except share amounts)
​
 
(b)
Certain variable rate securities in the Company’s portfolio bear interest at a rate determined by a publicly disclosed base rate plus a basis point spread. As of September 30, 2018, the three-month London Interbank Offered Rate, or LIBOR or L, was 2.40%, and the U.S. Prime Lending Rate, or Prime, was 5.25%. PIK means paid-in-kind. PIK income accruals may be adjusted based on the fair value of underlying investment.
​
(c)
Denominated in U.S. dollars unless otherwise noted.
​
(d)
Fair value determined by the Company’s board of directors (see Note 7).
​
(e)
Security or portion thereof held within Cobbs Creek LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with ING Capital LLC (see Note 8).
​
(f)
Security or portion thereof held within Cooper River LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with Citibank, N.A. (see Note 8).
​
(g)
Security or portion thereof held within Darby Creek LLC and is pledged as collateral supporting the amounts outstanding under a revolving credit facility with Deutsche Bank AG, New York Branch (see Note 8).
​
(h)
Security or portion thereof held within Juniata River LLC and is pledged as collateral supporting the amounts outstanding under a term loan credit facility with JPMorgan Chase Bank, N.A. (see Note 8).
​
(i)
Security or portion thereof held within Green Creek LLC and is pledged as collateral supporting the amounts outstanding under a term loan credit facility with Goldman Sachs Bank USA (see Note 8).
​
(j)
Position or portion thereof unsettled as of September 30, 2018.
​
(k)
Security was on non-accrual status as of September 30, 2018.
​
(l)
Security is non-income producing.
​
(m)
The investment is not a qualifying asset under the Investment Company Act of 1940, as amended. A business development company may not acquire any asset other than qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets. As of September 30, 2018, 86.9% of the Company’s total assets represented qualifying assets.
​
(n)
Security is an unfunded commitment. The stated rate reflects the spread disclosed at the time of commitment and may not indicate the actual rate received upon funding.
​
(o)
Security held within IC II American Energy Investments, Inc., a wholly-owned subsidiary of the Company.
​
(p)
Security held within FSIC II Investments, Inc., a wholly-owned subsidiary of the Company.
​
(q)
Security held within IC II Arches Investments, LLC, a wholly-owned subsidiary of the Company.
​
(r)
Security held within IC II Altus Investments, LLC, a wholly-owned subsidiary of the Company.
​
(t)
Investment denominated in Canadian dollars. Cost and fair value are converted into U.S. dollars at an exchange rate of CAD $1.00 to $0.77 as of September 30, 2018.
​
(u)
Security is classified as Level 1 or Level 2 in the Company’s fair value hierarchy (see Note 7).
​
(v)
Under the Investment Company Act of 1940, as amended, the Company generally is deemed to be an “affiliated person” of a portfolio company if it owns 5% or more of the portfolio company’s voting securities and generally is deemed to “control” a portfolio company if it owns more than 25% of the portfolio company’s voting securities or it has the power to exercise control over the management or policies of such portfolio company. As of September 30, 2018, the Company held investments in portfolio companies of which it is deemed to be an “affiliated person” but is not deemed to “control”. The following table presents certain information with respect to investments in portfolio companies of which the Company was deemed to be an affiliated person for the nine months ended September 30, 2018:
​
​
See notes to unaudited consolidated financial statements.
13
FS Investment Corporation II
Unaudited Consolidated Schedule of Investments
As of September 30, 2018
(in thousands, except share amounts)
​
Portfolio Company
​ ​
Fair Value at
December 31,
2017
​ ​
Transfers
In or Out
​ ​
Purchases
and Paid-
in-Kind
Interest
​ ​
Sales and
Repayments
​ ​
Accretion
of Discount
​ ​
Net
Realized
Gain
(Loss)
​ ​
Net Change in
Unrealized
Appreciation
(Depreciation)
​ ​
Fair Value at
September 30,
2018
​ ​
Interest
Income(1)
 ​ ​
PIK
Income(1)
 ​ ​
Fee
Income(1)
 ​
Senior Secured Loans—First Lien ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Advanced Lighting Technologies, Inc.
​ ​ ​ $ 9,218 ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​ ​ ​ $ (69) ​ ​ ​ ​ $ 169 ​ ​ ​ ​ $ 10 ​ ​ ​ ​ $ (179) ​ ​ ​ ​ $ 9,149 ​ ​ ​ ​ $ 834 ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​
H.M. Dunn Co., Inc.(2)
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ 64,286 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (25,715) ​ ​ ​ ​ ​ (28,976) ​ ​ ​ ​ ​ 9,595 ​ ​ ​ ​ ​ 1,656 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Logan’s Roadhouse, Inc.
​ ​ ​ ​ 4,669 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 2,139 ​ ​ ​ ​ ​ (909) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (8) ​ ​ ​ ​ ​ 8 ​ ​ ​ ​ ​ 5,899 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 625 ​ ​ ​ ​ ​ — ​ ​
Logan’s Roadhouse, Inc.(3)
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,326 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,326 ​ ​ ​ ​ ​ 529 ​ ​ ​ ​ ​ 508 ​ ​ ​ ​ ​ — ​ ​
Warren Resources, Inc.
​ ​ ​ ​ 43,613 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 141 ​ ​ ​ ​ ​ (28,068) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (1,063) ​ ​ ​ ​ ​ 14,623 ​ ​ ​ ​ ​ 1,652 ​ ​ ​ ​ ​ 141 ​ ​ ​ ​ ​ 1,123 ​ ​
Senior Secured Loans—Second Lien ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
JW Aluminum Co.
​ ​ ​ ​ 34,382 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (33,874) ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ 7 ​ ​ ​ ​ ​ (516) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,492 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Logan’s Roadhouse, Inc.
​ ​ ​ ​ 6,771 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 194 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 6 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (2,862) ​ ​ ​ ​ ​ 4,109 ​ ​ ​ ​ ​ 188 ​ ​ ​ ​ ​ 194 ​ ​ ​ ​ ​ — ​ ​
Senior Secured Bonds ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Advanced Lighting Technologies, Inc.
​ ​ ​ ​ 10,278 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 647 ​ ​ ​ ​ ​ (261) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (5,588) ​ ​ ​ ​ ​ 5,076 ​ ​ ​ ​ ​ 1,182 ​ ​ ​ ​ ​ 646 ​ ​ ​ ​ ​ — ​ ​
JW Aluminum Co.
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 33,001 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 41 ​ ​ ​ ​ ​ 33,042 ​ ​ ​ ​ ​ 1,128 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Mood Media Corp.
​ ​ ​ ​ 23,219 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 5,273 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (14) ​ ​ ​ ​ ​ 28,478 ​ ​ ​ ​ ​ 3,247 ​ ​ ​ ​ ​ 1,901 ​ ​ ​ ​ ​ — ​ ​
Equity/Other ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Advanced Lighting Technologies, Inc., Common Equity
​ ​ ​ ​ 5,900 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (5,900) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Advanced Lighting Technologies, Warrants, 10/4/2027
​ ​ ​ ​ 26 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (26) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
ASG Everglades Holdings, Inc., Common Equity
​ ​ ​ ​ 30,727 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,939 ​ ​ ​ ​ ​ 32,666 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
ASG Everglades Holdings, Inc., 6/27/2022, Warrants
​ ​ ​ ​ 6,951 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 787 ​ ​ ​ ​ ​ 7,738 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
HM Dunn Aerosystems, Inc., Preferred Equity, Series A(2)
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
HM Dunn Aerosystems, Inc., Preferred Equity, Series B(2)
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
JW Aluminum Co., Common Equity
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 2,452 ​ ​ ​ ​ ​ 2,452 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
JW Aluminum Co., Preferred Equity
​ ​ ​ ​ 15,074 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 17,271 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 117 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 601 ​ ​ ​ ​ ​ 33,063 ​ ​ ​ ​ ​ 3,791 ​ ​ ​ ​ ​ 3,065 ​ ​ ​ ​ ​ — ​ ​
Mood Media Corp.
​ ​ ​ ​ 28,659 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (9,718) ​ ​ ​ ​ ​ 18,941 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Roadhouse Holding Inc., Common Equity
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Warren Resources, Inc., Common Equity
​ ​ ​ ​ 4,031 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 4,980 ​ ​ ​ ​ ​ 9,011 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Total
 ​ ​ ​ $ 223,518 ​ ​ ​ ​ $ 64,286 ​ ​ ​ ​ $ 59,992 ​ ​ ​ ​ $ (63,181) ​ ​ ​ ​ $ 293 ​ ​ ​ ​ $ (25,706) ​ ​ ​ ​ $ (44,034) ​ ​ ​ ​ $ 215,168 ​ ​ ​ ​ $ 15,699 ​ ​ ​ ​ $ 7,080 ​ ​ ​ ​ $ 1,123 ​ ​
​
​
(1)
Interest, PIK and fee income presented for the nine months ended September 30, 2018.
​
(2)
The Company held this investment as of December 31, 2017 but it was not deemed to be an “affiliated person” of the portfolio company or deemed to “control” the portfolio company as of December 31, 2017. Transfers in or out have been presented at amortized cost.
​
(3)
Security includes a partially unfunded commitment with an amortized cost of  $818 and a fair value of  $818.
​
​
See notes to unaudited consolidated financial statements.
14
FS Investment Corporation II
Consolidated Schedule of Investments
As of December 31, 2017
(in thousands, except share amounts)
​
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Rate(b)
 ​ ​
Floor
​ ​
Maturity
​ ​
Principal
Amount(c)
 ​ ​
Amortized
Cost
​ ​
Fair
Value(d)
 ​
Senior Secured Loans—First Lien—119.9% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
5 Arch Income Fund 2, LLC
​ ​
(o)(s)
​ ​ Diversified Financials ​ ​
10.5%
​ ​ ​ ​ ​ ​ ​ ​
11/18/21
​ ​ ​ $ 14,912 ​ ​ ​ ​ $ 14,935 ​ ​ ​ ​ $ 14,912 ​ ​
5 Arch Income Fund 2, LLC
​ ​
(o)(p)(s)
​ ​ Diversified Financials ​ ​
10.5%
​ ​ ​ ​ ​ ​ ​ ​
11/18/21
​ ​ ​ ​ 4,088 ​ ​ ​ ​ ​ 4,088 ​ ​ ​ ​ ​ 4,088 ​ ​
Abaco Energy Technologies LLC
​ ​
(j)
​ ​ Energy ​ ​
L+700, 2.5% PIK (2.5% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​
11/20/20
​ ​ ​ ​ 25,842 ​ ​ ​ ​ ​ 25,079 ​ ​ ​ ​ ​ 25,390 ​ ​
Actian Corp.
​ ​
(f)(j)(g)
​ ​ Software & Services ​ ​
L+806
​ ​ ​ ​ 1.0% ​ ​ ​
6/30/22
​ ​ ​ ​ 45,714 ​ ​ ​ ​ ​ 45,714 ​ ​ ​ ​ ​ 46,286 ​ ​
Advanced Lighting Technologies, Inc.
​ ​
(j)(x)
​ ​ Materials ​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​
10/4/22
​ ​ ​ ​ 9,218 ​ ​ ​ ​ ​ 7,789 ​ ​ ​ ​ ​ 9,218 ​ ​
AG Group Merger Sub, Inc.
​ ​
(f)(h)(k)(j)
​ ​
Commercial & Professional Services
​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​
12/29/23
​ ​ ​ ​ 62,418 ​ ​ ​ ​ ​ 62,418 ​ ​ ​ ​ ​ 63,510 ​ ​
All Systems Holding LLC
​ ​
(h)(k)(j)
​ ​
Commercial & Professional Services
​ ​
L+767
​ ​ ​ ​ 1.0% ​ ​ ​
10/31/23
​ ​ ​ ​ 103,557 ​ ​ ​ ​ ​ 103,557 ​ ​ ​ ​ ​ 105,110 ​ ​
Altus Power America, Inc.
​ ​
(k)
​ ​ Energy ​ ​
L+750
​ ​ ​ ​ 1.5% ​ ​ ​
9/30/21
​ ​ ​ ​ 2,866 ​ ​ ​ ​ ​ 2,866 ​ ​ ​ ​ ​ 2,809 ​ ​
Altus Power America, Inc.
​ ​
(p)
​ ​ Energy ​ ​
L+750
​ ​ ​ ​ 1.5% ​ ​ ​
9/30/21
​ ​ ​ ​ 884 ​ ​ ​ ​ ​ 884 ​ ​ ​ ​ ​ 866 ​ ​
Ascension Insurance, Inc.
​ ​
(f)(h)(j)(g)
​ ​ Insurance ​ ​
L+825
​ ​ ​ ​ 1.3% ​ ​ ​
3/5/19
​ ​ ​ ​ 78,342 ​ ​ ​ ​ ​ 78,020 ​ ​ ​ ​ ​ 79,419 ​ ​
Ascension Insurance, Inc.
​ ​
(p)
​ ​ Insurance ​ ​
L+825
​ ​ ​ ​ 1.3% ​ ​ ​
3/5/19
​ ​ ​ ​ 27,800 ​ ​ ​ ​ ​ 27,800 ​ ​ ​ ​ ​ 28,182 ​ ​
Aspect Software, Inc.
​ ​ ​ ​ ​ Software & Services ​ ​
L+1050
​ ​ ​ ​ 1.0% ​ ​ ​
5/25/18
​ ​ ​ ​ 1,804 ​ ​ ​ ​ ​ 1,804 ​ ​ ​ ​ ​ 1,804 ​ ​
Aspect Software, Inc.
​ ​
(p)
​ ​ Software & Services ​ ​
L+1050
​ ​ ​ ​ 1.0% ​ ​ ​
5/25/18
​ ​ ​ ​ 46 ​ ​ ​ ​ ​ 46 ​ ​ ​ ​ ​ 46 ​ ​
Aspect Software, Inc.
​ ​
(j)
​ ​ Software & Services ​ ​
L+1050
​ ​ ​ ​ 1.0% ​ ​ ​
5/25/20
​ ​ ​ ​ 3,620 ​ ​ ​ ​ ​ 3,620 ​ ​ ​ ​ ​ 3,349 ​ ​
Aspect Software, Inc.
​ ​
(p)
​ ​ Software & Services ​ ​
L+1200
​ ​ ​ ​ 1.0% ​ ​ ​
5/25/18
​ ​ ​ ​ 657 ​ ​ ​ ​ ​ 657 ​ ​ ​ ​ ​ — ​ ​
Atlas Aerospace LLC
​ ​
(f)(k)(j)
​ ​ Capital Goods ​ ​
L+802
​ ​ ​ ​ 1.0% ​ ​ ​
12/29/22
​ ​ ​ ​ 86,857 ​ ​ ​ ​ ​ 86,857 ​ ​ ​ ​ ​ 86,857 ​ ​
ATX Networks Corp.
​ ​
(f)(g)(o)
​ ​
Technology Hardware & Equipment
​ ​
L+600, 1.0% PIK (1.0% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​
6/11/21
​ ​ ​ ​ 1,911 ​ ​ ​ ​ ​ 1,894 ​ ​ ​ ​ ​ 1,899 ​ ​
ATX Networks Corp.
​ ​
(f)(k)(o)
​ ​
Technology Hardware & Equipment
​ ​
L+600, 1.0% PIK (1.0% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​
6/11/21
​ ​ ​ ​ 25,569 ​ ​ ​ ​ ​ 24,974 ​ ​ ​ ​ ​ 25,410 ​ ​
Avaya Inc.
​ ​
(i)(g)
​ ​
Technology Hardware & Equipment
​ ​
L+475
​ ​ ​ ​ 1.0% ​ ​ ​
12/15/24
​ ​ ​ ​ 17,000 ​ ​ ​ ​ ​ 16,830 ​ ​ ​ ​ ​ 16,761 ​ ​
AVF Parent, LLC
​ ​
(f)(j)(k)
​ ​ Retailing ​ ​
L+725
​ ​ ​ ​ 1.3% ​ ​ ​
3/1/24
​ ​ ​ ​ 76,382 ​ ​ ​ ​ ​ 76,382 ​ ​ ​ ​ ​ 77,963 ​ ​
Borden Dairy Co.
​ ​
(g)(h)(j)
​ ​ Food, Beverage & Tobacco ​ ​
L+804
​ ​ ​ ​ 1.0% ​ ​ ​
7/6/23
​ ​ ​ ​ 52,500 ​ ​ ​ ​ ​ 52,500 ​ ​ ​ ​ ​ 52,484 ​ ​
Cactus Wellhead, LLC
​ ​
(f)(g)
​ ​ Energy ​ ​
L+600
​ ​ ​ ​ 1.0% ​ ​ ​
7/31/20
​ ​ ​ ​ 16,211 ​ ​ ​ ​ ​ 15,596 ​ ​ ​ ​ ​ 16,238 ​ ​
CEVA Group Plc
​ ​
(o)(p)
​ ​ Transportation ​ ​
L+500
​ ​ ​ ​ ​ ​ ​ ​
3/19/19
​ ​ ​ ​ 20,000 ​ ​ ​ ​ ​ 20,000 ​ ​ ​ ​ ​ 18,750 ​ ​
Cimarron Energy Inc.
​ ​
(k)
​ ​ Energy ​ ​
L+1150 PIK (L+1150 Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​
12/15/19
​ ​ ​ ​ 25,470 ​ ​ ​ ​ ​ 25,470 ​ ​ ​ ​ ​ 10,379 ​ ​
ConnectiveRx, LLC
​ ​
(f)(g)(j)
​ ​
Health Care Equipment & Services
​ ​
L+828
​ ​ ​ ​ 1.0% ​ ​ ​
11/25/21
​ ​ ​ ​ 51,032 ​ ​ ​ ​ ​ 51,032 ​ ​ ​ ​ ​ 51,053 ​ ​
Crestwood Holdings LLC
​ ​
(f)
​ ​ Energy ​ ​
L+800
​ ​ ​ ​ 1.0% ​ ​ ​
6/19/19
​ ​ ​ ​ 4,185 ​ ​ ​ ​ ​ 4,180 ​ ​ ​ ​ ​ 4,207 ​ ​
CSafe Acquisition Co., Inc.
​ ​ ​ ​ ​ Capital Goods ​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​
11/1/21
​ ​ ​ ​ 3,548 ​ ​ ​ ​ ​ 3,548 ​ ​ ​ ​ ​ 3,517 ​ ​
CSafe Acquisition Co., Inc.
​ ​
(p)
​ ​ Capital Goods ​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​
11/1/21
​ ​ ​ ​ 2,713 ​ ​ ​ ​ ​ 2,713 ​ ​ ​ ​ ​ 2,689 ​ ​
CSafe Acquisition Co., Inc.
​ ​
(f)(g)(h)(j)
​ ​ Capital Goods ​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​
10/31/23
​ ​ ​ ​ 49,935 ​ ​ ​ ​ ​ 49,935 ​ ​ ​ ​ ​ 49,498 ​ ​
CSafe Acquisition Co., Inc.
​ ​
(p)
​ ​ Capital Goods ​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​
10/31/23
​ ​ ​ ​ 26,797 ​ ​ ​ ​ ​ 26,797 ​ ​ ​ ​ ​ 26,562 ​ ​
Dade Paper & Bag, LLC
​ ​
(f)(g)(h)(j)
​ ​ Capital Goods ​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​
6/10/24
​ ​ ​ ​ 137,112 ​ ​ ​ ​ ​ 137,112 ​ ​ ​ ​ ​ 141,911 ​ ​
Dayton Superior Corp.
​ ​
(k)
​ ​ Materials ​ ​
L+800
​ ​ ​ ​ 1.0% ​ ​ ​
11/15/21
​ ​ ​ ​ 11,550 ​ ​ ​ ​ ​ 11,263 ​ ​ ​ ​ ​ 9,992 ​ ​
Diamond Resorts International, Inc.
​ ​
(g)
​ ​ Consumer Services ​ ​
L+600
​ ​ ​ ​ 1.0% ​ ​ ​
9/2/23
​ ​ ​ ​ 6,853 ​ ​ ​ ​ ​ 6,713 ​ ​ ​ ​ ​ 6,919 ​ ​
Eastman Kodak Co.
​ ​
(f)
​ ​ Consumer Durables & Apparel ​ ​
L+625
​ ​ ​ ​ 1.0% ​ ​ ​
9/3/19
​ ​ ​ ​ 6,836 ​ ​ ​ ​ ​ 6,797 ​ ​ ​ ​ ​ 5,931 ​ ​
Empire Today, LLC
​ ​
(f)(g)(h)(j)(k)
​ ​ Retailing ​ ​
L+800
​ ​ ​ ​ 1.0% ​ ​ ​
11/17/22
​ ​ ​ ​ 89,100 ​ ​ ​ ​ ​ 89,100 ​ ​ ​ ​ ​ 89,991 ​ ​
Fairway Group Acquisition Co.
​ ​
(j)
​ ​ Food & Staples Retailing ​ ​
12.0% PIK (12.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
1/3/20
​ ​ ​ ​ 2,725 ​ ​ ​ ​ ​ 2,725 ​ ​ ​ ​ ​ 2,725 ​ ​
Fairway Group Acquisition Co.
​ ​
(m)(n)
​ ​ Food & Staples Retailing ​ ​
10.0% PIK (10.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
1/3/20
​ ​ ​ ​ 1,777 ​ ​ ​ ​ ​ 1,733 ​ ​ ​ ​ ​ 400 ​ ​
Fox Head, Inc.
​ ​
(g)(j)(k)
​ ​ Consumer Durables & Apparel ​ ​
L+850
​ ​ ​ ​ 1.0% ​ ​ ​
12/19/20
​ ​ ​ ​ 13,020 ​ ​ ​ ​ ​ 13,020 ​ ​ ​ ​ ​ 13,009 ​ ​
FR Dixie Acquisition Corp.
​ ​
(f)
​ ​ Energy ​ ​
L+475
​ ​ ​ ​ 1.0% ​ ​ ​
12/18/20
​ ​ ​ ​ 4,042 ​ ​ ​ ​ ​ 4,032 ​ ​ ​ ​ ​ 2,386 ​ ​
See notes to unaudited consolidated financial statements.
15
FS Investment Corporation II
Consolidated Schedule of Investments (continued)
As of December 31, 2017
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Rate(b)
 ​ ​
Floor
​ ​
Maturity
​ ​
Principal
Amount(c)
 ​ ​
Amortized
Cost
​ ​
Fair
Value(d)
 ​
FullBeauty Brands Holdings Corp.
​ ​
(k)
​ ​ Consumer Durables & Apparel ​ ​
L+475
​ ​ ​ ​ 1.0% ​ ​ ​
10/14/22
​ ​ ​ $ 4,949 ​ ​ ​ ​ $ 4,561 ​ ​ ​ ​ $ 2,929 ​ ​
FullBeauty Brands Holdings Corp.
​ ​
(k)
​ ​ Consumer Durables & Apparel ​ ​
L+800
​ ​ ​ ​ 1.0% ​ ​ ​
10/14/20
​ ​ ​ ​ 55,000 ​ ​ ​ ​ ​ 55,000 ​ ​ ​ ​ ​ 54,313 ​ ​
Greystone Equity Member Corp.
​ ​
(e)(o)
​ ​ Diversified Financials ​ ​
L+1050
​ ​ ​ ​ ​ ​ ​ ​
3/31/21
​ ​ ​ ​ 13,582 ​ ​ ​ ​ ​ 13,596 ​ ​ ​ ​ ​ 13,599 ​ ​
Greystone Equity Member Corp.
​ ​
(e)(o)
​ ​ Diversified Financials ​ ​
L+1100
​ ​ ​ ​ ​ ​ ​ ​
3/31/21
​ ​ ​ ​ 21,048 ​ ​ ​ ​ ​ 21,048 ​ ​ ​ ​ ​ 21,258 ​ ​
Greystone Equity Member Corp.
​ ​
(o)(p)
​ ​ Diversified Financials ​ ​
L+1100
​ ​ ​ ​ ​ ​ ​ ​
3/31/21
​ ​ ​ ​ 5,370 ​ ​ ​ ​ ​ 5,370 ​ ​ ​ ​ ​ 5,424 ​ ​
Gulf Finance, LLC
​ ​
(g)
​ ​ Energy ​ ​
L+525
​ ​ ​ ​ 1.0% ​ ​ ​
8/25/23
​ ​ ​ ​ 4,864 ​ ​ ​ ​ ​ 4,745 ​ ​ ​ ​ ​ 4,392 ​ ​
H.M. Dunn Co., Inc.
​ ​
(j)(k)
​ ​ Capital Goods ​ ​
L+946
​ ​ ​ ​ 1.0% ​ ​ ​
3/26/21
​ ​ ​ ​ 64,286 ​ ​ ​ ​ ​ 64,286 ​ ​ ​ ​ ​ 61,393 ​ ​
Hudson Technologies Co.
​ ​
(j)(k)(o)
​ ​
Commercial & Professional Services
​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​
10/10/23
​ ​ ​ ​ 51,359 ​ ​ ​ ​ ​ 51,359 ​ ​ ​ ​ ​ 52,065 ​ ​
Hudson Technologies Co.
​ ​
(o)(p)
​ ​
Commercial & Professional Services
​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​
10/10/23
​ ​ ​ ​ 12,228 ​ ​ ​ ​ ​ 12,228 ​ ​ ​ ​ ​ 12,396 ​ ​
Hybrid Promotions, LLC
​ ​
(g)(j)(k)
​ ​ Consumer Durables & Apparel ​ ​
L+850
​ ​ ​ ​ 1.0% ​ ​ ​
12/19/20
​ ​ ​ ​ 47,740 ​ ​ ​ ​ ​ 47,740 ​ ​ ​ ​ ​ 47,699 ​ ​
Icynene U.S. Acquisition Corp.
​ ​
(f)(g)(j)
​ ​ Materials ​ ​
L+700
​ ​ ​ ​ 1.0% ​ ​ ​
11/30/24
​ ​ ​ ​ 36,000 ​ ​ ​ ​ ​ 36,000 ​ ​ ​ ​ ​ 36,007 ​ ​
Industrial Group Intermediate Holdings, LLC
​ ​
(f)(g)(h)(j)(k)
​ ​ Materials ​ ​
L+800
​ ​ ​ ​ 1.3% ​ ​ ​
5/31/20
​ ​ ​ ​ 130,488 ​ ​ ​ ​ ​ 130,488 ​ ​ ​ ​ ​ 132,445 ​ ​
Industry City TI Lessor, L.P.
​ ​
(j)
​ ​ Consumer Services ​ ​
10.8%, 1.0% PIK (1.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
6/30/26
​ ​ ​ ​ 12,324 ​ ​ ​ ​ ​ 12,324 ​ ​ ​ ​ ​ 12,478 ​ ​
JMC Acquisition Merger Corp.
​ ​
(f)(g)(h)
​ ​ Capital Goods ​ ​
L+854
​ ​ ​ ​ 1.0% ​ ​ ​
11/6/21
​ ​ ​ ​ 20,495 ​ ​ ​ ​ ​ 20,495 ​ ​ ​ ​ ​ 20,828 ​ ​
JSS Holdings, Inc.
​ ​
(f)(g)(j)(k)
​ ​ Capital Goods ​ ​
L+800, 0.0% PIK (2.5% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​
3/31/23
​ ​ ​ ​ 72,715 ​ ​ ​ ​ ​ 72,056 ​ ​ ​ ​ ​ 73,842 ​ ​
JSS Holdings, Inc.
​ ​
(p)
​ ​ Capital Goods ​ ​
L+800, 0.0% PIK (2.5% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​
3/31/23
​ ​ ​ ​ 13,273 ​ ​ ​ ​ ​ 13,273 ​ ​ ​ ​ ​ 13,478 ​ ​
Kodiak BP, LLC
​ ​
(g)(h)(j)(k)
​ ​ Capital Goods ​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​
12/1/24
​ ​ ​ ​ 84,121 ​ ​ ​ ​ ​ 84,121 ​ ​ ​ ​ ​ 84,332 ​ ​
Kodiak BP, LLC
​ ​
(p)
​ ​ Capital Goods ​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​
12/1/24
​ ​ ​ ​ 24,242 ​ ​ ​ ​ ​ 24,242 ​ ​ ​ ​ ​ 24,303 ​ ​
Latham Pool Products, Inc.
​ ​
(f)(g)(j)
​ ​
Commercial & Professional Services
​ ​
L+775
​ ​ ​ ​ 1.0% ​ ​ ​
6/29/21
​ ​ ​ ​ 28,092 ​ ​ ​ ​ ​ 28,092 ​ ​ ​ ​ ​ 28,408 ​ ​
LD Intermediate Holdings, Inc.
​ ​
(k)
​ ​ Software & Services ​ ​
L+588
​ ​ ​ ​ 1.0% ​ ​ ​
12/9/22
​ ​ ​ ​ 16,575 ​ ​ ​ ​ ​ 15,186 ​ ​ ​ ​ ​ 14,891 ​ ​
Logan’s Roadhouse, Inc.
​ ​
(x)
​ ​ Consumer Services ​ ​
L+1100
​ ​ ​ ​ 1.0% ​ ​ ​
5/5/19
​ ​ ​ ​ 4,677 ​ ​ ​ ​ ​ 4,677 ​ ​ ​ ​ ​ 4,677 ​ ​
Logan’s Roadhouse, Inc.
​ ​
(p)(x)
​ ​ Consumer Services ​ ​
L+1100
​ ​ ​ ​ 1.0% ​ ​ ​
5/5/19
​ ​ ​ ​ 752 ​ ​ ​ ​ ​ 760 ​ ​ ​ ​ ​ 752 ​ ​
MB Precision Holdings LLC
​ ​
(g)(h)(j)
​ ​ Capital Goods ​ ​
L+725, 2.3% PIK (2.3% Max PIK)
​ ​ ​ ​ 1.3% ​ ​ ​
1/23/21
​ ​ ​ ​ 64,367 ​ ​ ​ ​ ​ 64,367 ​ ​ ​ ​ ​ 58,976 ​ ​
MORSCO, Inc.
​ ​
(e)(f)
​ ​ Capital Goods ​ ​
L+700
​ ​ ​ ​ 1.0% ​ ​ ​
10/31/23
​ ​ ​ ​ 3,581 ​ ​ ​ ​ ​ 3,460 ​ ​ ​ ​ ​ 3,652 ​ ​
Moxie Liberty LLC
​ ​
(f)(h)
​ ​ Energy ​ ​
L+650
​ ​ ​ ​ 1.0% ​ ​ ​
8/21/20
​ ​ ​ ​ 11,634 ​ ​ ​ ​ ​ 11,651 ​ ​ ​ ​ ​ 10,751 ​ ​
Moxie Patriot LLC
​ ​
(h)
​ ​ Energy ​ ​
L+575
​ ​ ​ ​ 1.0% ​ ​ ​
12/19/20
​ ​ ​ ​ 5,383 ​ ​ ​ ​ ​ 5,360 ​ ​ ​ ​ ​ 5,303 ​ ​
Nobel Learning Communities, Inc.
​ ​ ​ ​ ​ Consumer Services ​ ​
L+450
​ ​ ​ ​ 1.0% ​ ​ ​
5/5/21
​ ​ ​ ​ 3,075 ​ ​ ​ ​ ​ 3,075 ​ ​ ​ ​ ​ 3,075 ​ ​
Nobel Learning Communities, Inc.
​ ​
(p)
​ ​ Consumer Services ​ ​
L+450
​ ​ ​ ​ 1.0% ​ ​ ​
5/5/21
​ ​ ​ ​ 8,106 ​ ​ ​ ​ ​ 8,106 ​ ​ ​ ​ ​ 8,106 ​ ​
Nobel Learning Communities, Inc.
​ ​
(f)(j)(k)
​ ​ Consumer Services ​ ​
L+436
​ ​ ​ ​ 4.5% ​ ​ ​
5/5/23
​ ​ ​ ​ 84,472 ​ ​ ​ ​ ​ 84,472 ​ ​ ​ ​ ​ 84,045 ​ ​
Nobel Learning Communities, Inc.
​ ​
(p)
​ ​ Consumer Services ​ ​
L+375
​ ​ ​ ​ 4.5% ​ ​ ​
5/5/23
​ ​ ​ ​ 49,689 ​ ​ ​ ​ ​ 49,689 ​ ​ ​ ​ ​ 49,439 ​ ​
North Haven Cadence Buyer, Inc.
​ ​
(p)
​ ​ Consumer Services ​ ​
L+500
​ ​ ​ ​ 1.0% ​ ​ ​
9/2/21
​ ​ ​ ​ 2,625 ​ ​ ​ ​ ​ 2,625 ​ ​ ​ ​ ​ 2,625 ​ ​
North Haven Cadence Buyer, Inc.
​ ​
(f)(h)(j)(k)
​ ​ Consumer Services ​ ​
L+810
​ ​ ​ ​ 1.0% ​ ​ ​
9/2/22
​ ​ ​ ​ 77,522 ​ ​ ​ ​ ​ 77,522 ​ ​ ​ ​ ​ 78,976 ​ ​
North Haven Cadence Buyer, Inc.
​ ​
(p)
​ ​ Consumer Services ​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​
9/2/22
​ ​ ​ ​ 9,917 ​ ​ ​ ​ ​ 9,917 ​ ​ ​ ​ ​ 10,103 ​ ​
Nova Wildcat Amerock, LLC
​ ​
(f)(g)(j)
​ ​ Consumer Durables & Apparel ​ ​
L+800
​ ​ ​ ​ 1.3% ​ ​ ​
9/10/19
​ ​ ​ ​ 64,921 ​ ​ ​ ​ ​ 64,921 ​ ​ ​ ​ ​ 65,245 ​ ​
PHRC License, LLC
​ ​
(e)(g)(h)
​ ​ Consumer Services ​ ​
L+850
​ ​ ​ ​ 1.5% ​ ​ ​
4/28/22
​ ​ ​ ​ 67,500 ​ ​ ​ ​ ​ 67,500 ​ ​ ​ ​ ​ 69,187 ​ ​
Polymer Additives, Inc.
​ ​
(g)(h)(k)
​ ​ Materials ​ ​
L+888
​ ​ ​ ​ 1.0% ​ ​ ​
12/19/22
​ ​ ​ ​ 63,068 ​ ​ ​ ​ ​ 63,068 ​ ​ ​ ​ ​ 65,276 ​ ​
Polymer Additives, Inc.
​ ​
(h)(k)
​ ​ Materials ​ ​
L+834
​ ​ ​ ​ 1.0% ​ ​ ​
12/19/22
​ ​ ​ ​ 29,005 ​ ​ ​ ​ ​ 29,005 ​ ​ ​ ​ ​ 29,585 ​ ​
Power Distribution, Inc.
​ ​
(f)(g)(k)
​ ​ Capital Goods ​ ​
L+725
​ ​ ​ ​ 1.3% ​ ​ ​
1/25/23
​ ​ ​ ​ 44,893 ​ ​ ​ ​ ​ 44,893 ​ ​ ​ ​ ​ 45,566 ​ ​
Production Resource Group, LLC
​ ​
(g)(j)(k)
​ ​ Media ​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​
1/14/19
​ ​ ​ ​ 137,162 ​ ​ ​ ​ ​ 137,162 ​ ​ ​ ​ ​ 145,049 ​ ​
See notes to unaudited consolidated financial statements.
16
FS Investment Corporation II
Consolidated Schedule of Investments (continued)
As of December 31, 2017
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Rate(b)
 ​ ​
Floor
​ ​
Maturity
​ ​
Principal
Amount(c)
 ​ ​
Amortized
Cost
​ ​
Fair
Value(d)
 ​
Propulsion Acquisition, LLC
​ ​
(f)(g)(j)(k)
​ ​
Commercial & Professional Services
​ ​
L+600
​ ​ ​ ​ 1.0% ​ ​ ​
7/13/21
​ ​ ​ $ 58,874 ​ ​ ​ ​ $ 56,828 ​ ​ ​ ​ $ 58,285 ​ ​
Quest Software US Holdings Inc.
​ ​
(f)(h)(i)
​ ​ Software & Services ​ ​
L+550
​ ​ ​ ​ 1.0% ​ ​ ​
10/31/22
​ ​ ​ ​ 18,333 ​ ​ ​ ​ ​ 18,244 ​ ​ ​ ​ ​ 18,659 ​ ​
Roadrunner Intermediate Acquisition Co., LLC
 ​ ​
(f)
​ ​
Health Care Equipment & Services
​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​
3/15/23
​ ​ ​ ​ 7,550 ​ ​ ​ ​ ​ 7,550 ​ ​ ​ ​ ​ 7,614 ​ ​
Rogue Wave Software, Inc.
​ ​
(j)
​ ​ Software & Services ​ ​
L+858
​ ​ ​ ​ 1.0% ​ ​ ​
9/25/21
​ ​ ​ ​ 24,413 ​ ​ ​ ​ ​ 24,413 ​ ​ ​ ​ ​ 24,413 ​ ​
Safariland, LLC
​ ​
(h)(j)
​ ​ Capital Goods ​ ​
L+768
​ ​ ​ ​ 1.1% ​ ​ ​
11/18/23
​ ​ ​ ​ 70,234 ​ ​ ​ ​ ​ 70,234 ​ ​ ​ ​ ​ 71,200 ​ ​
Safariland, LLC
​ ​
(p)(h)(j)
​ ​ Capital Goods ​ ​
L+725
​ ​ ​ ​ 1.1% ​ ​ ​
11/18/23
​ ​ ​ ​ 13,867 ​ ​ ​ ​ ​ 13,867 ​ ​ ​ ​ ​ 14,057 ​ ​
Sequel Youth and Family Services, LLC
​ ​
(f)(k)(j)
​ ​
Health Care Equipment & Services
​ ​
L+778
​ ​ ​ ​ 1.0% ​ ​ ​
9/1/22
​ ​ ​ ​ 82,353 ​ ​ ​ ​ ​ 82,353 ​ ​ ​ ​ ​ 83,111 ​ ​
Sequel Youth and Family Services, LLC
​ ​
(p)
​ ​
Health Care Equipment & Services
​ ​
L+700
​ ​ ​ ​ 1.0% ​ ​ ​
9/1/22
​ ​ ​ ​ 4,118 ​ ​ ​ ​ ​ 4,118 ​ ​ ​ ​ ​ 4,156 ​ ​
Sequential Brands Group, Inc.
​ ​
(h)(j)(k)
​ ​ Consumer Durables & Apparel ​ ​
L+900
​ ​ ​ ​ ​ ​ ​ ​
7/1/22
​ ​ ​ ​ 156,102 ​ ​ ​ ​ ​ 156,102 ​ ​ ​ ​ ​ 154,541 ​ ​
Sorenson Communications, Inc.
​ ​
(f)(g)(h)(j)
​ ​ Telecommunication Services ​ ​
L+575
​ ​ ​ ​ 2.3% ​ ​ ​
4/30/20
​ ​ ​ ​ 98,440 ​ ​ ​ ​ ​ 98,219 ​ ​ ​ ​ ​ 99,240 ​ ​
SSC (Lux) Limited S.à r.l.
​ ​
(g)(h)(j)(o)
​ ​
Health Care Equipment & Services
​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​
9/10/24
​ ​ ​ ​ 104,545 ​ ​ ​ ​ ​ 104,545 ​ ​ ​ ​ ​ 106,636 ​ ​
Staples Canada, ULC
​ ​
(o)(v)
​ ​ Retailing ​ ​
L+700
​ ​ ​ ​ 1.0% ​ ​ ​
9/12/23
​ ​ ​ C$ 3,229 ​ ​ ​ ​ ​ 2,667 ​ ​ ​ ​ ​ 2,602 ​ ​
Strike, LLC
​ ​ ​ ​ ​ Energy ​ ​
L+800
​ ​ ​ ​ 1.0% ​ ​ ​
5/30/19
​ ​ ​ $ 2,800 ​ ​ ​ ​ ​ 2,766 ​ ​ ​ ​ ​ 2,814 ​ ​
Strike, LLC
​ ​
(k)
​ ​ Energy ​ ​
L+800
​ ​ ​ ​ 1.0% ​ ​ ​
11/30/22
​ ​ ​ ​ 4,523 ​ ​ ​ ​ ​ 4,408 ​ ​ ​ ​ ​ 4,591 ​ ​
SunGard Availability Services Capital, Inc.
​ ​
(f)(i)
​ ​ Software & Services ​ ​
L+700
​ ​ ​ ​ 1.0% ​ ​ ​
9/30/21
​ ​ ​ ​ 10,749 ​ ​ ​ ​ ​ 10,653 ​ ​ ​ ​ ​ 9,970 ​ ​
SunGard Availability Services Capital, Inc.
​ ​
(i)(l)
​ ​ Software & Services ​ ​
L+1000
​ ​ ​ ​ 1.0% ​ ​ ​
10/1/22
​ ​ ​ ​ 1,000 ​ ​ ​ ​ ​ 950 ​ ​ ​ ​ ​ 962 ​ ​
Swift Worldwide Resources US Holdings Corp.
 ​ ​
(f)(h)
​ ​ Energy ​ ​
L+1000, 1.0% PIK (1.0% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​
7/20/21
​ ​ ​ ​ 19,489 ​ ​ ​ ​ ​ 19,489 ​ ​ ​ ​ ​ 19,879 ​ ​
ThermaSys Corp.
​ ​
(f)
​ ​ Capital Goods ​ ​
L+400
​ ​ ​ ​ 1.3% ​ ​ ​
5/3/19
​ ​ ​ ​ 4,522 ​ ​ ​ ​ ​ 4,523 ​ ​ ​ ​ ​ 4,267 ​ ​
Trace3, LLC
​ ​
(f)(g)(j)
​ ​ Software & Services ​ ​
L+775
​ ​ ​ ​ 1.0% ​ ​ ​
6/6/23
​ ​ ​ ​ 53,481 ​ ​ ​ ​ ​ 53,481 ​ ​ ​ ​ ​ 54,751 ​ ​
U.S. Xpress Enterprises, Inc.
​ ​
(g)(h)(j)
​ ​ Transportation ​ ​
L+1075, 0.0% PIK (1.8% Max PIK)
​ ​ ​ ​ 1.5% ​ ​ ​
5/30/20
​ ​ ​ ​ 66,734 ​ ​ ​ ​ ​ 66,734 ​ ​ ​ ​ ​ 66,901 ​ ​
USI Senior Holdings, Inc.
​ ​
(h)(j)
​ ​ Capital Goods ​ ​
L+779
​ ​ ​ ​ 1.0% ​ ​ ​
1/5/22
​ ​ ​ ​ 41,150 ​ ​ ​ ​ ​ 41,150 ​ ​ ​ ​ ​ 41,383 ​ ​
USI Senior Holdings, Inc.
​ ​
(p)
​ ​ Capital Goods ​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​
1/5/22
​ ​ ​ ​ 8,373 ​ ​ ​ ​ ​ 8,373 ​ ​ ​ ​ ​ 8,421 ​ ​
UTEX Industries, Inc.
​ ​
(k)
​ ​ Energy ​ ​
L+400
​ ​ ​ ​ 1.0% ​ ​ ​
5/21/21
​ ​ ​ ​ 22,057 ​ ​ ​ ​ ​ 20,083 ​ ​ ​ ​ ​ 21,680 ​ ​
Warren Resources, Inc.
​ ​
(e)(j)(x)
​ ​ Energy ​ ​
L+900, 1.0% PIK (1.0% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​
5/22/20
​ ​ ​ ​ 42,550 ​ ​ ​ ​ ​ 42,550 ​ ​ ​ ​ ​ 43,613 ​ ​
Waste Pro USA, Inc.
​ ​
(g)(h)(j)(k)
​ ​
Commercial & Professional Services
​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​
10/15/20
​ ​ ​ ​ 121,116 ​ ​ ​ ​ ​ 121,116 ​ ​ ​ ​ ​ 123,387 ​ ​
Westbridge Technologies, Inc.
​ ​
(i)
​ ​ Software & Services ​ ​
L+850
​ ​ ​ ​ 1.0% ​ ​ ​
4/28/23
​ ​ ​ ​ 14,813 ​ ​ ​ ​ ​ 14,541 ​ ​ ​ ​ ​ 14,701 ​ ​
York Risk Services Holding Corp.
​ ​ ​ ​ ​ Insurance ​ ​
L+375
​ ​ ​ ​ 1.0% ​ ​ ​
10/1/21
​ ​ ​ ​ 990 ​ ​ ​ ​ ​ 983 ​ ​ ​ ​ ​ 971 ​ ​
Zeta Interactive Holdings Corp.
​ ​
(f)(g)(j)
​ ​ Software & Services ​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​
7/29/22
​ ​ ​ ​ 33,826 ​ ​ ​ ​ ​ 33,826 ​ ​ ​ ​ ​ 34,334 ​ ​
Zeta Interactive Holdings Corp.
​ ​
(p)
​ ​ Software & Services ​ ​
L+750
​ ​ ​ ​ 1.0% ​ ​ ​
7/29/22
​ ​ ​ ​ 6,424 ​ ​ ​ ​ ​ 6,424 ​ ​ ​ ​ ​ 6,520 ​ ​
Total Senior Secured Loans—First Lien
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 3,650,110 ​ ​ ​ ​ ​ 3,663,047 ​ ​
Unfunded Loan Commitments
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (241,977) ​ ​ ​ ​ ​ (241,977) ​ ​
Net Senior Secured Loans—First Lien
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 3,408,133 ​ ​ ​ ​ ​ 3,421,070 ​ ​
Senior Secured Loans—Second Lien—11.5% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
American Bath Group, LLC
​ ​
(k)
​ ​ Capital Goods ​ ​
L+975
​ ​ ​ ​ 1.0% ​ ​ ​
9/30/24
​ ​ ​ ​ 7,000 ​ ​ ​ ​ ​ 6,494 ​ ​ ​ ​ ​ 7,018 ​ ​
Arena Energy, LP
​ ​
(f)(j)
​ ​ Energy ​ ​
L+900, 4.0% PIK (4.0% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​
1/24/21
​ ​ ​ ​ 24,844 ​ ​ ​ ​ ​ 24,844 ​ ​ ​ ​ ​ 23,621 ​ ​
BPA Laboratories Inc.
​ ​
(j)
​ ​ Pharmaceuticals, Biotechnology &
Life Sciences 		​ ​
L+250
​ ​ ​ ​ ​ ​ ​ ​
4/29/20
​ ​ ​ ​ 3,272 ​ ​ ​ ​ ​ 3,134 ​ ​ ​ ​ ​ 3,239 ​ ​
Byrider Finance, LLC
​ ​
(e)
​ ​ Automobiles & Components ​ ​
L+1000, 0.5% PIK (4.0% Max PIK)
​ ​ ​ ​ 1.3% ​ ​ ​
8/22/20
​ ​ ​ ​ 22,608 ​ ​ ​ ​ ​ 22,608 ​ ​ ​ ​ ​ 21,280 ​ ​
Checkout Holding Corp.
​ ​
(k)
​ ​ Media ​ ​
L+675
​ ​ ​ ​ 1.0% ​ ​ ​
4/11/22
​ ​ ​ ​ 10,000 ​ ​ ​ ​ ​ 9,953 ​ ​ ​ ​ ​ 4,356 ​ ​
See notes to unaudited consolidated financial statements.
17
FS Investment Corporation II
Consolidated Schedule of Investments (continued)
As of December 31, 2017
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Rate(b)
 ​ ​
Floor
​ ​
Maturity
​ ​
Principal
Amount(c)
 ​ ​
Amortized
Cost
​ ​
Fair
Value(d)
 ​
Chisholm Oil and Gas Operating, LLC
​ ​
(j)
​ ​ Energy ​ ​
L+800
​ ​ ​ ​ 1.0% ​ ​ ​
3/21/24
​ ​ ​ $ 16,000 ​ ​ ​ ​ $ 16,000 ​ ​ ​ ​ $ 15,998 ​ ​
Compuware Corp.
​ ​
(j)
​ ​ Software & Services ​ ​
L+825
​ ​ ​ ​ 1.0% ​ ​ ​
12/15/22
​ ​ ​ ​ 1,841 ​ ​ ​ ​ ​ 1,666 ​ ​ ​ ​ ​ 1,850 ​ ​
Crossmark Holdings, Inc.
​ ​
(k)
​ ​ Media ​ ​
L+750
​ ​ ​ ​ 1.3% ​ ​ ​
12/21/20
​ ​ ​ ​ 7,778 ​ ​ ​ ​ ​ 7,788 ​ ​ ​ ​ ​ 879 ​ ​
Fairway Group Acquisition Co.
​ ​
(m)(n)
​ ​ Food & Staples Retailing ​ ​
11.0% PIK (11.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
10/3/21
​ ​ ​ ​ 1,563 ​ ​ ​ ​ ​ 1,520 ​ ​ ​ ​ ​ 352 ​ ​
Fieldwood Energy LLC
​ ​
(e)(k)(m)(n)
​ ​ Energy ​ ​
L+713
​ ​ ​ ​ 1.3% ​ ​ ​
9/30/20
​ ​ ​ ​ 1,947 ​ ​ ​ ​ ​ 1,602 ​ ​ ​ ​ ​ 652 ​ ​
Gruden Acquisition, Inc.
​ ​
(j)
​ ​ Transportation ​ ​
L+850
​ ​ ​ ​ 1.0% ​ ​ ​
8/18/23
​ ​ ​ ​ 15,000 ​ ​ ​ ​ ​ 14,435 ​ ​ ​ ​ ​ 14,981 ​ ​
Inmar, Inc.
​ ​
(k)
​ ​ Software & Services ​ ​
L+800
​ ​ ​ ​ 1.0% ​ ​ ​
5/1/25
​ ​ ​ ​ 2,615 ​ ​ ​ ​ ​ 2,579 ​ ​ ​ ​ ​ 2,630 ​ ​
Jazz Acquisition, Inc.
​ ​
(f)
​ ​ Capital Goods ​ ​
L+675
​ ​ ​ ​ 1.0% ​ ​ ​
6/19/22
​ ​ ​ ​ 3,700 ​ ​ ​ ​ ​ 3,736 ​ ​ ​ ​ ​ 3,500 ​ ​
JW Aluminum Co.
​ ​
(e)(j)(k)(x)
​ ​ Materials ​ ​
L+850
​ ​ ​ ​ 0.8% ​ ​ ​
11/17/20
​ ​ ​ ​ 33,874 ​ ​ ​ ​ ​ 33,866 ​ ​ ​ ​ ​ 34,382 ​ ​
Logan’s Roadhouse, Inc.
​ ​
(x)
​ ​ Consumer Services ​ ​
L+850 PIK (L+850 Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​
11/23/20
​ ​ ​ ​ 14,728 ​ ​ ​ ​ ​ 14,640 ​ ​ ​ ​ ​ 6,771 ​ ​
LTI Holdings, Inc.
​ ​
(j)
​ ​ Materials ​ ​
L+875
​ ​ ​ ​ 1.0% ​ ​ ​
5/16/25
​ ​ ​ ​ 9,259 ​ ​ ​ ​ ​ 9,087 ​ ​ ​ ​ ​ 9,421 ​ ​
P2 Upstream Acquisition Co.
​ ​
(k)
​ ​ Energy ​ ​
L+800
​ ​ ​ ​ 1.0% ​ ​ ​
4/30/21
​ ​ ​ ​ 14,500 ​ ​ ​ ​ ​ 14,652 ​ ​ ​ ​ ​ 13,413 ​ ​
Peak 10 Holding Corp.
​ ​
(k)
​ ​ Software & Services ​ ​
L+725
​ ​ ​ ​ 1.0% ​ ​ ​
8/1/25
​ ​ ​ ​ 2,786 ​ ​ ​ ​ ​ 2,759 ​ ​ ​ ​ ​ 2,810 ​ ​
Production Resource Group, LLC
​ ​
(f)(g)(h)
​ ​ Media ​ ​
L+850
​ ​ ​ ​ 1.0% ​ ​ ​
7/23/19
​ ​ ​ ​ 95,599 ​ ​ ​ ​ ​ 95,599 ​ ​ ​ ​ ​ 96,256 ​ ​
Spencer Gifts LLC
​ ​
(k)
​ ​ Retailing ​ ​
L+825
​ ​ ​ ​ 1.0% ​ ​ ​
6/29/22
​ ​ ​ ​ 20,000 ​ ​ ​ ​ ​ 20,078 ​ ​ ​ ​ ​ 10,800 ​ ​
Talos Production LLC
​ ​ ​ ​ ​ Energy ​ ​
11.0%
​ ​ ​ ​ ​ ​ ​ ​
4/3/22
​ ​ ​ ​ 4,500 ​ ​ ​ ​ ​ 4,213 ​ ​ ​ ​ ​ 4,466 ​ ​
Titan Energy Operating, LLC
​ ​
(g)(j)
​ ​ Energy ​ ​
2.0%, L+1100 PIK (L+1100 Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​
2/23/20
​ ​ ​ ​ 78,366 ​ ​ ​ ​ ​ 67,595 ​ ​ ​ ​ ​ 41,557 ​ ​
WP CPP Holdings, LLC
​ ​
(j)
​ ​ Capital Goods ​ ​
L+775
​ ​ ​ ​ 1.0% ​ ​ ​
4/30/21
​ ​ ​ ​ 6,932 ​ ​ ​ ​ ​ 6,913 ​ ​ ​ ​ ​ 6,903 ​ ​
Total Senior Secured Loans—Second Lien
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 385,761 ​ ​ ​ ​ ​ 327,135 ​ ​
Senior Secured Bonds—4.4% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Advanced Lighting Technologies, Inc.
​ ​
(x)
​ ​ Materials ​ ​
L+700, 10.0% PIK (10.0% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​
10/4/23
​ ​ ​ ​ 10,278 ​ ​ ​ ​ ​ 10,278 ​ ​ ​ ​ ​ 10,278 ​ ​
Black Swan Energy Ltd.
​ ​
(o)
​ ​ Energy ​ ​
9.0%
​ ​ ​ ​ ​ ​ ​ ​
1/20/24
​ ​ ​ ​ 1,333 ​ ​ ​ ​ ​ 1,333 ​ ​ ​ ​ ​ 1,343 ​ ​
FourPoint Energy, LLC
​ ​
(e)(j)(k)
​ ​ Energy ​ ​
9.0%
​ ​ ​ ​ ​ ​ ​ ​
12/31/21
​ ​ ​ ​ 46,313 ​ ​ ​ ​ ​ 44,869 ​ ​ ​ ​ ​ 47,065 ​ ​
Global A&T Electronics Ltd.
​ ​
(e)(k)(m)(n)(o)
​ ​ Semiconductors &
Semiconductor Equipment 		​ ​
10.0%
​ ​ ​ ​ ​ ​ ​ ​
2/1/19
​ ​ ​ ​ 19,490 ​ ​ ​ ​ ​ 19,114 ​ ​ ​ ​ ​ 18,069 ​ ​
Mood Media Corp.
​ ​
(e)(j)(o)(x)
​ ​ Media ​ ​
L+600, 8.0% PIK (8.0% Max PIK)
​ ​ ​ ​ 1.0% ​ ​ ​
6/28/24
​ ​ ​ ​ 23,104 ​ ​ ​ ​ ​ 23,104 ​ ​ ​ ​ ​ 23,219 ​ ​
Ridgeback Resources Inc.
​ ​
(e)(o)(w)
​ ​ Energy ​ ​
12.0%
​ ​ ​ ​ ​ ​ ​ ​
12/29/20
​ ​ ​ ​ 331 ​ ​ ​ ​ ​ 326 ​ ​ ​ ​ ​ 331 ​ ​
Sorenson Communications, Inc.
​ ​
(j)
​ ​ Telecommunication Services ​ ​
9.0%, 0.0% PIK (9.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
10/31/20
​ ​ ​ ​ 7,058 ​ ​ ​ ​ ​ 6,904 ​ ​ ​ ​ ​ 7,058 ​ ​
Sunnova Energy Corp.
​ ​ ​ ​ ​ Energy ​ ​
6.0%, 6.0% PIK (6.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
10/24/18
​ ​ ​ ​ 2,117 ​ ​ ​ ​ ​ 2,117 ​ ​ ​ ​ ​ 2,117 ​ ​
Velvet Energy Ltd.
​ ​
(o)
​ ​ Energy ​ ​
9.0%
​ ​ ​ ​ ​ ​ ​ ​
10/5/23
​ ​ ​ ​ 15,000 ​ ​ ​ ​ ​ 15,000 ​ ​ ​ ​ ​ 15,193 ​ ​
Total Senior Secured Bonds
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 123,045 ​ ​ ​ ​ ​ 124,673 ​ ​
Subordinated Debt—12.8% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Ascent Resources Utica Holdings, LLC
​ ​
(i)
​ ​ Energy ​ ​
10.0%
​ ​ ​ ​ ​ ​ ​ ​
4/1/22
​ ​ ​ ​ 40,000 ​ ​ ​ ​ ​ 40,000 ​ ​ ​ ​ ​ 43,226 ​ ​
Aurora Diagnostics, LLC
​ ​
(j)
​ ​
Health Care Equipment & Services
​ ​
10.8%, 1.5% PIK (1.5% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
1/15/20
​ ​ ​ ​ 6,143 ​ ​ ​ ​ ​ 5,628 ​ ​ ​ ​ ​ 5,713 ​ ​
Avantor, Inc.
​ ​
(k)
​ ​ Materials ​ ​
9.0%
​ ​ ​ ​ ​ ​ ​ ​
10/1/25
​ ​ ​ ​ 20,000 ​ ​ ​ ​ ​ 20,000 ​ ​ ​ ​ ​ 19,888 ​ ​
Bellatrix Exploration Ltd.
​ ​
(o)
​ ​ Energy ​ ​
8.5%
​ ​ ​ ​ ​ ​ ​ ​
5/15/20
​ ​ ​ ​ 5,000 ​ ​ ​ ​ ​ 4,947 ​ ​ ​ ​ ​ 4,775 ​ ​
Brooklyn Basketball Holdings, LLC
​ ​
(h)(j)
​ ​ Consumer Services ​ ​
L+725
​ ​ ​ ​ ​ ​ ​ ​
10/25/19
​ ​ ​ ​ 39,746 ​ ​ ​ ​ ​ 39,746 ​ ​ ​ ​ ​ 40,342 ​ ​
CEC Entertainment, Inc.
​ ​
(i)
​ ​ Consumer Services ​ ​
8.0%
​ ​ ​ ​ ​ ​ ​ ​
2/15/22
​ ​ ​ ​ 18,715 ​ ​ ​ ​ ​ 18,572 ​ ​ ​ ​ ​ 17,709 ​ ​
See notes to unaudited consolidated financial statements.
18
FS Investment Corporation II
Consolidated Schedule of Investments (continued)
As of December 31, 2017
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Rate(b)
 ​ ​
Floor
​ ​
Maturity
​ ​
Principal
Amount(c)
 ​ ​
Amortized
Cost
​ ​
Fair
Value(d)
 ​
Ceridian HCM Holding, Inc.
​ ​
(i)(k)
​ ​
Commercial & Professional Services
​ ​
11.0%
​ ​ ​ ​ ​ ​ ​ ​
3/15/21
​ ​ ​ $ 40,657 ​ ​ ​ ​ $ 40,304 ​ ​ ​ ​ $ 42,534 ​ ​
Coveris Holdings S.A.
​ ​
(i)(k)(o)
​ ​ Materials ​ ​
7.9%
​ ​ ​ ​ ​ ​ ​ ​
11/1/19
​ ​ ​ ​ 42,534 ​ ​ ​ ​ ​ 42,270 ​ ​ ​ ​ ​ 42,454 ​ ​
Eclipse Resources Corp.
​ ​
(i)(o)
​ ​ Energy ​ ​
8.9%
​ ​ ​ ​ ​ ​ ​ ​
7/15/23
​ ​ ​ ​ 9,175 ​ ​ ​ ​ ​ 9,028 ​ ​ ​ ​ ​ 9,439 ​ ​
EV Energy Partners, L.P.
​ ​
(e)(m)
​ ​ Energy ​ ​
8.0%
​ ​ ​ ​ ​ ​ ​ ​
4/15/19
​ ​ ​ ​ 259 ​ ​ ​ ​ ​ 246 ​ ​ ​ ​ ​ 132 ​ ​
Global Jet Capital Inc.
​ ​ ​ ​ ​
Commercial & Professional Services
​ ​
15.0% PIK (15.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
1/30/25
​ ​ ​ ​ 849 ​ ​ ​ ​ ​ 849 ​ ​ ​ ​ ​ 864 ​ ​
Global Jet Capital Inc.
​ ​ ​ ​ ​
Commercial & Professional Services
​ ​
15.0% PIK (15.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
4/30/25
​ ​ ​ ​ 5,398 ​ ​ ​ ​ ​ 5,398 ​ ​ ​ ​ ​ 5,492 ​ ​
Global Jet Capital Inc.
​ ​ ​ ​ ​
Commercial & Professional Services
​ ​
15.0% PIK (15.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
9/3/25
​ ​ ​ ​ 1,115 ​ ​ ​ ​ ​ 1,115 ​ ​ ​ ​ ​ 1,135 ​ ​
Global Jet Capital Inc.
​ ​ ​ ​ ​
Commercial & Professional Services
​ ​
15.0% PIK (15.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
9/29/25
​ ​ ​ ​ 1,050 ​ ​ ​ ​ ​ 1,050 ​ ​ ​ ​ ​ 1,068 ​ ​
Global Jet Capital Inc.
​ ​
(e)(o)
​ ​
Commercial & Professional Services
​ ​
15.0% PIK (15.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
12/4/25
​ ​ ​ ​ 7,751 ​ ​ ​ ​ ​ 7,751 ​ ​ ​ ​ ​ 7,887 ​ ​
Global Jet Capital Inc.
​ ​
(e)(o)
​ ​
Commercial & Professional Services
​ ​
15.0% PIK (15.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
12/9/25
​ ​ ​ ​ 1,268 ​ ​ ​ ​ ​ 1,268 ​ ​ ​ ​ ​ 1,290 ​ ​
Global Jet Capital Inc.
​ ​
(e)(o)
​ ​
Commercial & Professional Services
​ ​
15.0% PIK (15.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
1/29/26
​ ​ ​ ​ 664 ​ ​ ​ ​ ​ 664 ​ ​ ​ ​ ​ 675 ​ ​
Global Jet Capital Inc.
​ ​ ​ ​ ​
Commercial & Professional Services
​ ​
15.0% PIK (15.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
12/2/26
​ ​ ​ ​ 2,009 ​ ​ ​ ​ ​ 2,009 ​ ​ ​ ​ ​ 2,044 ​ ​
Great Lakes Dredge & Dock Corp.
​ ​
(i)(o)
​ ​ Capital Goods ​ ​
8.0%
​ ​ ​ ​ ​ ​ ​ ​
5/15/22
​ ​ ​ ​ 9,000 ​ ​ ​ ​ ​ 9,000 ​ ​ ​ ​ ​ 9,453 ​ ​
Greystone Mezzanine Equity Member Corp.
​ ​
(o)
​ ​ Diversified Financials ​ ​
L+650
​ ​ ​ ​ 4.5% ​ ​ ​
9/15/25
​ ​ ​ ​ 1,011 ​ ​ ​ ​ ​ 1,011 ​ ​ ​ ​ ​ 1,011 ​ ​
Greystone Mezzanine Equity Member Corp.
​ ​
(o)(p)
​ ​ Diversified Financials ​ ​
L+650
​ ​ ​ ​ 4.5% ​ ​ ​
9/15/25
​ ​ ​ ​ 18,989 ​ ​ ​ ​ ​ 18,989 ​ ​ ​ ​ ​ 18,989 ​ ​
Jupiter Resources Inc.
​ ​
(h)(k)(o)
​ ​ Energy ​ ​
8.5%
​ ​ ​ ​ ​ ​ ​ ​
10/1/22
​ ​ ​ ​ 28,800 ​ ​ ​ ​ ​ 27,037 ​ ​ ​ ​ ​ 17,784 ​ ​
P.F. Chang’s China Bistro, Inc.
​ ​
(i)(k)(j)
​ ​ Consumer Services ​ ​
10.3%
​ ​ ​ ​ ​ ​ ​ ​
6/30/20
​ ​ ​ ​ 44,078 ​ ​ ​ ​ ​ 43,300 ​ ​ ​ ​ ​ 40,395 ​ ​
S1 Blocker Buyer Inc.
​ ​ ​ ​ ​
Commercial & Professional Services
​ ​
10.0% PIK (10.0% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
10/31/22
​ ​ ​ ​ 295 ​ ​ ​ ​ ​ 295 ​ ​ ​ ​ ​ 330 ​ ​
Sorenson Communications, Inc.
​ ​
(e)(j)
​ ​ Telecommunication Services ​ ​
13.9%, 0.0% PIK (13.9% Max PIK)
​ ​ ​ ​ ​ ​ ​ ​
10/31/21
​ ​ ​ ​ 5,364 ​ ​ ​ ​ ​ 5,119 ​ ​ ​ ​ ​ 5,565 ​ ​
SunGard Availability Services Capital, Inc.
​ ​
(i)
​ ​ Software & Services ​ ​
8.8%
​ ​ ​ ​ ​ ​ ​ ​
4/1/22
​ ​ ​ ​ 5,900 ​ ​ ​ ​ ​ 4,632 ​ ​ ​ ​ ​ 3,680 ​ ​
TI Group Automotive Systems, LLC
​ ​
(i)(o)
​ ​ Automobiles & Components ​ ​
8.8%
​ ​ ​ ​ ​ ​ ​ ​
7/15/23
​ ​ ​ ​ 3,408 ​ ​ ​ ​ ​ 3,408 ​ ​ ​ ​ ​ 3,664 ​ ​
York Risk Services Holding Corp.
​ ​
(i)(j)(k)
​ ​ Insurance ​ ​
8.5%
​ ​ ​ ​ ​ ​ ​ ​
10/1/22
​ ​ ​ ​ 38,070 ​ ​ ​ ​ ​ 35,217 ​ ​ ​ ​ ​ 37,499 ​ ​
Total Subordinated Debt
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 388,853 ​ ​ ​ ​ ​ 385,037 ​ ​
Unfunded Loan Commitments
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (18,989) ​ ​ ​ ​ ​ (18,989) ​ ​
Net Subordinated Debt
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 369,864 ​ ​ ​ ​ ​ 366,048 ​ ​
Collateralized Securities—0.9% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
CGMS CLO 2013-3A Class Subord.
​ ​
(o)
​ ​ Diversified Financials ​ ​
10.5%
​ ​ ​ ​ ​ ​ ​ ​
7/15/25
​ ​ ​ ​ 23,263 ​ ​ ​ ​ ​ 10,658 ​ ​ ​ ​ ​ 14,722 ​ ​
NewStar Clarendon 2014-1A Class D
​ ​
(o)
​ ​ Diversified Financials ​ ​
L+435
​ ​ ​ ​ ​ ​ ​ ​
1/25/27
​ ​ ​ ​ 1,060 ​ ​ ​ ​ ​ 1,009 ​ ​ ​ ​ ​ 1,062 ​ ​
NewStar Clarendon 2014-1A Class Subord. B
​ ​
(o)
​ ​ Diversified Financials ​ ​
15.8%
​ ​ ​ ​ ​ ​ ​ ​
1/25/27
​ ​ ​ ​ 12,140 ​ ​ ​ ​ ​ 8,768 ​ ​ ​ ​ ​ 9,979 ​ ​
Total Collateralized Securities
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 20,435 ​ ​ ​ ​ ​ 25,763 ​ ​
​
See notes to unaudited consolidated financial statements.
19
FS Investment Corporation II
Consolidated Schedule of Investments (continued)
As of December 31, 2017
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Number of
Shares
​ ​
Cost
​ ​
Fair Value(d)
 ​
Equity/Other—11.7% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
5 Arches, LLC, Common Equity
​ ​
(o)(r)
​ ​ Diversified Financials ​ ​ ​ ​ 10,000 ​ ​ ​ ​ $ 250 ​ ​ ​ ​ $ 250 ​ ​
Abaco Energy Technologies LLC, Common Equity
​ ​
(n)
​ ​ Energy ​ ​ ​ ​ 3,055,556 ​ ​ ​ ​ ​ 3,056 ​ ​ ​ ​ ​ 458 ​ ​
Abaco Energy Technologies LLC, Preferred Equity
​ ​
(n)
​ ​ Energy ​ ​ ​ ​ 12,734,481 ​ ​ ​ ​ ​ 637 ​ ​ ​ ​ ​ 2,229 ​ ​
ACP FH Holdings GP, LLC, Common Equity
​ ​
(e)(n)
​ ​ Consumer Durables & Apparel ​ ​ ​ ​ 88,571 ​ ​ ​ ​ ​ 89 ​ ​ ​ ​ ​ 67 ​ ​
ACP FH Holdings, LP, Common Equity
​ ​
(e)(n)
​ ​ Consumer Durables & Apparel ​ ​ ​ ​ 8,768,572 ​ ​ ​ ​ ​ 8,769 ​ ​ ​ ​ ​ 6,668 ​ ​
Advanced Lighting Technologies, Inc., Common Equity
​ ​
(n)(x)
​ ​ Materials ​ ​ ​ ​ 265,747 ​ ​ ​ ​ ​ 7,471 ​ ​ ​ ​ ​ 5,900 ​ ​
Advanced Lighting Technologies, Warrants, 10/4/2027
​ ​
(n)(x)
​ ​ Materials ​ ​ ​ ​ 4,189 ​ ​ ​ ​ ​ 39 ​ ​ ​ ​ ​ 26 ​ ​
Altus Power America Holdings, LLC, Common Equity
​ ​
(n)
​ ​ Energy ​ ​ ​ ​ 462,008 ​ ​ ​ ​ ​ 462 ​ ​ ​ ​ ​ 69 ​ ​
Altus Power America Holdings, LLC, Preferred Equity
​ ​
(t)
​ ​ Energy ​ ​ ​ ​ 955,284 ​ ​ ​ ​ ​ 955 ​ ​ ​ ​ ​ 955 ​ ​
AP Exhaust Holdings, LLC, Class A1 Common Units
​ ​
(n)(r)
​ ​ Automobiles & Components ​ ​ ​ ​ 84 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
AP Exhaust Holdings, LLC, Class A1 Preferred Units
​ ​
(n)(r)
​ ​ Automobiles & Components ​ ​ ​ ​ 8,295 ​ ​ ​ ​ ​ 9,248 ​ ​ ​ ​ ​ 8,378 ​ ​
Ascent Resources Utica Holdings, LLC, Common Equity
​ ​
(n)(q)
​ ​ Energy ​ ​ ​ ​ 128,734,129 ​ ​ ​ ​ ​ 38,700 ​ ​ ​ ​ ​ 32,184 ​ ​
ASG Everglades Holdings, Inc., Common Equity
​ ​
(n)(x)
​ ​ Software & Services ​ ​ ​ ​ 625,178 ​ ​ ​ ​ ​ 13,475 ​ ​ ​ ​ ​ 30,727 ​ ​
ASG Everglades Holdings, Inc. Warrants, 6/27/2022
​ ​
(n)(x)
​ ​ Software & Services ​ ​ ​ ​ 253,704 ​ ​ ​ ​ ​ 7,231 ​ ​ ​ ​ ​ 6,951 ​ ​
Aspect Software Parent, Inc., Common Equity
​ ​
(n)
​ ​ Software & Services ​ ​ ​ ​ 403,955 ​ ​ ​ ​ ​ 19,021 ​ ​ ​ ​ ​ — ​ ​
ATX Holdings, LLC, Common Equity
​ ​
(n)(o)
​ ​ Technology Hardware & Equipment ​ ​ ​ ​ 72,635 ​ ​ ​ ​ ​ 116 ​ ​ ​ ​ ​ 84 ​ ​
Aurora Diagnostics Holdings, LLC, Warrants, 5/25/2027
​ ​
(j)(n)
​ ​ Health Care Equipment & Services ​ ​ ​ ​ 94,193 ​ ​ ​ ​ ​ 686 ​ ​ ​ ​ ​ 673 ​ ​
BPA Laboratories, Inc., Series A Warrants, 4/29/2024
​ ​
(j)(n)
​ ​ Pharmaceuticals, Biotechnology & Life Sciences ​ ​ ​ ​ 10,924 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
BPA Laboratories, Inc., Series B Warrants, 4/29/2024
​ ​
(j)(n)
​ ​ Pharmaceuticals, Biotechnology & Life Sciences ​ ​ ​ ​ 17,515 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Burleigh Point, Ltd., Warrants, 7/16/2020
​ ​
(n)(o)
​ ​ Retailing ​ ​ ​ ​ 3,451,216 ​ ​ ​ ​ ​ 1,898 ​ ​ ​ ​ ​ 49 ​ ​
Chisholm Oil and Gas Operating, LLC, Series A Units
​ ​
(n)(r)
​ ​ Energy ​ ​ ​ ​ 70,947 ​ ​ ​ ​ ​ 71 ​ ​ ​ ​ ​ 70 ​ ​
Cimarron Energy Holdco Inc., Common Equity
​ ​
(n)
​ ​ Energy ​ ​ ​ ​ 3,675,487 ​ ​ ​ ​ ​ 3,323 ​ ​ ​ ​ ​ — ​ ​
Cimarron Energy Holdco Inc., Preferred Equity
​ ​
(n)
​ ​ Energy ​ ​ ​ ​ 626,806 ​ ​ ​ ​ ​ 627 ​ ​ ​ ​ ​ — ​ ​
CSF Group Holdings, Inc., Common Equity
​ ​
(n)
​ ​ Capital Goods ​ ​ ​ ​ 417,400 ​ ​ ​ ​ ​ 417 ​ ​ ​ ​ ​ 292 ​ ​
Eastman Kodak Co., Common Equity
​ ​
(n)(w)
​ ​ Consumer Durables & Apparel ​ ​ ​ ​ 1,846 ​ ​ ​ ​ ​ 36 ​ ​ ​ ​ ​ 6 ​ ​
Escape Velocity Holdings, Inc., Common Equity
​ ​
(n)
​ ​ Software & Services ​ ​ ​ ​ 33,216 ​ ​ ​ ​ ​ 332 ​ ​ ​ ​ ​ 784 ​ ​
Fairway Group Holdings Corp., Common Equity
​ ​
(n)
​ ​ Food & Staples Retailing ​ ​ ​ ​ 31,626 ​ ​ ​ ​ ​ 1,016 ​ ​ ​ ​ ​ — ​ ​
FourPoint Energy, LLC, Common Equity, Class C-II-A Units
​ ​
(n)(r)
​ ​ Energy ​ ​ ​ ​ 13,000 ​ ​ ​ ​ ​ 13,000 ​ ​ ​ ​ ​ 3,770 ​ ​
FourPoint Energy, LLC, Common Equity, Class D Units
​ ​
(n)(r)
​ ​ Energy ​ ​ ​ ​ 2,437 ​ ​ ​ ​ ​ 1,610 ​ ​ ​ ​ ​ 713 ​ ​
FourPoint Energy, LLC, Common Equity, Class E-II Units
​ ​
(n)(r)
​ ​ Energy ​ ​ ​ ​ 29,730 ​ ​ ​ ​ ​ 7,432 ​ ​ ​ ​ ​ 8,547 ​ ​
FourPoint Energy, LLC, Common Equity, Class E-III Units
​ ​
(n)(r)
​ ​ Energy ​ ​ ​ ​ 43,875 ​ ​ ​ ​ ​ 10,969 ​ ​ ​ ​ ​ 12,724 ​ ​
Global Jet Capital Holdings, LP, Preferred Equity
​ ​
(e)(n)
​ ​ Commercial & Professional Services ​ ​ ​ ​ 62,289 ​ ​ ​ ​ ​ 6,229 ​ ​ ​ ​ ​ 5,606 ​ ​
H.I.G. Empire Holdco, Inc., Common Equity
​ ​
(n)
​ ​ Retailing ​ ​ ​ ​ 411 ​ ​ ​ ​ ​ 1,227 ​ ​ ​ ​ ​ 1,226 ​ ​
Harvey Holdings, LLC, Common Equity
​ ​
(n)
​ ​ Capital Goods ​ ​ ​ ​ 666,667 ​ ​ ​ ​ ​ 667 ​ ​ ​ ​ ​ 1,700 ​ ​
Industrial Group Intermediate Holdings, LLC, Common Equity
​ ​
(n)(r)
​ ​ Materials ​ ​ ​ ​ 2,678,947 ​ ​ ​ ​ ​ 2,679 ​ ​ ​ ​ ​ 4,018 ​ ​
See notes to unaudited consolidated financial statements.
20
FS Investment Corporation II
Consolidated Schedule of Investments (continued)
As of December 31, 2017
(in thousands, except share amounts)
​
 
Portfolio Company(a)
 ​ ​
Footnotes
​ ​
Industry
​ ​
Number of
Shares
​ ​
Cost
​ ​
Fair Value(d)
 ​
JMC Acquisition Holdings, LLC, Common Equity
​ ​
(n)
​ ​ Capital Goods ​ ​ ​ ​ 1,449 ​ ​ ​ ​ $ 1,449 ​ ​ ​ ​ $ 1,964 ​ ​
JSS Holdco, LLC, Net Profits Interest
​ ​
(n)
​ ​ Capital Goods ​ ​ ​ ​ 27 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 500 ​ ​
JW Aluminum Co., Common Equity
​ ​
(e)(k)(n)(x)
​ ​ Materials ​ ​ ​ ​ 256 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
JW Aluminum Co., Preferred Equity
​ ​
(e)(k)(x)
​ ​ Materials ​ ​ ​ ​ 1,184 ​ ​ ​ ​ ​ 12,838 ​ ​ ​ ​ ​ 15,074 ​ ​
MB Precision Investment Holdings LLC, Class A-2 Units
​ ​
(n)(r)
​ ​ Capital Goods ​ ​ ​ ​ 2,287,659 ​ ​ ​ ​ ​ 2,288 ​ ​ ​ ​ ​ — ​ ​
Mood Media Corp., Common Equity
​ ​
(n)(o)(x)
​ ​ Media ​ ​ ​ ​ 17,400,835 ​ ​ ​ ​ ​ 12,644 ​ ​ ​ ​ ​ 28,659 ​ ​
North Haven Cadence TopCo, LLC, Common Equity
​ ​
(n)
​ ​ Consumer Services ​ ​ ​ ​ 2,916,667 ​ ​ ​ ​ ​ 2,917 ​ ​ ​ ​ ​ 4,521 ​ ​
PDI Parent LLC, Common Equity
​ ​
(n)
​ ​ Capital Goods ​ ​ ​ ​ 2,076,923 ​ ​ ​ ​ ​ 2,077 ​ ​ ​ ​ ​ 2,181 ​ ​
Professional Plumbing Group, Inc., Common Equity
​ ​
(e)(n)
​ ​ Capital Goods ​ ​ ​ ​ 3,000,000 ​ ​ ​ ​ ​ 3,000 ​ ​ ​ ​ ​ 6,900 ​ ​
PSAV Holdings LLC, Common Equity
​ ​
(n)
​ ​ Technology Hardware & Equipment ​ ​ ​ ​ 10,000 ​ ​ ​ ​ ​ 10,000 ​ ​ ​ ​ ​ 34,000 ​ ​
Ridgeback Resources Inc., Common Equity
​ ​
(e)(n)(o)(v)
​ ​ Energy ​ ​ ​ ​ 817,308 ​ ​ ​ ​ ​ 5,022 ​ ​ ​ ​ ​ 4,962 ​ ​
Roadhouse Holding Inc., Common Equity
​ ​
(n)(x)
​ ​ Consumer Services ​ ​ ​ ​ 4,481,763 ​ ​ ​ ​ ​ 4,657 ​ ​ ​ ​ ​ — ​ ​
S1 Blocker Buyer Inc., Common Equity
​ ​ ​ ​ ​ Commercial & Professional Services ​ ​ ​ ​ 124 ​ ​ ​ ​ ​ 1,240 ​ ​ ​ ​ ​ 1,887 ​ ​
SandRidge Energy, Inc., Common Equity
​ ​
(n)(o)(w)
​ ​ Energy ​ ​ ​ ​ 253,009 ​ ​ ​ ​ ​ 5,647 ​ ​ ​ ​ ​ 5,331 ​ ​
Sequential Brands Group, Inc., Common Equity
​ ​
(e)(n)(w)
​ ​ Consumer Durables & Apparel ​ ​ ​ ​ 408,685 ​ ​ ​ ​ ​ 5,517 ​ ​ ​ ​ ​ 727 ​ ​
Sorenson Communications, Inc., Common Equity
​ ​
(e)(n)
​ ​ Telecommunication Services ​ ​ ​ ​ 43,796 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 35,917 ​ ​
SSC Holdco Limited, Common Equity
​ ​
(n)(o)
​ ​ Health Care Equipment & Services ​ ​ ​ ​ 261,364 ​ ​ ​ ​ ​ 5,227 ​ ​ ​ ​ ​ 6,247 ​ ​
Sunnova Energy Corp., Common Equity
​ ​
(n)
​ ​ Energy ​ ​ ​ ​ 384,746 ​ ​ ​ ​ ​ 1,444 ​ ​ ​ ​ ​ — ​ ​
Sunnova Energy Corp., Preferred Equity
​ ​
(n)
​ ​ Energy ​ ​ ​ ​ 70,229 ​ ​ ​ ​ ​ 374 ​ ​ ​ ​ ​ 283 ​ ​
Swift Worldwide Resources Holdco Limited, Common Equity
​ ​
(n)(o)(u)
​ ​ Energy ​ ​ ​ ​ 1,250,000 ​ ​ ​ ​ ​ 2,010 ​ ​ ​ ​ ​ 687 ​ ​
TE Holdings, LLC, Common Equity
​ ​
(e)(n)(r)
​ ​ Energy ​ ​ ​ ​ 717,718 ​ ​ ​ ​ ​ 6,101 ​ ​ ​ ​ ​ 1,166 ​ ​
TE Holdings, LLC, Preferred Equity
​ ​
(e)(n)
​ ​ Energy ​ ​ ​ ​ 475,758 ​ ​ ​ ​ ​ 4,751 ​ ​ ​ ​ ​ 4,520 ​ ​
The Stars Group Inc., Warrants, 5/15/2024
​ ​
(n)(o)
​ ​ Consumer Services ​ ​ ​ ​ 2,000,000 ​ ​ ​ ​ ​ 16,832 ​ ​ ​ ​ ​ 25,140 ​ ​
Titan Energy, LLC, Common Equity
​ ​
(e)(n)(w)
​ ​ Energy ​ ​ ​ ​ 200,040 ​ ​ ​ ​ ​ 6,322 ​ ​ ​ ​ ​ 304 ​ ​
Warren Resources, Inc., Common Equity
​ ​
(n)(x)
​ ​ Energy ​ ​ ​ ​ 2,371,337 ​ ​ ​ ​ ​ 11,145 ​ ​ ​ ​ ​ 4,031 ​ ​
White Star Petroleum Holdings, LLC, Common Equity
​ ​
(n)(r)
​ ​ Energy ​ ​ ​ ​ 1,613,753 ​ ​ ​ ​ ​ 1,372 ​ ​ ​ ​ ​ 1,210 ​ ​
Zeta Interactive Holdings Corp., Preferred Equity, Series E-1
​ ​
(n)
​ ​ Software & Services ​ ​ ​ ​ 620,025 ​ ​ ​ ​ ​ 4,929 ​ ​ ​ ​ ​ 6,015 ​ ​
Zeta Interactive Holdings Corp., Preferred Equity, Series F
​ ​
(n)
​ ​ Software & Services ​ ​ ​ ​ 563,932 ​ ​ ​ ​ ​ 4,929 ​ ​ ​ ​ ​ 5,261 ​ ​
Zeta Interactive Holdings Corp., Warrants, 4/20/2027
​ ​
(n)
​ ​ Software & Services ​ ​ ​ ​ 84,590 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 294 ​ ​
Total Equity/Other
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 296,470 ​ ​ ​ ​ ​ 332,905 ​ ​
TOTAL INVESTMENTS—161.2%
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 4,603,708 ​ ​ ​ ​ ​ 4,597,594 ​ ​
LIABILITIES IN EXCESS OF OTHER ASSETS—(61.2%)
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (1,744,573) ​ ​
NET ASSETS—100.0%
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 2,853,021 ​ ​
​
​
(a)
Security may be an obligation of one or more entities affiliated with the named company.
​
​
See notes to unaudited consolidated financial statements.
21
FS Investment Corporation II
Consolidated Schedule of Investments (continued)
As of December 31, 2017
(in thousands, except share amounts)
​
 
(b)
Certain variable rate securities in the Company’s portfolio bear interest at a rate determined by a publicly disclosed base rate plus a basis point spread. As of December 31, 2017, the three-month London Interbank Offered Rate, or LIBOR or “L”, was 1.69% and the U.S. Prime Lending Rate, or Prime, was 4.50%. PIK means paid-in-kind. PIK income accruals may be adjusted based on the fair value of underlying investment.
​
(c)
Denominated in U.S. dollars unless otherwise noted.
​
(d)
Fair value determined by the Company’s board of directors (see Note 7).
​
(e)
Security or portion thereof held within Cobbs Creek LLC and is pledged as collateral supporting the obligations of Cobbs Creek LLC under the repurchase transaction with JPMorgan Chase Bank, N.A., London Branch (see Note 8).
​
(f)
Security or portion thereof held within Cooper River LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with Citibank, N.A. (see Note 8).
​
(g)
Security or portion thereof held within Wissahickon Creek LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with Wells Fargo Bank, National Association (see Note 8).
​
(h)
Security or portion thereof held within Darby Creek LLC and is pledged as collateral supporting the amounts outstanding under a revolving credit facility with Deutsche Bank AG, New York Branch (see Note 8).
​
(i)
Security or portion thereof held within Dunning Creek LLC and is pledged as collateral supporting the amounts outstanding under a revolving credit facility with Deutsche Bank AG, New York Branch (see Note 8).
​
(j)
Security or portion thereof held within Juniata River LLC and is pledged as collateral supporting the amounts outstanding under a term loan credit facility with JPMorgan Chase Bank, N.A. (see Note 8).
​
(k)
Security or portion thereof held within Green Creek LLC and is pledged as collateral supporting the amounts outstanding under a term loan with Goldman Sachs Bank USA (see Note 8).
​
(l)
Position or portion thereof unsettled as of December 31, 2017.
​
(m)
Security was on non-accrual status as of December 31, 2017.
​
(n)
Security is non-income producing.
​
(o)
The investment is not a qualifying asset under the Investment Company Act of 1940, as amended. A business development company may not acquire any asset other than qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets. As of December 31, 2017, 90.2% of the Company’s total assets represented qualifying assets.
​
(p)
Security is an unfunded commitment. The stated rate reflects the spread disclosed at the time of commitment and may not indicate the actual rate received upon funding.
​
(q)
Security held within IC II American Energy Investments, Inc., a wholly-owned subsidiary of the Company.
​
(r)
Security held within FSIC II Investments, Inc., a wholly-owned subsidiary of the Company.
​
(s)
Security held within IC II Arches Investments, LLC, a wholly-owned subsidiary of the Company.
​
(t)
Security held within IC II Altus Investments, LLC, a wholly-owned subsidiary of the Company.
​
(u)
Investment denominated in British pounds. Cost and fair value are converted into U.S. dollars at an exchange rate of  £1.00 to $1.35 as of December 31, 2017.
​
​
See notes to unaudited consolidated financial statements.
22
FS Investment Corporation II
Consolidated Schedule of Investments (continued)
As of December 31, 2017
(in thousands, except share amounts)
​
 
(v)
Investment denominated in Canadian dollars. Cost and fair value are converted into U.S. dollars at an exchange rate of CAD $1.00 to $0.80 as of December 31, 2017.
​
(w)
Security is classified as Level 1 in the Company’s fair value hierarchy (see Note 7).
​
(x)
Under the Investment Company Act of 1940, as amended, the Company generally is deemed to be an “affiliated person” of a portfolio company if it owns 5% or more of the portfolio company’s voting securities and generally is deemed to “control” a portfolio company if it owns more than 25% of the portfolio company’s voting securities or it has the power to exercise control over the management or policies of such portfolio company. As of December 31, 2017, the Company held investments in portfolio companies of which it is deemed to be an “affiliated person” but is not deemed to “control”. The following table presents certain financial information with respect to investments in portfolio companies of which the Company was deemed to be an affiliated person for the year ended December 31, 2017:
​
​
See notes to unaudited consolidated financial statements.
23
FS Investment Corporation II
Consolidated Schedule of Investments
As of December 31, 2017
(in thousands, except share amounts)
​
Portfolio Company
​ ​
Fair Value at
December 31,
2016
​ ​
Transfers
In or Out
​ ​
Purchases
and Paid-
in-Kind
Interest
​ ​
Sales and
Repayments
​ ​
Accretion
of Discount
​ ​
Net
Realized
Gain
(Loss)
​ ​
Net Change in
Unrealized
Appreciation
(Depreciation)
​ ​
Fair Value at
December 31,
2017
​ ​
Interest
Income(3)
 ​ ​
PIK
Income(3)
 ​ ​
Fee
Income(3)
 ​
Senior Secured Loans—First Lien ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Advanced Lighting Technologies, Inc.
​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​ ​ ​ $ 9,055 ​ ​ ​ ​ $ (1,333) ​ ​ ​ ​ $ 63 ​ ​ ​ ​ $ 4 ​ ​ ​ ​ $ 1,429 ​ ​ ​ ​ $ 9,218 ​ ​ ​ ​ $ 265 ​ ​ ​ ​ $ — ​ ​ ​ ​ $ 403 ​ ​
A.T. Cross Co.(1)
 ​ ​ ​ ​ 28,081 ​ ​ ​ ​ ​ (31,027) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (682) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 3,628 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (682) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
ASG Everglades Holdings, Inc.
​ ​ ​ ​ 80,505 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 12,509 ​ ​ ​ ​ ​ (91,824) ​ ​ ​ ​ ​ 24 ​ ​ ​ ​ ​ 148 ​ ​ ​ ​ ​ (1,362) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 4,540 ​ ​ ​ ​ ​ 508 ​ ​ ​ ​ ​ — ​ ​
Logan’s Roadhouse, Inc.(2)
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 5,437 ​ ​ ​ ​ ​ (760) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (8) ​ ​ ​ ​ ​ 4,669 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 544 ​ ​ ​ ​ ​ — ​ ​
Warren Resources, Inc.
​ ​ ​ ​ 42,122 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 428 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,063 ​ ​ ​ ​ ​ 43,613 ​ ​ ​ ​ ​ 4,379 ​ ​ ​ ​ ​ 428 ​ ​ ​ ​ ​ (180) ​ ​
Senior Secured Loans—Second Lien ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
ASG Everglades Holdings, Inc.
​ ​ ​ ​ 26,179 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (26,989) ​ ​ ​ ​ ​ 408 ​ ​ ​ ​ ​ 6,392 ​ ​ ​ ​ ​ (5,990) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 2,312 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,349 ​ ​
JW Aluminum Co.
​ ​ ​ ​ 34,410 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 132 ​ ​ ​ ​ ​ (76) ​ ​ ​ ​ ​ 2 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (86) ​ ​ ​ ​ ​ 34,382 ​ ​ ​ ​ ​ 3,198 ​ ​ ​ ​ ​ 132 ​ ​ ​ ​ ​ — ​ ​
Logan’s Roadhouse, Inc.
​ ​ ​ ​ 10,355 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 3,794 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 22 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (7,400) ​ ​ ​ ​ ​ 6,771 ​ ​ ​ ​ ​ 22 ​ ​ ​ ​ ​ 743 ​ ​ ​ ​ ​ — ​ ​
Senior Secured Bonds ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Advanced Lighting Technologies, Inc.
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 10,278 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 10,278 ​ ​ ​ ​ ​ 152 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Mood Media Corp.
​ ​ ​ ​ — ​ ​ ​ ​ ​ 23,104 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 115 ​ ​ ​ ​ ​ 23,219 ​ ​ ​ ​ ​ 3,746 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Subordinated Debt ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Mood Media Corp.
​ ​ ​ ​ — ​ ​ ​ ​ ​ 6,103 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (6,930) ​ ​ ​ ​ ​ 47 ​ ​ ​ ​ ​ 780 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 463 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Equity/Other ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Advanced Lighting Technologies, Inc., Common Equity
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 7,471 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (1,571) ​ ​ ​ ​ ​ 5,900 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Advanced Lighting Technologies, Warrants, 10/4/2027
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 39 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (13) ​ ​ ​ ​ ​ 26 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
A.T. Cross Co., Common Equity, Class A Units(1)
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ (1,000) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,000 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
A.T. Cross Co., Preferred Equity, Class A-1 Units(1)
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ (243) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 243 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
A.T. Cross Co., GSO Special Unit(1)
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
ASG Everglades Holdings, Inc., Common Equity
​ ​ ​ ​ 29,477 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,250 ​ ​ ​ ​ ​ 30,727 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
ASG Everglades Holdings, Inc., 6/27/2022, Warrants
​ ​ ​ ​ 6,444 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 507 ​ ​ ​ ​ ​ 6,951 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
JW Aluminum Co., Common Equity
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
JW Aluminum Co., Preferred Equity
​ ​ ​ ​ 11,854 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,559 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,661 ​ ​ ​ ​ ​ 15,074 ​ ​ ​ ​ ​ 222 ​ ​ ​ ​ ​ 1,559 ​ ​ ​ ​ ​ — ​ ​
Mood Media Corp.
​ ​ ​ ​ — ​ ​ ​ ​ ​ 7,136 ​ ​ ​ ​ ​ 5,508 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 16,015 ​ ​ ​ ​ ​ 28,659 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Roadhouse Holding Inc., Common Equity
​ ​ ​ ​ 5,472 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (5,472) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Warren Resources, Inc., Common Equity
​ ​ ​ ​ 10,197 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (6,166) ​ ​ ​ ​ ​ 4,031 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Total
 ​ ​ ​ $ 285,096 ​ ​ ​ ​ $ 4,073 ​ ​ ​ ​ $ 56,210 ​ ​ ​ ​ $ (127,912) ​ ​ ​ ​ $ (116) ​ ​ ​ ​ $ 7,324 ​ ​ ​ ​ $ (1,157) ​ ​ ​ ​ $ 223,518 ​ ​ ​ ​ $ 18,617 ​ ​ ​ ​ $ 3,914 ​ ​ ​ ​ $ 1,572 ​ ​
​
​
(1)
During the year ended December 31, 2017, the Company’s ownership increased to over 25% of the portfolio company’s voting securities and as a result the Company was deemed to “control” the portfolio company prior to disposition of the investment.
​
(2)
Security includes a partially unfunded commitment as of December 31, 2017 with an amortized cost of  $760 and a fair value of  $752
​
(3)
Interest, PIK, and fee income presented for the year ended December 31, 2017.
​
​
See notes to unaudited consolidated financial statements.
24
FS Investment Corporation II
Consolidated Schedule of Investments (continued)
As of December 31, 2017
(in thousands, except share amounts)
​
 
Portfolio Company
​ ​
Fair Value at
December 31,
2016
​ ​
Transfers
In or Out
​ ​
Purchases
and Paid-
in-Kind
Interest
​ ​
Sales and
Repayments
​ ​
Accretion
of Discount
​ ​
Net
Realized
Gain
(Loss)
​ ​
Net Change in
Unrealized
Appreciation
(Depreciation)
​ ​
Fair Value at
December 31,
2017
​ ​
Interest
Income(2)
 ​ ​
PIK
Income(2)
 ​ ​
Fee
Income(2)
 ​
Senior Secured Loans—First Lien ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
A.T. Cross Co.(1)
 ​ ​ ​ $    — ​ ​ ​ ​ $ 31,027 ​ ​ ​ ​ $ 9,654 ​ ​ ​ ​ $ (11,099) ​ ​ ​ ​ $    — ​ ​ ​ ​ $ (29,582) ​ ​ ​ ​ $    — ​ ​ ​ ​ $    — ​ ​ ​ ​ $ 664 ​ ​ ​ ​ $ 553 ​ ​ ​ ​ $    — ​ ​
Equity/Other ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
A.T. Cross Co., Common Equity, Class A Units(1)
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,000 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (1,000) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
A.T. Cross Co., Preferred Equity, Class A-1 Units(1)
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ 243 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (243) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
A.T. Cross Co., GSO Special Unit(1)
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Total
 ​ ​ ​ $ — ​ ​ ​ ​ $ 32,270 ​ ​ ​ ​ $ 9,654 ​ ​ ​ ​ $ (11,099) ​ ​ ​ ​ $ — ​ ​ ​ ​ $ (30,825) ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​ ​ ​ $ 664 ​ ​ ​ ​ $ 553 ​ ​ ​ ​ $ — ​ ​
​
​
(1)
During the year ended December 31, 2017, the Company’s ownership increased to over 25% of the portfolio company’s voting securities and as a result the Company was deemed to “control” the portfolio company prior to disposition of the investment.
​
(2)
Interest, PIK and fee income presented for the full year ended December 31, 2017.
​
​
See notes to unaudited consolidated financial statements.
25
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements
(in thousands, except share and per share amounts)
​
Note 1. Principal Business and Organization
FS Investment Corporation II, or the Company, was incorporated under the general corporation laws of the State of Maryland on July 13, 2011 and formally commenced investment operations on June 18, 2012. The Company is an externally managed, non-diversified, closed-end management investment company that has elected to be regulated as a business development company, or BDC, under the Investment Company Act of 1940, as amended, or the 1940 Act. In addition, the Company has elected to be treated for U.S. federal income tax purposes, and intends to qualify annually, as a regulated investment company, or RIC, as defined under Subchapter M of the Internal Revenue Code of 1986, as amended, or the Code. As of September 30, 2018, the Company had seven wholly-owned financing subsidiaries, four wholly-owned subsidiaries through which it holds interests in portfolio companies and one wholly-owned subsidiary through which it expects to hold interests in portfolio companies. The unaudited consolidated financial statements include both the Company’s accounts and the accounts of its wholly-owned subsidiaries as of September 30, 2018. All significant intercompany transactions have been eliminated in consolidation. Certain of the Company’s consolidated subsidiaries are subject to U.S. federal and state income taxes.
The Company’s investment objectives are to generate current income and, to a lesser extent, long-term capital appreciation by investing primarily in senior secured loans and second lien secured loans of private U.S. companies. The Company seeks to generate superior risk-adjusted returns by focusing on debt investments in a broad array of private U.S. companies, including middle market companies, which the Company defines as companies with annual revenues of  $50 million to $2.5 billion at the time of investment. The Company may purchase interests in loans or make other debt investments, including investments in senior secured bonds, through secondary market transactions in the “over-the-counter” market or directly from the Company’s target companies as primary market or directly originated investments. In connection with the Company’s debt investments, the Company may on occasion receive equity interests such as warrants or options as additional consideration. The Company may also purchase or otherwise acquire interests in the form of common or preferred equity or equity-related securities, such as rights and warrants that may be converted into or exchanged for common stock or other equity or the cash value of common stock or other equity, in the Company’s target companies, generally in conjunction with one of the Company’s debt investments, including through the restructuring of such investments, or through a co-investment with a financial sponsor, such as an institutional investor or private equity firm. In addition, a portion of the Company’s portfolio may be comprised of corporate bonds, collateralized loan obligations, or CLOs, other debt securities and derivatives, including total return swaps and credit default swaps. The Company’s investment adviser will seek to tailor the Company’s investment focus as market conditions evolve. Depending on market conditions, the Company may increase or decrease its exposure to less senior portions of the capital structure or otherwise make opportunistic investments.
As the Company previously announced on April 9, 2018, GSO/Blackstone Debt Funds Management LLC, or GDFM, resigned as the investment sub-adviser to the Company and terminated the investment sub-advisory agreement, or the investment sub-advisory agreement, between FSIC II Advisor, LLC, or FSIC II Advisor, and GDFM, effective April 9, 2018. In connection with GDFM’s resignation as the investment sub-adviser to the Company, on April 9, 2018, the Company entered into an investment advisory and administrative services agreement, or the FS/KKR Advisor investment advisory and administrative services agreement, with FS/KKR Advisor, LLC, or FS/KKR Advisor, a newly-formed investment adviser jointly operated by an affiliate of Franklin Square Holdings, L.P. (which does business as FS Investments) and by KKR Credit Advisors (US), LLC, or KKR Credit, pursuant to which FS/KKR Advisor acts as investment adviser to the Company. The FS/KKR Advisor investment advisory and administrative services agreement replaced the investment advisory and administrative services agreement, dated February 8, 2012, or the FSIC II Advisor investment advisory and administrative services agreement, by and between the Company and FSIC II Advisor.
26
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 2. Summary of Significant Accounting Policies
Basis of Presentation: The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP, for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For a more complete discussion of significant accounting policies and certain other information, the Company’s interim unaudited consolidated financial statements should be read in conjunction with its audited consolidated financial statements as of and for the year ended December 31, 2017 included in the Company’s annual report on Form 10-K for the year ended December 31, 2017. Operating results for the three and nine months ended September 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. The December 31, 2017 consolidated balance sheet and consolidated schedule of investments are derived from the Company’s audited consolidated financial statements as of and for the year ended December 31, 2017. The Company is considered an investment company under GAAP and follows the accounting and reporting guidance applicable to investment companies under Accounting Standards Codification, or ASC, Topic 946, Financial Services—Investment Companies. The Company has evaluated the impact of subsequent events through the date the consolidated financial statements were issued and filed with the U.S. Securities and Exchange Commission, or the SEC.
Use of Estimates: The preparation of the unaudited consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Many of the amounts have been rounded and all amounts are in thousands, except share and per share amounts.
Capital Gains Incentive Fee: Pursuant to the terms of the FS/KKR Advisor investment advisory and administrative services agreement, the incentive fee on capital gains is determined and payable in arrears as of the end of each calendar year (or upon termination of the FS/KKR Advisor investment advisory and administrative services agreement). This fee equals 20.0% of the Company’s incentive fee capital gains, which equals the Company’s realized capital gains on a cumulative basis from inception, calculated as of the end of the applicable period, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gains incentive fees. The Company accrues for the capital gains incentive fee, which, if earned, is paid annually. The Company accrues the incentive fee on capital gains based on net realized and unrealized gains; however, the fee payable to FS/KKR Advisor is based on realized gains and no such fee is payable with respect to unrealized gains unless and until such gains are actually realized. The terms of the incentive fee on capital gains were substantially similar under the FSIC II Advisor investment advisory and administrative services agreement.
Subordinated Income Incentive Fee: Pursuant to the terms of the FS/KKR Advisor investment advisory and administrative services agreement, FS/KKR Advisor may also be entitled to receive a subordinated incentive fee on income. The subordinated incentive fee on income under the FS/KKR Advisor investment advisory and administrative services agreement is calculated and payable quarterly in arrears, and equals 20.0% of the Company’s “pre-incentive fee net investment income” for the immediately preceding quarter subject to a hurdle rate, expressed as a rate of return on adjusted capital equal to 1.75% per quarter (1.875% under the FSIC II Advisor investment advisory and administrative services agreement), or an annualized hurdle rate of 7.0% (7.5% under the FSIC II Advisor investment advisory and administrative services agreement). For purposes of this fee, “adjusted capital” means cumulative gross proceeds generated from sales of the Company’s common stock (including proceeds from its distribution reinvestment plan) reduced for distributions paid to stockholders from proceeds of non-liquidating dispositions of the Company’s
27
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 2. Summary of Significant Accounting Policies (continued)
 
investments and amounts paid for share repurchases pursuant to the Company’s share repurchase program. As a result, FS/KKR Advisor will not earn this incentive fee for any quarter until the Company’s pre-incentive fee net investment income for such quarter exceeds the hurdle rate of 1.75% (1.875% under the FSIC II Advisor investment advisory and administrative services agreement). Once the Company’s pre-incentive fee net investment income in any quarter exceeds the hurdle rate, FS/KKR Advisor will be entitled to a “catch-up” fee equal to the amount of the Company’s pre-incentive fee net investment income in excess of the hurdle rate, until the Company’s pre-incentive fee net investment income for such quarter equals 2.1875%, or 8.75% annually (2.34375%, or 9.375% annually under the FSIC II Advisor investment advisory and administrative services agreement), of the Company’s adjusted capital. Thereafter, FS/KKR Advisor will be entitled to receive 20.0% of the Company’s pre-incentive fee net investment income.
Partial Loan Sales: The Company follows the guidance in ASC Topic 860, Transfers and Servicing, or ASC Topic 860, when accounting for loan participations and other partial loan sales. This guidance requires a participation or other partial loan sale to meet the definition of a participating interest, as defined in the guidance, in order for sale treatment to be allowed. Participations or other partial loan sales which do not meet the definition of a participating interest remain on the Company’s consolidated balance sheets and the proceeds are recorded as a secured borrowing until the participation or other partial loan sale meets the definition. Secured borrowings are carried at fair value to correspond with the related investments, which are carried at fair value. See Note 8 for additional information regarding the Company’s secured borrowing.
Reclassifications: Certain amounts in the unaudited consolidated financial statements as of and for the three and nine months ended September 30, 2017 and the audited consolidated financial statements as of and for the year ended December 31, 2017 may have been reclassified to conform to the classifications used to prepare the unaudited consolidated financial statements as of and for the three and nine months ended September 30, 2018. These reclassifications had no material impact on the Company’s consolidated financial position, results of operations or cash flows as previously reported.
Revenue Recognition: Security transactions are accounted for on the trade date. The Company records interest income on an accrual basis to the extent that it expects to collect such amounts. The Company records dividend income on the ex-dividend date. The Company does not accrue as a receivable interest or dividends on loans and securities if it has reason to doubt its ability to collect such income. The Company’s policy is to place investments on non-accrual status when there is reasonable doubt that interest income will be collected. The Company considers many factors relevant to an investment when placing it on or removing it from non-accrual status including, but not limited to, the delinquency status of the investment, economic and business conditions, the overall financial condition of the underlying investment, the value of the underlying collateral, bankruptcy status, if any, and any other facts or circumstances relevant to the investment. If there is reasonable doubt that the Company will receive any previously accrued interest, then the interest income will be written-off. Payments received on non-accrual investments may be recognized as income or applied to principal depending upon the collectability of the remaining principal and interest. Non-accrual investments may be restored to accrual status when principal and interest become current and are likely to remain current based on the Company’s judgment.
Loan origination fees, original issue discount and market discount are capitalized and the Company amortizes such amounts as interest income over the respective term of the loan or security. Upon the prepayment of a loan or security, any unamortized loan origination fees and original issue discount are recorded as interest income. The Company records prepayment premiums on loans and securities as fee income when it receives such amounts.
28
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 2. Summary of Significant Accounting Policies (continued)
 
Effective January 1, 2018, the Company adopted ASC Topic 606, Revenue from Contracts with Customers, using the cumulative effect method applied to in-scope contracts with customers that have not been completed as of the date of adoption. The Company did not identify any in-scope contracts that had not been completed as of the date of adoption and, as a result, the Company did not recognize a cumulative effect on stockholders’ equity in connection with the adoption of the new revenue recognition guidance.
The new revenue recognition guidance applies to all entities and all contracts with customers to provide goods or services in the ordinary course of business, excluding, among other things, financial instruments as well as certain other contractual rights and obligations. Under the new revenue recognition guidance, which the Company has applied to all new in-scope contracts as of the date of adoption, structuring and other upfront fees are recognized as revenue based on the transaction price as the performance obligation is fulfilled. The related performance obligation consists of structuring activities and is satisfied over time as such activities are performed. Consideration is variable and is constrained from being included in the transaction price until the uncertainty associated with the variable consideration is resolved, typically as of the trade date of the related transaction. Payment is typically due on the settlement date of the related transaction.
For the nine months ended September 30, 2018, the Company recognized $7,168 in structuring fee revenue under the new revenue recognition guidance and included such revenue in the fee income line item on its consolidated statement of operations. Comparative periods are presented in accordance with revenue recognition guidance effective prior to January 1, 2018, under which the Company recorded structuring and other non-recurring upfront fees as income when earned. The Company has determined that the adoption of the new revenue recognition guidance did not have a material impact on the amount of revenue recognized for the nine months ended September 30, 2018.
Note 3. Share Transactions
Below is a summary of transactions with respect to shares of the Company’s common stock during the nine months ended September 30, 2018 and 2017:
​ ​ ​
Nine Months Ended September 30,
​
​ ​ ​
2018
​ ​
2017
​
​ ​ ​
Shares
​ ​
Amount
​ ​
Shares
​ ​
Amount
​
Reinvestment of Distributions
​ ​ ​ ​ 9,802,626 ​ ​ ​ ​ $ 84,192 ​ ​ ​ ​ ​ 10,255,691 ​ ​ ​ ​ $ 92,207 ​ ​
Share Repurchase Program
​ ​ ​ ​ (10,072,672) ​ ​ ​ ​ ​ (86,976) ​ ​ ​ ​ ​ (10,211,257) ​ ​ ​ ​ ​ (92,570) ​ ​
Net Proceeds from Share Transactions
​ ​ ​ ​ (270,046) ​ ​ ​ ​ $ (2,784) ​ ​ ​ ​ ​ 44,434 ​ ​ ​ ​ $ 337 ​ ​
During the period from October 1, 2018 to November 9, 2018, the Company issued 1,054,704 shares of common stock pursuant to its distribution reinvestment plan, or DRP, for gross proceeds of  $8,806,779 at an average price per share of  $8.35. For additional information regarding the terms of the DRP, see Note 5.
Share Repurchase Program
The Company intends to continue to conduct quarterly tender offers pursuant to its share repurchase program. The Company’s board of directors will consider the following factors, among others, in making its determination regarding whether to cause the Company to offer to repurchase shares of common stock and under what terms:
•
the effect of such repurchases on the Company’s qualification as a RIC (including the consequences of any necessary asset sales);
​
•
the liquidity of the Company’s assets (including fees and costs associated with disposing of assets);
​
​
29
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 3. Share Transactions (continued)
 
•
the Company’s investment plans and working capital requirements;
​
•
the relative economies of scale with respect to the Company’s size;
​
•
the Company’s history in repurchasing shares of common stock or portions thereof; and
​
•
the condition of the securities markets.
​
Historically, the Company limited the number of shares of common stock to be repurchased during any calendar year to the lesser of  (i) the number of shares of common stock that the Company could repurchase with the proceeds it received from the issuance of shares of common stock under the DRP and (ii) 10% of the weighted average number of shares of common stock outstanding in the prior calendar year, or 2.5% in each calendar quarter. On May 8, 2017, the board of directors of the Company amended the share repurchase program. As amended, the Company limits the maximum number of shares of common stock to be repurchased for any repurchase offer to the greater of  (A) the number of shares of common stock that the Company can repurchase with the proceeds it has received from the sale of shares of common stock under the DRP during the twelve-month period ending on the date the applicable repurchase offer expires (less the amount of proceeds used to repurchase shares of common stock on each previous repurchase date for repurchase offers conducted during such twelve-month period) (the Company refers to this limitation as the twelve-month repurchase limitation) and (B) the number of shares of common stock that the Company can repurchase with the proceeds it received from the sale of shares of common stock under the DRP during the three-month period ending on the date the applicable repurchase offer expires (the Company refers to this limitation as the three-month repurchase limitation). In addition to this limitation, the maximum number of shares of common stock to be repurchased for any repurchase offer will also be limited to 10% of the weighted average number of shares of common stock outstanding in the prior calendar year, or 2.5% in each calendar quarter. As a result, the maximum number of shares of common stock to be repurchased for any repurchase offer will not exceed the lesser of  (i) 10% of the weighted average number of shares of common stock outstanding in the prior calendar year, or 2.5% in each calendar quarter, and (ii) whichever is greater of the twelve-month repurchase limitation described in clause (A) above and the three-month repurchase limitation described in clause (B) above. At the discretion of the Company’s board of directors, the Company may also use cash on hand, cash available from borrowings and cash from the liquidation of securities investments as of the end of the applicable period to repurchase shares of common stock. The actual number of shares of common stock that the Company offers to repurchase may be less in light of the limitations noted above. The Company’s board of directors may amend, suspend or terminate the share repurchase program at any time upon 30 days’ notice.
Under the Company’s share repurchase program, the Company intends to offer to repurchase shares of common stock at a price equal to the price at which shares of common stock are issued pursuant to the DRP on the distribution date coinciding with the applicable share repurchase date. The price at which shares of common stock are issued under the DRP is determined by the Company’s board of directors or a committee thereof, in its sole discretion, and will be (i) not less than the net asset value per share of the Company’s common stock as determined in good faith by the Company’s board of directors or a committee thereof, in its sole discretion, immediately prior to the payment date of the distribution and (ii) not more than 2.5% greater than the net asset value per share as of such date.
30
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 3. Share Transactions (continued)
 
The following table provides information concerning the Company’s repurchases of shares of common stock pursuant to its share repurchase program during the nine months ended September 30, 2018 and 2017:
For the Three Months Ended
​ ​
Repurchase
Date
​ ​
Shares
Repurchased
​ ​
Percentage of
Shares
Tendered
That Were
Repurchased
​ ​
Percentage of
Outstanding
Shares
Repurchased
as of the
Repurchase
Date
​ ​
Repurchase
Price Per
Share
​ ​
Aggregate
Consideration
for
Repurchased
Shares
​
Fiscal 2017 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
December 31, 2016
​ ​
January 3, 2017
​ ​ ​ ​ 2,344,810 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ ​ 0.72% ​ ​ ​ ​ $ 8.950 ​ ​ ​ ​ $ 20,986 ​ ​
March 31, 2017
​ ​
April 3, 2017
​ ​ ​ ​ 3,353,328 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ ​ 1.02% ​ ​ ​ ​ $ 9.100 ​ ​ ​ ​ ​ 30,515 ​ ​
June 30, 2017
​ ​
July 3, 2017
​ ​ ​ ​ 4,513,119 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ ​ 1.38% ​ ​ ​ ​ $ 9.100 ​ ​ ​ ​ ​ 41,069 ​ ​
Total
​ ​ ​ ​ ​ ​ ​ 10,211,257 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 92,570 ​ ​
Fiscal 2018 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
December 31, 2017
​ ​
January 12, 2018
​ ​ ​ ​ 3,408,305 ​ ​ ​ ​ ​ 28% ​ ​ ​ ​ ​ 1.04% ​ ​ ​ ​ $ 8.800 ​ ​ ​ ​ $ 29,993 ​ ​
March 31, 2018
​ ​
April 2, 2018
​ ​ ​ ​ 3,367,488 ​ ​ ​ ​ ​ 21% ​ ​ ​ ​ ​ 1.03% ​ ​ ​ ​ $ 8.600 ​ ​ ​ ​ ​ 28,960 ​ ​
June 30, 2018
​ ​
July 3, 2018
​ ​ ​ ​ 3,296,879 ​ ​ ​ ​ ​ 20% ​ ​ ​ ​ ​ 1.01% ​ ​ ​ ​ $ 8.500 ​ ​ ​ ​ ​ 28,023 ​ ​
Total
​ ​ ​ ​ ​ ​ ​ 10,072,672 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 86,976 ​ ​
​
On October 5, 2018, the Company repurchased 3,237,783 shares of common stock (representing 17% of the shares of common stock tendered for repurchase and 0.99% of the shares outstanding as of such date) at $8.40 per share for aggregate consideration totaling $27,197.
Note 4. Related Party Transactions
Compensation of the Investment Adviser
Pursuant to the FS/KKR Advisor investment advisory and administrative services agreement, FS/KKR Advisor is entitled to an annual base management fee based on the average weekly value of the Company’s gross assets (gross assets equal the total assets of the Company as set forth on the Company’s consolidated balance sheets) and an incentive fee based on the Company’s performance. The base management fee is payable quarterly in arrears, and is calculated at an annual rate of 1.50% of the average weekly value of the Company’s gross assets. See Note 2 for a discussion of the capital gains and subordinated income incentive fees that FS/KKR Advisor may be entitled to under the FS/KKR Advisor investment advisory and administrative services agreement.
Pursuant to the FSIC II Advisor investment advisory and administrative services agreement, FSIC II Advisor was entitled to an annual base management fee equal to 2.0% of the average value of the Company’s gross assets (gross assets equal the total assets of the Company as set forth on the Company’s consolidated balance sheets) and an incentive fee based on the Company’s performance. Effective March 5, 2015, FSIC II Advisor had agreed to permanently waive 0.25% of its base management fee to which it was entitled under the FSIC II Advisor investment advisory and administrative services agreement, so that the fee received equaled 1.75% of the average value of the Company’s gross assets. Pursuant to the investment sub-advisory agreement, GDFM was entitled to receive 50% of all management and incentive fees payable to FSIC II Advisor under the FSIC II Advisor investment advisory and administrative services agreement with respect to each year.
31
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 4. Related Party Transactions (continued)
 
Pursuant to the FS/KKR Advisor investment advisory and administrative services agreement, FS/KKR Advisor also oversees the Company’s day-to-day operations, including the provision of general ledger accounting, fund accounting, legal services, investor relations, certain government and regulatory affairs activities, and other administrative services. FS/KKR Advisor also performs, or oversees the performance of, the Company’s corporate operations and required administrative services, which includes being responsible for the financial records that the Company is required to maintain and preparing reports for the Company’s stockholders and reports filed with the SEC. In addition, FS/KKR Advisor assists the Company in calculating its net asset value, overseeing the preparation and filing of tax returns and the printing and dissemination of reports to the Company’s stockholders, and generally overseeing the payment of the Company’s expenses and the performance of administrative and professional services rendered to the Company by others.
Pursuant to the FS/KKR Advisor investment advisory and administrative services agreement, the Company reimburses FS/KKR Advisor for expenses necessary to perform services related to its administration and operations, including FS/KKR Advisor’s allocable portion of the compensation and related expenses of certain personnel of FS Investments and KKR Credit providing administrative services to the Company on behalf of FS/KKR Advisor. The Company reimburses FS/KKR Advisor no less than monthly for expenses necessary to perform services related to the Company’s administration and operations. The amount of this reimbursement is set at the lesser of  (1) FS/KKR Advisor’s actual costs incurred in providing such services and (2) the amount that the Company estimates it would be required to pay alternative service providers for comparable services in the same geographic location. FS/KKR Advisor allocates the cost of such services to the Company based on factors such as total assets, revenues, time allocations and/or other reasonable metrics. The Company’s board of directors reviews the methodology employed in determining how the expenses are allocated to the Company and the proposed allocation of administrative expenses among the Company and certain affiliates of FS/KKR Advisor. The Company’s board of directors then assesses the reasonableness of such reimbursements for expenses allocated to it based on the breadth, depth and quality of such services as compared to the estimated cost to the Company of obtaining similar services from third-party service providers known to be available. In addition, the Company’s board of directors considers whether any single third-party service provider would be capable of providing all such services at comparable cost and quality. Finally, the Company’s board of directors compares the total amount paid to FS/KKR Advisor for such services as a percentage of the Company’s net assets to the same ratio as reported by other comparable BDCs. The administrative services provisions of the FSIC II Advisor investment advisory and administrative services agreement were substantially similar to the administrative services provisions of the FS/KKR Advisor investment advisory and administrative services agreement.
32
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 4. Related Party Transactions (continued)
 
The following table describes the fees and expenses the Company accrued under the FSIC II Advisor investment advisory and administrative services agreement and the FS/KKR Advisor investment advisory and administrative agreement, as applicable, during the three and nine months ended September 30, 2018 and 2017:
​ ​ ​ ​ ​ ​ ​ ​ ​
Three Months Ended
September 30,
​ ​
Nine Months Ended
September 30,
​
Related Party
​ ​
Source Agreement
​ ​
Description
​ ​
2018
​ ​
2017
​ ​
2018
​ ​
2017
​
FSIC II Advisor
and FS/KKR Advisor
​ ​    
FSIC II Advisor Investment
Advisory and Administrative
Services Agreement and
FS/KKR Advisor Investment
Advisory and Administrative
Services Agreement 		​ ​    
Base Management Fee(1)		 ​ ​ ​    
$		 ​
17,567		 ​ ​ ​ ​    
$		 ​
22,547		 ​ ​ ​ ​    
$		 ​
58,307		 ​ ​ ​ ​    
$		 ​
67,379		 ​ ​
FSIC II Advisor
and FS/KKR Advisor
​ ​    
FSIC II Advisor Investment
Advisory and Administrative
Services Agreement and
FS/KKR Advisor Investment
Advisory and Administrative
Services Agreement 		​ ​    
Subordinated
Incentive Fee on
Income(2)		 ​ ​ ​    
$		 ​
11,939		 ​ ​ ​ ​    
$		 ​
10,137		 ​ ​ ​ ​    
$		 ​
18,994		 ​ ​ ​ ​    
$		 ​
42,352		 ​ ​
FSIC II Advisor
and FS/KKR Advisor
​ ​    
FSIC II Advisor Investment
Advisory and Administrative
Services Agreement and
FS/KKR Advisor Investment
Advisory and Administrative
Services Agreement 		​ ​    
Administrative Services Expenses(3)		 ​ ​ ​    
$		 ​
799		 ​ ​ ​ ​    
$		 ​
799		 ​ ​ ​ ​    
$		 ​
2,371		 ​ ​ ​ ​    
$		 ​
2,530		 ​ ​
​
(1)
FSIC II Advisor agreed, effective March 5, 2015, to permanently waive 0.25% of its base management fee to which it is entitled under the FSIC II Advisor investment advisory and administrative services agreement so that the fee received equals 1.75% of the average value of the Company’s gross assets. As a result, the amount shown for the nine months ended September 30, 2018 is net of a waiver of  $3,432, and the amounts shown for the three and nine months ended September 30, 2017 are net of waivers of  $3,222 and $9,626, respectively. During the nine months ended September 30, 2018 and 2017, $63,335 and $66,442, respectively, in base management fees were paid to FSIC II Advisor and FS/KKR Advisor. As of September 30, 2018, $17,567 in base management fees were payable to FS/KKR Advisor.
​
(2)
During the nine months ended September 30, 2018 and 2017, $26,185 and $48,708, respectively, of subordinated incentive fees on income were paid to FSIC II Advisor and FS/KKR Advisor. As of September 30, 2018, a subordinated incentive fee on income of  $11,939 was payable to FS/KKR Advisor.
​
(3)
During the nine months ended September 30, 2018 and 2017, $1,992 and $2,412, respectively, of the accrued administrative services expenses related to the allocation of costs of administrative personnel for services rendered to the Company by FSIC II Advisor and FS/KKR Advisor and the remainder related to other reimbursable expenses. The Company paid $2,192 and $2,360 in administrative services expenses to FSIC II Advisor and FS/KKR Advisor during the nine months ended September 30, 2018 and 2017, respectively.
​
Potential Conflicts of Interest
The members of the senior management and investment teams of FS/KKR Advisor serve or may serve as officers, directors or principals of entities that operate in the same or a related line of business as the Company does, or of investment vehicles managed by the same personnel. For example, FS/KKR Advisor
33
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 4. Related Party Transactions (continued)
 
is the investment adviser to FS Investment Corporation, FS Investment Corporation III, FS Investment Corporation IV, Corporate Capital Trust, Inc. and Corporate Capital Trust II, and the officers, managers and other personnel of FS/KKR Advisor may serve in similar or other capacities for the investment advisers to future investment vehicles affiliated with FS Investments or KKR Credit. In serving in these multiple and other capacities, they may have obligations to other clients or investors in those entities, the fulfillment of which may not be in the Company’s best interests or in the best interest of the Company’s stockholders. The Company’s investment objectives may overlap with the investment objectives of such investment funds, accounts or other investment vehicles. For additional information regarding potential conflicts of interest, see the Company’s annual report on Form 10-K for the year ended December 31, 2017.
Exemptive Relief
As a BDC, the Company is subject to certain regulatory restrictions in making its investments. For example, BDCs generally are not permitted to co-invest with certain affiliated entities in transactions originated by the BDC or its affiliates in the absence of an exemptive order from the SEC. However, BDCs are permitted to, and may, simultaneously co-invest in transactions where price is the only negotiated term.
In an order dated June 4, 2013, or the FS Order, the SEC granted exemptive relief permitting the Company, subject to the satisfaction of certain conditions, to co-invest in certain privately negotiated investment transactions with certain affiliates of FSIC II Advisor, including FS Energy and Power Fund, FS Investment Corporation, FS Investment Corporation III, FS Investment Corporation IV and any future BDCs that are advised by FSIC II Advisor or its affiliated investment advisers. However, in connection with the investment advisory relationship with FS/KKR Advisor, and in an effort to mitigate potential future conflicts of interest, the Company’s board of directors authorized and directed that the Company (i) withdraw from the FS Order, except with respect to any transaction in which the Company participated in reliance on the FS Order prior to April 9, 2018, and (ii) rely on an exemptive relief order, dated April 3, 2018, that permits the Company, subject to the satisfaction of certain conditions, to co-invest in certain privately negotiated investment transactions, including investments originated and directly negotiated by FS/KKR Advisor or KKR Credit, with certain affiliates of FS/KKR Advisor.
Note 5. Distributions
The following table reflects the cash distributions per share that the Company declared and paid on its common stock during the nine months ended September 30, 2018 and 2017:
​ ​ ​
Distribution
​
For the Three Months Ended
​ ​
Per Share
​ ​
Amount
​
Fiscal 2017 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
March 31, 2017
​ ​ ​ $ 0.1885 ​ ​ ​ ​ $ 61,436 ​ ​
June 30, 2017
​ ​ ​ ​ 0.1885 ​ ​ ​ ​ ​ 61,505 ​ ​
September 30, 2017
​ ​ ​ ​ 0.1885 ​ ​ ​ ​ ​ 61,277 ​ ​
Total
​ ​ ​ $ 0.5655 ​ ​ ​ ​ $ 184,218 ​ ​
Fiscal 2018 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
March 31, 2018
​ ​ ​ $ 0.1885 ​ ​ ​ ​ $ 61,153 ​ ​
June 30, 2018
​ ​ ​ ​ 0.1885 ​ ​ ​ ​ ​ 61,146 ​ ​
September 30, 2018
​ ​ ​ ​ 0.1885 ​ ​ ​ ​ ​ 61,137 ​ ​
Total
​ ​ ​ $ 0.5655 ​ ​ ​ ​ $ 183,436 ​ ​
34
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 5. Distributions (continued)
 
The Company intends to declare regular cash distributions on a quarterly basis and pay such distributions on a monthly basis. On November 7, 2018, the Company’s board of directors declared regular monthly cash distributions for January 2019 through March 2019, respectively, each in the amount of $0.06283 per share. These distributions have been or will be paid monthly to stockholders of record as of monthly record dates previously determined by the Company’s board of directors. The timing and amount of any future distributions to stockholders are subject to applicable legal restrictions and the sole discretion of the Company’s board of directors.
The Company has adopted an “opt in” distribution reinvestment plan for its stockholders. As a result, if the Company makes a cash distribution, its stockholders will receive the distribution in cash unless they specifically “opt in” to the DRP so as to have their cash distributions reinvested in additional shares of the Company’s common stock. However, certain state authorities or regulators may impose restrictions from time to time that may prevent or limit a stockholder’s ability to participate in the DRP.
Under the DRP, cash distributions to participating stockholders will be reinvested in additional shares of the Company’s common stock at a purchase price determined by the Company’s board of directors, or a committee thereof, in its sole discretion, that is (i) not less than the net asset value per share of the Company’s common stock as determined in good faith by the Company’s board of directors or a committee thereof, in its sole discretion, immediately prior to the payment of the distribution and (ii) not more than 2.5% greater than the net asset value per share of the Company’s common stock as of such date. Although distributions paid in the form of additional shares of common stock will generally be subject to U.S. federal, state and local taxes in the same manner as cash distributions, stockholders who elect to participate in the DRP will not receive any corresponding cash distributions with which to pay any such applicable taxes. Stockholders receiving distributions in the form of additional shares of common stock will be treated as receiving a distribution in the amount of the fair market value of the Company’s shares of common stock.
The Company may fund its cash distributions to stockholders from any sources of funds legally available to it, including proceeds from the sale of the Company’s common stock, borrowings, net investment income from operations, capital gains proceeds from the sale of assets, non-capital gains proceeds from the sale of assets and dividends or other distributions paid to the Company on account of preferred and common equity investments in portfolio companies. The Company has not established limits on the amount of funds it may use from available sources to make distributions. During certain periods, the Company’s distributions may exceed its earnings. As a result, it is possible that a portion of the distributions the Company makes may represent a return of capital. A return of capital generally is a return of a stockholder’s investment rather than a return of earnings or gains derived from the Company’s investment activities. Each year a statement on Form 1099-DIV identifying the sources of the distributions (i.e., paid from ordinary income, paid from net capital gains on the sale of securities, and/or a return of capital, which is a nontaxable distribution) will be mailed to the Company’s stockholders. There can be no assurance that the Company will be able to pay distributions at a specific rate or at all.
35
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 5. Distributions (continued)
 
The following table reflects the sources of the cash distributions on a tax basis that the Company paid on its common stock during the nine months ended September 30, 2018 and 2017:
​ ​ ​
Nine Months Ended September 30,
​
​ ​ ​
2018
​ ​
2017
​
Source of Distribution
​ ​
Distribution
Amount
​ ​
Percentage
​ ​
Distribution
Amount
​ ​
Percentage
​
Offering proceeds
​ ​ ​ $ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ — ​ ​ ​ ​ ​ — ​ ​
Borrowings
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Net investment income(1)
 ​ ​ ​ ​ 183,436 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ ​ 184,218 ​ ​ ​ ​ ​ 100% ​ ​
Short-term capital gains proceeds from the sale of assets
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Long-term capital gains proceeds from the sale of assets
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Non-capital gains proceeds from the sale of assets
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Distributions on account of preferred and common equity
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Total
​ ​ ​ $ 183,436 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ $ 184,218 ​ ​ ​ ​ ​ 100% ​ ​
​
(1)
During the nine months ended September 30, 2018 and 2017, 94.4% and 92.6%, respectively, of the Company’s gross investment income was attributable to cash income earned, 1.6% and 2.0%, respectively, was attributable to non-cash accretion of discount and 4.0% and 5.4%, respectively, was attributable to paid-in-kind, or PIK, interest.
​
The Company’s net investment income on a tax basis for the nine months ended September 30, 2018 and 2017 was $168,957 and $185,239, respectively. As of September 30, 2018 and December 31, 2017, the Company had $56,005 and $70,483, respectively, of undistributed net investment income and $160,845 and $202,496, respectively, of accumulated capital losses on a tax basis.
The difference between the Company’s GAAP-basis net investment income and its tax-basis net investment income is primarily due to the reclassification of unamortized original issue discount and prepayment fees recognized upon prepayment of loans from income for GAAP purposes to realized gains or deferred to future periods for tax purposes, the impact of consolidating certain subsidiaries for purposes of computing GAAP-basis net investment income but not for purposes of computing tax-basis net investment income and income recognized for tax purposes on certain transactions but not recognized for GAAP purposes.
The following table sets forth a reconciliation between GAAP-basis net investment income and tax-basis net investment income during the nine months ended September 30, 2018 and 2017:
​ ​ ​
Nine Months Ended
September 30,
​
​ ​ ​
2018
​ ​
2017
​
GAAP-basis net investment income
​ ​ ​ $ 178,239 ​ ​ ​ ​ $ 194,842 ​ ​
Income subject to tax not recorded for GAAP
​ ​ ​ ​ 2,538 ​ ​ ​ ​ ​ (2,111) ​ ​
GAAP versus tax-basis impact of consolidation of certain subsidiaries
​ ​ ​ ​ 5,192 ​ ​ ​ ​ ​ 5,901 ​ ​
Reclassification of unamortized original issue discount, prepayment fees and other income
​ ​ ​ ​ (16,781) ​ ​ ​ ​ ​ (13,822) ​ ​
Other miscellaneous differences
​ ​ ​ ​ (231) ​ ​ ​ ​ ​ 429 ​ ​
Tax-basis net investment income
​ ​ ​ $ 168,957 ​ ​ ​ ​ $ 185,239 ​ ​
​
36
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 5. Distributions (continued)
 
The determination of the tax attributes of the Company’s distributions is made annually as of the end of the Company’s fiscal year based upon the Company’s taxable income for the full year and distributions paid for the full year. Therefore, a determination made on a quarterly basis may not be representative of the actual tax attributes of the Company’s distributions for a full year. The actual tax characteristics of distributions to stockholders are reported to stockholders annually on Form 1099-DIV.
As of September 30, 2018 and December 31, 2017, the components of accumulated earnings on a tax basis were as follows:
​ ​ ​
September 30, 2018
(Unaudited)
​ ​
December 31, 2017
​
Distributable ordinary income
​ ​ ​ $ 56,005 ​ ​ ​ ​ $ 70,483 ​ ​
Capital loss carryover(1)
 ​ ​ ​ ​ (160,845) ​ ​ ​ ​ ​ (202,496) ​ ​
Other temporary differences
​ ​ ​ ​ (136) ​ ​ ​ ​ ​ (168) ​ ​
Net unrealized appreciation (depreciation) on investments and secured
borrowing and gain (loss) on foreign currency(2)
 ​ ​ ​ ​ (203,351) ​ ​ ​ ​ ​ (20,073) ​ ​
Total
​ ​ ​ $ (308,327) ​ ​ ​ ​ $ (152,254) ​ ​
​
​
(1)
Net capital losses recognized may be carried forward indefinitely, and their character is retained as short-term or long-term losses. As of September 30, 2018, the Company had no short-term capital loss carryforwards and had long-term capital loss carryforwards available to offset future realized capital gains of  $160,845.
​
(2)
As of September 30, 2018 and December 31, 2017, the gross unrealized appreciation on the Company’s investments and gain on foreign currency was $150,865 and $208,211, respectively. As of September 30, 2018 and December 31, 2017, the gross unrealized depreciation on the Company’s investments and loss on foreign currency was $354,216 and $228,284, respectively.
​
The aggregate cost of the Company’s investments for U.S. federal income tax purposes totaled $4,536,384 and $4,617,073 as of September 30, 2018 and December 31, 2017, respectively. The aggregate net unrealized appreciation (depreciation) on investments on a tax basis was $(202,840) and $(19,479) as of September 30, 2018 and December 31, 2017, respectively.
As of September 30, 2018, the Company had a deferred tax liability of  $7,295 resulting from unrealized appreciation on investments held by the Company’s wholly-owned taxable subsidiaries and a deferred tax asset of  $20,103 resulting from net operating losses of the Company’s wholly-owned taxable subsidiaries. As of September 30, 2018, certain wholly-owned taxable subsidiaries anticipated that they would be unable to fully utilize their generated net operating losses, therefore the deferred tax asset was offset by a valuation allowance of  $12,808. For the nine months ended September 30, 2018, the Company did not record a provision for taxes related to its wholly-owned taxable subsidiaries.
37
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 6. Investment Portfolio
The following table summarizes the composition of the Company’s investment portfolio at cost and fair value as of September 30, 2018 and December 31, 2017:
​ ​ ​
September 30, 2018
(Unaudited)
​ ​
December 31, 2017
​
​ ​ ​
Amortized
Cost(1)
 ​ ​
Fair Value
​ ​
Percentage
of Portfolio
​ ​
Amortized
Cost(1)
 ​ ​
Fair Value
​ ​
Percentage
of Portfolio
​
Senior Secured Loans—First Lien
​ ​ ​ $ 3,400,523 ​ ​ ​ ​ $ 3,313,859 ​ ​ ​ ​ ​ 77% ​ ​ ​ ​ $ 3,408,133 ​ ​ ​ ​ $ 3,421,070 ​ ​ ​ ​ ​ 74% ​ ​
Senior Secured Loans—Second Lien
​ ​ ​ ​ 366,321 ​ ​ ​ ​ ​ 278,162 ​ ​ ​ ​ ​ 6% ​ ​ ​ ​ ​ 385,761 ​ ​ ​ ​ ​ 327,135 ​ ​ ​ ​ ​ 7% ​ ​
Senior Secured Bonds
​ ​ ​ ​ 182,439 ​ ​ ​ ​ ​ 179,191 ​ ​ ​ ​ ​ 4% ​ ​ ​ ​ ​ 123,045 ​ ​ ​ ​ ​ 124,673 ​ ​ ​ ​ ​ 3% ​ ​
Subordinated Debt
​ ​ ​ ​ 255,303 ​ ​ ​ ​ ​ 257,023 ​ ​ ​ ​ ​ 6% ​ ​ ​ ​ ​ 369,864 ​ ​ ​ ​ ​ 366,048 ​ ​ ​ ​ ​ 8% ​ ​
Collateralized Securities
​ ​ ​ ​ 19,752 ​ ​ ​ ​ ​ 23,435 ​ ​ ​ ​ ​ 1% ​ ​ ​ ​ ​ 20,435 ​ ​ ​ ​ ​ 25,763 ​ ​ ​ ​ ​ 1% ​ ​
Equity/Other
​ ​ ​ ​ 261,293 ​ ​ ​ ​ ​ 281,874 ​ ​ ​ ​ ​ 6% ​ ​ ​ ​ ​ 296,470 ​ ​ ​ ​ ​ 332,905 ​ ​ ​ ​ ​ 7% ​ ​
Total
​ ​ ​ $ 4,485,631 ​ ​ ​ ​ $ 4,333,544 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ $ 4,603,708 ​ ​ ​ ​ $ 4,597,594 ​ ​ ​ ​ ​ 100% ​ ​
​
​
(1)
Amortized cost represents the original cost adjusted for the amortization of premiums and/or accretion of discounts, as applicable, on investments.
​
In general, under the 1940 Act, the Company would be presumed to “control” a portfolio company if it owned more than 25% of its voting securities or it had the power to exercise control over the management or policies of such portfolio company, and would be an “affiliated person” of a portfolio company if it owned 5% or more of its voting securities.
As of September 30, 2018, the Company did not “control” any of its portfolio companies. As of September 30, 2018, the Company held investments in seven portfolio companies of which it is deemed to be an “affiliated person” but is not deemed to “control.” For additional information with respect to such portfolio companies, see footnote (v) to the unaudited consolidated schedule of investments as of September 30, 2018 in this quarterly report on Form 10-Q.
As of December 31, 2017, the Company did not “control” any of its portfolio companies. During the year ended December 31, 2017, the Company held investments in one portfolio company of which it was deemed to “control” which was sold prior to December 31, 2017. As of December 31, 2017, the Company held investments in six portfolio companies of which it was deemed to be an “affiliated person” but was not deemed to “control.” For additional information with respect to such portfolio companies, see footnote (x) to the consolidated schedule of investments as of December 31, 2017 in this quarterly report on Form 10-Q.
The Company’s investment portfolio may contain loans and other unfunded arrangements that are in the form of lines of credit, revolving credit facilities, delayed draw credit facilities or other investments, pursuant to which the Company may be required to provide funding when requested by portfolio companies in accordance with the terms of the underlying agreements. As of September 30, 2018, the Company had nineteen senior secured loan investments with aggregate unfunded commitments of $194,639, one subordinated debt investment with an unfunded commitment of  $15,000 and one unfunded commitment to purchase up to $71 in shares of preferred stock of Altus Power America Holdings, LLC. As of December 31, 2017, the Company had twenty-one senior secured loan investments with aggregate unfunded commitments of  $241,977, one subordinated debt investment with an unfunded commitment of $18,989, one unfunded commitment to purchase up to $295 in shares of preferred stock of Altus Power America Holdings, LLC and one unfunded commitment to purchase up to $4 in shares of common stock of Chisholm Oil and Gas, LLC. The Company maintains sufficient cash on hand, available borrowings and
38
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 6. Investment Portfolio (continued)
 
liquid securities to fund such unfunded commitments should the need arise. For additional details regarding the Company’s unfunded debt investments, see the Company’s unaudited consolidated schedule of investments as of September 30, 2018 and audited consolidated schedule of investments as of December 31, 2017.
The table below describes investments by industry classification and enumerates the percentage, by fair value, of the total portfolio assets in such industries as of September 30, 2018 and December 31, 2017:
​ ​ ​
September 30, 2018
(Unaudited)
​ ​
December 31, 2017
​
Industry Classification
​ ​
Fair Value
​ ​
Percentage
of Portfolio
​ ​
Fair Value
​ ​
Percentage
of Portfolio
​
Automobiles & Components
​ ​ ​ $ 36,905 ​ ​ ​ ​ ​ 1% ​ ​ ​ ​ $ 33,322 ​ ​ ​ ​ ​ 1% ​ ​
Capital Goods
​ ​ ​ ​ 980,002 ​ ​ ​ ​ ​ 23% ​ ​ ​ ​ ​ 787,878 ​ ​ ​ ​ ​ 17% ​ ​
Commercial & Professional Services
​ ​ ​ ​ 265,368 ​ ​ ​ ​ ​ 6% ​ ​ ​ ​ ​ 501,745 ​ ​ ​ ​ ​ 11% ​ ​
Consumer Durables & Apparel
​ ​ ​ ​ 231,340 ​ ​ ​ ​ ​ 5% ​ ​ ​ ​ ​ 351,135 ​ ​ ​ ​ ​ 8% ​ ​
Consumer Services
​ ​ ​ ​ 256,719 ​ ​ ​ ​ ​ 6% ​ ​ ​ ​ ​ 394,163 ​ ​ ​ ​ ​ 9% ​ ​
Diversified Financials
​ ​ ​ ​ 88,839 ​ ​ ​ ​ ​ 2% ​ ​ ​ ​ ​ 76,847 ​ ​ ​ ​ ​ 2% ​ ​
Energy
​ ​ ​ ​ 415,953 ​ ​ ​ ​ ​ 10% ​ ​ ​ ​ ​ 499,739 ​ ​ ​ ​ ​ 11% ​ ​
Food & Staples Retailing
​ ​ ​ ​ 22,295 ​ ​ ​ ​ ​ 1% ​ ​ ​ ​ ​ 3,477 ​ ​ ​ ​ ​ 0% ​ ​
Food, Beverage & Tobacco
​ ​ ​ ​ 82,630 ​ ​ ​ ​ ​ 2% ​ ​ ​ ​ ​ 52,484 ​ ​ ​ ​ ​ 1% ​ ​
Health Care Equipment & Services
​ ​ ​ ​ 353,213 ​ ​ ​ ​ ​ 8% ​ ​ ​ ​ ​ 261,085 ​ ​ ​ ​ ​ 6% ​ ​
Insurance
​ ​ ​ ​ 112,401 ​ ​ ​ ​ ​ 3% ​ ​ ​ ​ ​ 118,271 ​ ​ ​ ​ ​ 2% ​ ​
Materials
​ ​ ​ ​ 298,235 ​ ​ ​ ​ ​ 7% ​ ​ ​ ​ ​ 423,964 ​ ​ ​ ​ ​ 9% ​ ​
Media
​ ​ ​ ​ 277,914 ​ ​ ​ ​ ​ 6% ​ ​ ​ ​ ​ 298,418 ​ ​ ​ ​ ​ 6% ​ ​
Pharmaceuticals, Biotechnology & Life Sciences
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 3,239 ​ ​ ​ ​ ​ 0% ​ ​
Retailing
​ ​ ​ ​ 312,323 ​ ​ ​ ​ ​ 7% ​ ​ ​ ​ ​ 182,631 ​ ​ ​ ​ ​ 4% ​ ​
Semiconductors & Semiconductor Equipment
​ ​ ​ ​ 15,511 ​ ​ ​ ​ ​ 0% ​ ​ ​ ​ ​ 18,069 ​ ​ ​ ​ ​ 0% ​ ​
Software & Services
​ ​ ​ ​ 390,376 ​ ​ ​ ​ ​ 9% ​ ​ ​ ​ ​ 284,561 ​ ​ ​ ​ ​ 6% ​ ​
Technology Hardware & Equipment
​ ​ ​ ​ 25,532 ​ ​ ​ ​ ​ 1% ​ ​ ​ ​ ​ 78,154 ​ ​ ​ ​ ​ 2% ​ ​
Telecommunication Services
​ ​ ​ ​ 147,882 ​ ​ ​ ​ ​ 3% ​ ​ ​ ​ ​ 147,780 ​ ​ ​ ​ ​ 3% ​ ​
Transportation
​ ​ ​ ​ 20,106 ​ ​ ​ ​ ​ 0% ​ ​ ​ ​ ​ 80,632 ​ ​ ​ ​ ​ 2% ​ ​
Total
​ ​ ​ $ 4,333,544 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ $ 4,597,594 ​ ​ ​ ​ ​ 100% ​ ​
​
Note 7. Fair Value of Financial Instruments
Under existing accounting guidance, fair value is defined as the price that the Company would receive upon selling an investment or pay to transfer a liability in an orderly transaction to a market participant in the principal or most advantageous market for the investment. This accounting guidance emphasizes valuation techniques that maximize the use of observable market inputs and minimize the use of unobservable inputs. Inputs refer broadly to the assumptions that market participants would use in pricing an asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on the best information available in the circumstances. The Company classifies the inputs used to measure these fair values into the following hierarchy as defined by current accounting guidance:
Level 1: Inputs that are quoted prices (unadjusted) in active markets for identical assets or liabilities.
39
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 7. Fair Value of Financial Instruments (continued)
 
Level 2: Inputs that are quoted prices for similar assets or liabilities in active markets.
Level 3: Inputs that are unobservable for an asset or liability.
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
As of September 30, 2018 and December 31, 2017, the Company’s investments were categorized as follows in the fair value hierarchy:
Valuation Inputs
​ ​
September 30, 2018
(Unaudited)
​ ​
December 31, 2017
 ​
Level 1—Price quotations in active markets
​ ​ ​ $ 914 ​ ​ ​ ​ $ 6,368 ​ ​
Level 2—Significant other observable inputs
​ ​ ​ ​ 838,933 ​ ​ ​ ​ ​ — ​ ​
Level 3—Significant unobservable inputs
​ ​ ​ ​ 3,493,697 ​ ​ ​ ​ ​ 4,591,226 ​ ​
Total
​ ​ ​ $ 4,333,544 ​ ​ ​ ​ $ 4,597,594 ​ ​
​
The Company has elected the fair value option under ASC Topic 825, Financial Instruments, relating to accounting for debt obligations at their fair value for its secured borrowing which arose due to partial loan sales which did not meet the criteria for sale treatment under ASC Topic 860. The Company reports changes in the fair value of its secured borrowing as a component of the net change in unrealized appreciation (depreciation) on secured borrowing in the consolidated statements of operations. The net gain or loss reflects the difference between the fair value and the principal amount due on maturity.
The Company’s investments consist primarily of debt investments that were acquired directly from the issuer. Debt investments, for which broker quotes are not available, are valued by independent valuation firms, which determine the fair value of such investments by considering, among other factors, the borrower’s ability to adequately service its debt, prevailing interest rates for like investments, expected cash flows, call features, anticipated prepayments and other relevant terms of the investments. Except as described below, all of the Company’s equity/other investments are also valued by independent valuation firms, which determine the fair value of such investments by considering, among other factors, contractual rights ascribed to such investments, as well as various income scenarios and multiples of earnings before interest, taxes, depreciation and amortization, or EBITDA, cash flows, net income, revenues or, in limited instances, book value or liquidation value. An investment that is newly issued and purchased near the date of the financial statements is valued at cost if the Company’s board of directors determines that the cost of such investment is the best indication of its fair value. Such investments described above are typically classified as Level 3 within the fair value hierarchy. Investments that are traded on an active public market are valued at their closing price as of the date of the financial statements and are classified as Level 1 within the fair value hierarchy. Except as described above, the Company values its other investments by using the midpoint of the prevailing bid and ask prices from dealers on the date of the relevant period end, which are provided by independent third-party pricing services and screened for validity by such services and are typically classified as Level 2 within the fair value hierarchy.
The Company periodically benchmarks the bid and ask prices it receives from the third-party pricing services and/or dealers and independent valuation firms as applicable, against the actual prices at which the Company purchases and sells its investments. Based on the results of the benchmark analysis and the experience of the Company’s management in purchasing and selling these investments, the Company believes that these prices are reliable indicators of fair value. The valuation committee of the Company’s board of directors, or the valuation committee, and the board of directors reviewed and approved the valuation determinations made with respect to these investments in a manner consistent with the Company’s valuation policy.
40
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 7. Fair Value of Financial Instruments (continued)
 
The following is a reconciliation for the nine months ended September 30, 2018 and 2017 of investments for which significant unobservable inputs (Level 3) were used in determining fair value:
​ ​ ​
For the Nine Months Ended September 30, 2018
​
​ ​ ​
Senior Secured
Loans—First
Lien
​ ​
Senior Secured
Loans—Second
Lien
​ ​
Senior
Secured
Bonds
​ ​
Subordinated
Debt
​ ​
Collateralized
Securities
​ ​
Equity/​
Other
​ ​
Total
​
Fair value at beginning of period
​ ​ ​ $ 3,421,070 ​ ​ ​ ​ $ 327,135 ​ ​ ​ ​ $ 124,673 ​ ​ ​ ​ $ 366,048 ​ ​ ​ ​ $ 25,763 ​ ​ ​ ​ $ 326,537 ​ ​ ​ ​ $ 4,591,226 ​ ​
Accretion of discount (amortization of premium)
​ ​ ​ ​ 2,272 ​ ​ ​ ​ ​ 57 ​ ​ ​ ​ ​ 414 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 4 ​ ​ ​ ​ ​ 117 ​ ​ ​ ​ ​ 2,864 ​ ​
Net realized gain (loss)
​ ​ ​ ​ (25,716) ​ ​ ​ ​ ​ 611 ​ ​ ​ ​ ​ (1,846) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 32,186 ​ ​ ​ ​ ​ 5,235 ​ ​
Net change in unrealized appreciation (depreciation)
​ ​ ​ ​ (97,573) ​ ​ ​ ​ ​ (30,768) ​ ​ ​ ​ ​ (4,502) ​ ​ ​ ​ ​ (1,404) ​ ​ ​ ​ ​ (1,645) ​ ​ ​ ​ ​ (14,013) ​ ​ ​ ​ ​ (149,905) ​ ​
Purchases
​ ​ ​ ​ 826,657 ​ ​ ​ ​ ​ 92,816 ​ ​ ​ ​ ​ 3,370 ​ ​ ​ ​ ​ 18,782 ​ ​ ​ ​ ​ 912 ​ ​ ​ ​ ​ 31,266 ​ ​ ​ ​ ​ 973,803 ​ ​
Paid-in-kind interest
​ ​ ​ ​ 3,773 ​ ​ ​ ​ ​ 1,339 ​ ​ ​ ​ ​ 2,636 ​ ​ ​ ​ ​ 2,444 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 3,065 ​ ​ ​ ​ ​ 13,257 ​ ​
Sales and repayments
​ ​ ​ ​ (841,856) ​ ​ ​ ​ ​ (134,310) ​ ​ ​ ​ ​ (18,691) ​ ​ ​ ​ ​ (58,206) ​ ​ ​ ​ ​ (1,599) ​ ​ ​ ​ ​ (96,322) ​ ​ ​ ​ ​ (1,150,984) ​ ​
Net transfers in or out of Level 3(1)
 ​ ​ ​ ​ (392,341) ​ ​ ​ ​ ​ (82,804) ​ ​ ​ ​ ​ (7,058) ​ ​ ​ ​ ​ (303,910) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (5,686) ​ ​ ​ ​ ​ (791,799) ​ ​
Fair value at end of period
​ ​ ​ $ 2,896,286 ​ ​ ​ ​ $ 174,076 ​ ​ ​ ​ $ 98,996 ​ ​ ​ ​ $ 23,754 ​ ​ ​ ​ $ 23,435 ​ ​ ​ ​ $ 277,150 ​ ​ ​ ​ $ 3,493,697 ​ ​
The amount of total gains or
losses for the period
included in changes in net
assets attributable to the
change in unrealized gains
or losses relating to
investments still held at the
reporting date
​ ​ ​ $ (85,430) ​ ​ ​ ​ $ (29,344) ​ ​ ​ ​ $ (5,544) ​ ​ ​ ​ $ (809) ​ ​ ​ ​ $ (1,645) ​ ​ ​ ​ $ 15,558 ​ ​ ​ ​ $ (107,214) ​ ​
​
41
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 7. Fair Value of Financial Instruments (continued)
 
​ ​ ​
For the Nine Months Ended September 30, 2017
​
​ ​ ​
Senior Secured
Loans—First
Lien
​ ​
Senior Secured
Loans—Second
Lien
​ ​
Senior
Secured
Bonds
​ ​
Subordinated
Debt
​ ​
Collateralized
Securities
​ ​
Equity/​
Other
​ ​
Total
​
Fair value at beginning of period
​ ​ ​ $ 2,864,089 ​ ​ ​ ​ $ 718,971 ​ ​ ​ ​ $ 148,085 ​ ​ ​ ​ $ 402,397 ​ ​ ​ ​ $ 23,173 ​ ​ ​ ​ $ 331,297 ​ ​ ​ ​ $ 4,488,012 ​ ​
Accretion of discount (amortization of premium)
​ ​ ​ ​ 4,257 ​ ​ ​ ​ ​ 12,330 ​ ​ ​ ​ ​ 418 ​ ​ ​ ​ ​ 2,533 ​ ​ ​ ​ ​ 4 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 19,542 ​ ​
Net realized gain (loss)
​ ​ ​ ​ 4,315 ​ ​ ​ ​ ​ (16,697) ​ ​ ​ ​ ​ (18,593) ​ ​ ​ ​ ​ (14,935) ​ ​ ​ ​ ​ (167) ​ ​ ​ ​ ​ (3,122) ​ ​ ​ ​ ​ (49,199) ​ ​
Net change in unrealized appreciation (depreciation)
​ ​ ​ ​ 11,743 ​ ​ ​ ​ ​ (10,215) ​ ​ ​ ​ ​ 26,019 ​ ​ ​ ​ ​ 45,308 ​ ​ ​ ​ ​ (945) ​ ​ ​ ​ ​ (10,173) ​ ​ ​ ​ ​ 61,737 ​ ​
Purchases
​ ​ ​ ​ 1,165,253 ​ ​ ​ ​ ​ 126,861 ​ ​ ​ ​ ​ 25,468 ​ ​ ​ ​ ​ 134,356 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 35,844 ​ ​ ​ ​ ​ 1,487,782 ​ ​
Paid-in-kind interest
​ ​ ​ ​ 7,537 ​ ​ ​ ​ ​ 9,470 ​ ​ ​ ​ ​ 23 ​ ​ ​ ​ ​ 2,059 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,099 ​ ​ ​ ​ ​ 20,188 ​ ​
Sales and repayments
​ ​ ​ ​ (821,782) ​ ​ ​ ​ ​ (508,516) ​ ​ ​ ​ ​ (1,497) ​ ​ ​ ​ ​ (65,062) ​ ​ ​ ​ ​ (2,805) ​ ​ ​ ​ ​ (9,994) ​ ​ ​ ​ ​ (1,409,656) ​ ​
Net transfers in or out of Level 3
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Fair value at end of period
​ ​ ​ $ 3,235,412 ​ ​ ​ ​ $ 332,204 ​ ​ ​ ​ $ 179,923 ​ ​ ​ ​ $ 506,656 ​ ​ ​ ​ $ 19,260 ​ ​ ​ ​ $ 344,951 ​ ​ ​ ​ $ 4,618,406 ​ ​
The amount of total gains or
losses for the period
included in changes in net
assets attributable to the
change in unrealized gains
or losses relating to
investments still held at the
reporting date
​ ​ ​ $ (3,650) ​ ​ ​ ​ $ (21,506) ​ ​ ​ ​ $ 5,632 ​ ​ ​ ​ $ 12,402 ​ ​ ​ ​ $ (512) ​ ​ ​ ​ $ (37,227) ​ ​ ​ ​ $ (44,861) ​ ​
​
​
(1)
As of June 30, 2018, the Company determined to classify investments whose valuations were obtained from independent third-party pricing services as Level 2 in the fair value hierarchy as the Company identified significant other observable inputs in these market quotations. It is the Company’s policy to recognize transfers between levels at the beginning of the reporting period.
​
​
42
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 7. Fair Value of Financial Instruments (continued)
 
The following is a reconciliation for the nine months ended September 30, 2017 of a secured borrowing for which significant unobservable inputs (Level 3) were used in determining fair value:
​ ​ ​
For the Nine
Months Ended
September 30, 2017
​
Fair value at beginning of period
​ ​ ​ $ (8,273) ​ ​
Amortization of premium (accretion of discount)
​ ​ ​ ​ (13) ​ ​
Net realized gain (loss)
​ ​ ​ ​ — ​ ​
Net change in unrealized (appreciation) depreciation
​ ​ ​ ​ (26) ​ ​
Proceeds from secured borrowing
​ ​ ​ ​ — ​ ​
Paid-in-kind interest
​ ​ ​ ​ — ​ ​
Repayments on secured borrowing
​ ​ ​ ​ — ​ ​
Net transfers in or out of Level 3
​ ​ ​ ​ — ​ ​
Fair value at end of period
​ ​ ​ $ (8,312) ​ ​
The amount of total gains or losses for the period included in changes in net assets attributable to the change in unrealized gains or losses relating to a secured borrowing still held at the reporting date
​ ​ ​ $ (26) ​ ​
​
43
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 7. Fair Value of Financial Instruments (continued)
 
The valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements as of September 30, 2018 and December 31, 2017 were as follows:
Type of Investment
​ ​
Fair Value at
September 30, 2018
(Unaudited)
​ ​
Valuation
Technique(1)
 ​ ​
Unobservable Input
​ ​
Range
​ ​
Weighted
Average
​
Senior Secured
Loans—First Lien
​ ​ ​
$
2,679,875
 ​ ​ ​
Market Comparables
​ ​ Market Yield (%) ​ ​
6.4% – 21.8%
​ ​
10.3%
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ EBITDA Multiples (x) ​ ​
4.8x – 9.0x
​ ​
8.0x
​
​ ​ ​ ​
​
216,411
 ​ ​ ​ Other(2) ​ ​ Other ​ ​
N/A
​ ​
N/A
​
Senior Secured
Loans—Second Lien
​ ​ ​
​
160,705
 ​ ​ ​
Market Comparables
​ ​ Market Yield (%) ​ ​
8.6% – 15.0%
​ ​
12.7%
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ EBITDA Multiples (x) ​ ​
4.8x – 5.3x
​ ​
5.0x
​
​ ​ ​ ​
​
13,371
 ​ ​ ​ Other(2) ​ ​ Other ​ ​
N/A
​ ​
N/A
​
Senior Secured Bonds
​ ​ ​
​
98,996
 ​ ​ ​
Market Comparables
​ ​ Market Yield (%) ​ ​
6.6% – 12.8%
​ ​
8.3%
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ EBITDA Multiples (x) ​ ​
6.9x – 9.0x
​ ​
7.6x
​
Subordinated Debt
​ ​ ​
​
23,754
 ​ ​ ​
Market Comparables
​ ​ Market Yield (%) ​ ​
14.8% – 20.3%
​ ​
15.4%
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ EBITDA Multiples (x) ​ ​
12.5x – 13.0x
​ ​
12.8x
​
Collateralized Securities
​ ​ ​
​
23,435
 ​ ​ ​ Market Quotes ​ ​ Indicative Dealer Quotes ​ ​
60.6% – 100.3%
​ ​
65.1%
​
Equity/Other
​ ​ ​
​
254,841
 ​ ​ ​
Market Comparables
​ ​ Market Yield (%) ​ ​
17.5% – 18.7%
​ ​
18.1%
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Capacity Multiple ($/kW) ​ ​
$1,875.0 – $2,125.0
​ ​
$2,000.0
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ EBITDA Multiples (x) ​ ​
4.8x – 14.2x
​ ​
7.9x
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Production Multiples (Mboe/d) ​ ​
$36,250.0 – $53,750.0
​ ​
$49,760.3
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Production Multiples (MMcfe/d) ​ ​
$4,200.0 – $4,700.0
​ ​
$4,450.0
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Proved Reserves Multiples (Bcfe) ​ ​
$1.2 – $1.3
​ ​
$1.2
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Proved Reserves Multiples (Mmboe)
​ ​
$8.3 – $18.0
​ ​
$16.3
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ PV-10 Multiples (x) ​ ​
1.1x – 2.4x
​ ​
2.1x
​
​ ​ ​ ​ ​ ​ ​ ​ ​ Discounted Cash
Flow 		​ ​ Discount Rate (%) ​ ​
14.5% – 15.5%
​ ​
15.0%
​
​ ​ ​ ​ ​ ​ ​ ​ ​ Option Valuation
Model 		​ ​ Volatility (%) ​ ​
25.0% – 25.0%
​ ​
25.0%
​
​ ​ ​ ​
​
22,309
 ​ ​ ​ Other(2) ​ ​ Other ​ ​
N/A
​ ​
N/A
​
Total
​ ​ ​
$
3,493,697
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​
​
(1)
Investments using a market quotes valuation technique were valued by using the midpoint of the prevailing bid and ask prices from dealers on the date of the relevant period end, which were provided by independent third-party pricing services and screened for validity by such services. For investments utilizing a market comparables valuation technique, a significant increase (decrease) in the market yield, in isolation, would result in a significantly lower (higher) fair value measurement, and a significant increase (decrease) in any of the valuation multiples, in isolation, would result in a significantly higher (lower) fair value measurement. For investments utilizing a discounted cash flow valuation technique, a significant increase (decrease) in the discount rate, in isolation, would result in a significantly lower (higher) fair value measurement. For investments utilizing an option valuation model valuation technique, a significant increase (decrease) in the volatility, in isolation, would result in a significantly higher (lower) fair value measurement.
​
(2)
Fair value based on expected outcome of proposed corporate transactions and/or other factors.
​
​
44
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 7. Fair Value of Financial Instruments (continued)
 
Type of Investment
​ ​
Fair Value at
December 31,
2017
​ ​
Valuation
Technique(1)
 ​ ​
Unobservable Input
​ ​
Range
​ ​
Weighted
Average
​
Senior Secured Loans—First
Lien
​ ​ ​
$
2,947,886
 ​ ​ ​
Market Comparables
​ ​ Market Yield (%) ​ ​
4.8% – 14.0%
​ ​
9.2%
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ EBITDA Multiples (x) ​ ​
5.0x – 8.0x
​ ​
7.3x
​
​ ​ ​ ​
​
80,848
 ​ ​ ​ Other(2) ​ ​ Other ​ ​
N/A
​ ​
N/A
​
​ ​ ​ ​
​
392,336
 ​ ​ ​ Market Quotes ​ ​ Indicative Dealer Quotes ​ ​
25.0% – 102.8%
​ ​
98.2%
​
Senior Secured Loans—Second Lien
​ ​ ​
​
244,330
 ​ ​ ​
Market Comparables
​ ​ Market Yield (%) ​ ​
8.3% – 20.7%
​ ​
14.2%
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ EBITDA Multiples (x) ​ ​
5.0x – 6.5x
​ ​
6.1x
​
​ ​ ​ ​
​
82,805
 ​ ​ ​ Market Quotes ​ ​ Indicative Dealer Quotes ​ ​
13.2% – 102.3%
​ ​
89.2%
​
Senior Secured Bonds
​ ​ ​
​
89,268
 ​ ​ ​
Market Comparables
​ ​ Market Yield (%) ​ ​
7.7% – 12.3%
​ ​
8.7%
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ EBITDA Multiples (x) ​ ​
4.8x – 8.0x
​ ​
7.7x
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Production Multiples (Mboe/d) ​ ​
$42,250.0 – $44,750.0
​ ​
$43,500.0
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Proved Reserves Multiples (Mmboe)
​ ​
$10.3 – $11.3
​ ​
$10.8
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ PV-10 Multiples (x) ​ ​
0.8x – 0.8x
​ ​
0.8x
​
​ ​ ​ ​
​
28,347
 ​ ​ ​ Other(2) ​ ​ Other ​ ​
N/A
​ ​
N/A
​
​ ​ ​ ​
​
7,058
 ​ ​ ​ Market Quotes ​ ​ Indicative Dealer Quotes ​ ​
100.5% – 100.5%
​ ​
100.5%
​
Subordinated Debt
​ ​ ​
​
62,138
 ​ ​ ​
Market Comparables
​ ​ Market Yield (%) ​ ​
7.8% – 14.8%
​ ​
10.2%
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ EBITDA Multiples (x) ​ ​
10.5x – 11.0x
​ ​
10.8x
​
​ ​ ​ ​
​
303,910
 ​ ​ ​ Market Quotes ​ ​ Indicative Dealer Quotes ​ ​
52.0% – 108.5%
​ ​
97.9%
​
Collateralized Securities
​ ​ ​
​
25,763
 ​ ​ ​ Market Quotes ​ ​ Indicative Dealer Quotes ​ ​
63.3% – 100.2%
​ ​
72.1%
​
Equity/Other
​ ​ ​
​
260,420
 ​ ​ ​
Market Comparables
​ ​ Market Yield (%) ​ ​
15.3% – 15.8%
​ ​
15.5%
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Capacity Multiple ($/kW) ​ ​
$2,000.0 – $2,250.0
​ ​
$2,125.0
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ EBITDA Multiples (x) ​ ​
4.8x – 23.5x
​ ​
7.9x
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Production Multiples (Mboe/d) ​ ​
$32,500.0 – $51,250.0
​ ​
$35,881.4
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Production Multiples (MMcfe/d) ​ ​
$5,000.0 – $5,500.0
​ ​
$5,250.0
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Proved Reserves Multiples (Bcfe) ​ ​
$1.8 – $2.0
​ ​
$1.9
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Proved Reserves Multiples (Mmboe)
​ ​
$8.3 – $11.3
​ ​
$8.9
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ PV-10 Multiples (x) ​ ​
0.8x – 2.6x
​ ​
2.2x
​
​ ​ ​ ​ ​ ​ ​ ​ ​ Discounted Cash Flow ​ ​ Discount Rate (%) ​ ​
11.0% – 13.0%
​ ​
12.0%
​
​ ​ ​ ​ ​ ​ ​ ​ ​ Option Valuation Model ​ ​ Volatility (%) ​ ​
30.0% – 36.5%
​ ​
35.4%
​
​ ​ ​ ​
​
60,431
 ​ ​ ​ Other(2) ​ ​ Other ​ ​
N/A
​ ​
N/A
​
​ ​ ​ ​
​
5,686
 ​ ​ ​ Market Quotes ​ ​ Indicative Dealer Quotes ​ ​
0.0% – 9.8%
​ ​
8.1%
​
Total
​ ​ ​
$
4,591,226
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​
​
(1)
Investments using a market quotes valuation technique were valued by using the midpoint of the prevailing bid and ask prices from dealers on the date of the relevant period end, which were provided by independent third-party pricing services and screened for validity by such services. For investments utilizing a market comparables valuation technique, a significant increase (decrease) in the market yield, in isolation, would result in a significantly lower (higher) fair value measurement, and a significant increase (decrease) in any of the valuation multiples, in isolation, would result in a significantly higher (lower) fair value measurement. For investments utilizing a discounted cash flow valuation technique, a significant increase (decrease) in the discount rate, in isolation, would result in a significantly lower (higher) fair value measurement. For investments utilizing an option valuation model valuation technique, a significant increase (decrease) in the volatility, in isolation, would result in a significantly higher (lower) fair value measurement.
​
(2)
Fair value based on expected outcome of proposed corporate transactions and/or other factors.
​
45
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 8. Financing Arrangements
The following tables present summary information with respect to the Company’s outstanding financing arrangements as of September 30, 2018 and December 31, 2017. For additional information regarding these financing arrangements, see the notes to the Company’s audited consolidated financial statements contained in its annual report on Form 10-K for the year ended December 31, 2017. Any significant changes to the Company’s financing arrangements during the three months ended September 30, 2018 are discussed below.
​ ​ ​
As of September 30, 2018
(Unaudited)
​
Arrangement(1)
 ​ ​
Type of Arrangement
​ ​
Rate
​ ​
Amount
Outstanding
​ ​
Amount
Available
​ ​
Maturity
Date
​
Green Creek Credit Facility
​ ​
Term Loan Credit Facility
​ ​
L+2.50%
​ ​ ​ $ 500,000 ​ ​ ​ ​ $ — ​ ​ ​
December 15, 2019
​
Cooper River Credit Facility
​ ​
Revolving Credit Facility
​ ​
L+2.25%
​ ​ ​ ​ 132,000 ​ ​ ​ ​ ​ 68,000 ​ ​ ​
May 29, 2020
​
Darby Creek Credit Facility
​ ​
Revolving Credit Facility
​ ​
L+2.50%
​ ​ ​ ​ 135,000 ​ ​ ​ ​ ​ 115,000 ​ ​ ​
August 19, 2020
​
Juniata River Credit Facility
​ ​
Term Loan Credit Facility
​ ​
L+2.68%
​ ​ ​ ​ 850,000 ​ ​ ​ ​ ​ — ​ ​ ​
October 11, 2020
​
Senior Secured Revolving Credit Facility
​ ​
Revolving Credit Facility
​ ​
L+2.00% – 2.25%(2)
 ​ ​ ​ ​ 276,394(3) ​ ​ ​ ​ ​ 373,606 ​ ​ ​
August 9, 2023
​
Total
​ ​ ​ ​ ​ ​ ​ ​ ​ $ 1,893,394 ​ ​ ​ ​ $ 556,606 ​ ​ ​ ​ ​
​
(1)
The carrying amount outstanding under the facility approximates its fair value.
​
(2)
The spread over LIBOR is determined by reference to the ratio of the value of the borrowing base to a combined debt amount calculation.
​
(3)
Amount includes borrowings in U.S. Dollars and Canadian Dollars. Canadian dollar balance outstanding of CAD $73,000 has been converted to U.S. dollars at an exchange rate of CAD $1.00 to $0.77 as of September 30, 2018 to reflect total amount outstanding in U.S. dollars.
​
​ ​ ​
As of December 31, 2017
​
Arrangement(1)
 ​ ​
Type of Arrangement
​ ​
Rate
​ ​
Amount
Outstanding
​ ​
Amount
Available
​ ​
Maturity
Date
​
Green Creek Credit Facility
​ ​
Term Loan Credit Facility
​ ​
L+2.50%
​ ​ ​ $ 500,000 ​ ​ ​ ​ $ — ​ ​ ​
December 15, 2019
​
Cooper River Credit Facility
​ ​
Revolving Credit Facility
​ ​
L+2.25%
​ ​ ​ ​ 180,933 ​ ​ ​ ​ ​ 19,067 ​ ​ ​
May 29, 2020
​
Wissahickon Creek Credit Facility
​ ​
Revolving Credit Facility
​ ​
L+1.50% to L+2.50%
​ ​ ​ ​ 240,146 ​ ​ ​ ​ ​ 9,854 ​ ​ ​
February 18, 2022
​
Darby Creek Credit Facility
​ ​
Revolving Credit Facility
​ ​
L+2.50%
​ ​ ​ ​ 250,000 ​ ​ ​ ​ ​ — ​ ​ ​
August 19, 2020
​
Dunning Creek Credit Facility
​ ​
Revolving Credit Facility
​ ​
L+1.80%
​ ​ ​ ​ 150,000 ​ ​ ​ ​ ​ — ​ ​ ​
May 14, 2018
​
Juniata River Credit Facility
​ ​
Term Loan Credit Facility
​ ​
L+2.68%
​ ​ ​ ​ 850,000 ​ ​ ​ ​ ​ — ​ ​ ​
October 11, 2020
​
FSIC II Revolving Credit Facility
​ ​
Revolving Credit Facility
​ ​
See Note(2)
 ​ ​ ​ ​ 13,400(3) ​ ​ ​ ​ ​ 106,600 ​ ​ ​
February 23, 2021
​
Total
​ ​ ​ ​ ​ ​ ​ ​ ​ $ 2,184,479 ​ ​ ​ ​ $ 135,521 ​ ​ ​ ​ ​
​
(1)
The carrying amount outstanding under the facility approximates its fair value.
​
(2)
Interest under the FSIC II revolving credit facility for (i) loans for which the Company elects the base rate option is payable at a rate equal to 0.75% per annum plus the greatest of  (a) the “U.S. Prime Rate” as published in The Wall Street Journal, (b) the federal funds effective rate for such day plus 0.5%, (c) the three-month LIBOR plus 1% per annum and (d) zero; and (ii) loans for which the Company elects the Eurocurrency option is payable at a rate equal to LIBOR plus 1.75% per annum.
​
(3)
Amount includes borrowing in U.S. dollars, Euros, and Canadian Dollars. Euro balance outstanding of €9,000 has been converted to U.S. dollars at an exchange rate of €1.00 to $1.20 as of December 31, 2017 to reflect total amount outstanding in U.S. dollars. Canadian dollar balance outstanding of CAD$3,229 has been converted to U.S. dollars at an exchange rate of CAD $1.00 to $0.80 as of December 31, 2017 to reflect total amount outstanding in U.S. dollars.
​
​
46
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 8. Financing Arrangements (continued)
 
For the three months ended September 30, 2018 and 2017, the components of total interest expense for the Company’s financing arrangements were as follows:
​ ​ ​
Three Months Ended September 30,
​
​ ​ ​
2018
​ ​
2017
​
Arrangement(1)
 ​ ​
Direct
Interest
Expense(2)
 ​ ​
Amortization of
Deferred
Financing Costs
​ ​
Total
Interest
Expense
​ ​
Direct
Interest
Expense(2)
 ​ ​
Amortization of
Deferred
Financing Costs
​ ​
Total
Interest
Expense
​
Green Creek Credit Facility
​ ​ ​ $ 6,187 ​ ​ ​ ​ $ 315 ​ ​ ​ ​ $ 6,502 ​ ​ ​ ​ $ 4,655 ​ ​ ​ ​ $ 125 ​ ​ ​ ​ $ 4,780 ​ ​
Cooper River Credit Facility
​ ​ ​ ​ 1,901 ​ ​ ​ ​ ​ 117 ​ ​ ​ ​ ​ 2,018 ​ ​ ​ ​ ​ 1,628 ​ ​ ​ ​ ​ 117 ​ ​ ​ ​ ​ 1,745 ​ ​
Wissahickon Creek Credit Facility
​ ​ ​ ​ 1,118 ​ ​ ​ ​ ​ 1,816 ​ ​ ​ ​ ​ 2,934 ​ ​ ​ ​ ​ 2,289 ​ ​ ​ ​ ​ 266 ​ ​ ​ ​ ​ 2,555 ​ ​
Darby Creek Credit Facility
​ ​ ​ ​ 2,243 ​ ​ ​ ​ ​ 139 ​ ​ ​ ​ ​ 2,382 ​ ​ ​ ​ ​ 2,567 ​ ​ ​ ​ ​ 345 ​ ​ ​ ​ ​ 2,912 ​ ​
Dunning Creek Credit Facility
​ ​ ​ ​ 268 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 268 ​ ​ ​ ​ ​ 1,198 ​ ​ ​ ​ ​ 94 ​ ​ ​ ​ ​ 1,292 ​ ​
Juniata River Credit Facility
​ ​ ​ ​ 10,907 ​ ​ ​ ​ ​ 370 ​ ​ ​ ​ ​ 11,277 ​ ​ ​ ​ ​ 8,587 ​ ​ ​ ​ ​ 369 ​ ​ ​ ​ ​ 8,956 ​ ​
FSIC II Revolving Credit Facility
​ ​ ​ ​ 11 ​ ​ ​ ​ ​ 4 ​ ​ ​ ​ ​ 15 ​ ​ ​ ​ ​ 407 ​ ​ ​ ​ ​ 13 ​ ​ ​ ​ ​ 420 ​ ​
Senior Secured Revolving Credit Facility
​ ​ ​ ​ 1,395 ​ ​ ​ ​ ​ 133 ​ ​ ​ ​ ​ 1,528 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Partial Loan Sale(3)
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 121 ​ ​ ​ ​ ​ 5 ​ ​ ​ ​ ​ 126 ​ ​
Total
​ ​ ​ $ 24,030 ​ ​ ​ ​ $ 2,894 ​ ​ ​ ​ $ 26,924 ​ ​ ​ ​ $ 21,452 ​ ​ ​ ​ $ 1,334 ​ ​ ​ ​ $ 22,786 ​ ​
​
​
(1)
Borrowings of each of the Company’s special-purpose financing subsidiaries (as defined below) are considered borrowings of the Company for purposes of complying with the asset coverage requirements applicable to BDCs under the 1940 Act.
​
(2)
Direct interest expense may include the effect of non-usage fees and/or make-whole fees.
​
(3)
Total interest expense for the secured borrowing includes the effect of amortization of discount.
​
For the nine months ended September 30, 2018 and 2017, the components of total interest expense for the Company’s financing arrangements were as follows:
​ ​ ​
Nine Months Ended September 30,
​
​ ​ ​
2018
​ ​
2017
​
Arrangement(1)
 ​ ​
Direct
Interest
Expense(2)
 ​ ​
Amortization of
Deferred
Financing Costs
​ ​
Total
Interest
Expense
​ ​
Direct
Interest
Expense(2)
 ​ ​
Amortization of
Deferred
Financing Costs
​ ​
Total
Interest
Expense
​
Goldman Repurchase Facility
​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​ ​ ​ $ 5,249 ​ ​ ​ ​ $ 202 ​ ​ ​ ​ $ 5,451 ​ ​
Green Creek Credit Facility
​ ​ ​ ​ 17,225 ​ ​ ​ ​ ​ 583 ​ ​ ​ ​ ​ 17,808 ​ ​ ​ ​ ​ 6,503 ​ ​ ​ ​ ​ 205 ​ ​ ​ ​ ​ 6,708 ​ ​
Cooper River Credit Facility
​ ​ ​ ​ 5,876 ​ ​ ​ ​ ​ 347 ​ ​ ​ ​ ​ 6,223 ​ ​ ​ ​ ​ 4,586 ​ ​ ​ ​ ​ 347 ​ ​ ​ ​ ​ 4,933 ​ ​
Wissahickon Creek Credit Facility
​ ​ ​ ​ 6,342 ​ ​ ​ ​ ​ 2,342 ​ ​ ​ ​ ​ 8,684 ​ ​ ​ ​ ​ 6,519 ​ ​ ​ ​ ​ 744 ​ ​ ​ ​ ​ 7,263 ​ ​
Darby Creek Credit Facility
​ ​ ​ ​ 7,759 ​ ​ ​ ​ ​ 527 ​ ​ ​ ​ ​ 8,286 ​ ​ ​ ​ ​ 7,306 ​ ​ ​ ​ ​ 1,023 ​ ​ ​ ​ ​ 8,329 ​ ​
Dunning Creek Credit Facility
​ ​ ​ ​ 2,914 ​ ​ ​ ​ ​ 136 ​ ​ ​ ​ ​ 3,050 ​ ​ ​ ​ ​ 3,008 ​ ​ ​ ​ ​ 298 ​ ​ ​ ​ ​ 3,306 ​ ​
Juniata River Credit Facility
​ ​ ​ ​ 30,767 ​ ​ ​ ​ ​ 1,095 ​ ​ ​ ​ ​ 31,862 ​ ​ ​ ​ ​ 24,381 ​ ​ ​ ​ ​ 1,095 ​ ​ ​ ​ ​ 25,476 ​ ​
FSIC II Revolving Credit Facility
​ ​ ​ ​ 488 ​ ​ ​ ​ ​ 29 ​ ​ ​ ​ ​ 517 ​ ​ ​ ​ ​ 1,086 ​ ​ ​ ​ ​ 55 ​ ​ ​ ​ ​ 1,141 ​ ​
Senior Secured Revolving Credit Facility
​ ​ ​ ​ 1,395 ​ ​ ​ ​ ​ 133 ​ ​ ​ ​ ​ 1,528 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Partial Loan Sale(3)
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 351 ​ ​ ​ ​ ​ 13 ​ ​ ​ ​ ​ 364 ​ ​
Total
​ ​ ​ $ 72,766 ​ ​ ​ ​ $ 5,192 ​ ​ ​ ​ $ 77,958 ​ ​ ​ ​ $ 58,989 ​ ​ ​ ​ $ 3,982 ​ ​ ​ ​ $ 62,971 ​ ​
​
​
(1)
Borrowings of each of the Company’s special-purpose financing subsidiaries (as defined below) are considered borrowings of the Company for purposes of complying with the asset coverage requirements applicable to BDCs under the 1940 Act.
​
​
47
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 8. Financing Arrangements (continued)
 
(2)
Direct interest expense may include the effect of non-usage fees and/or make-whole fees.
​
(3)
Total interest expense for the secured borrowing includes the effect of amortization of discount.
​
The Company’s average borrowings and weighted average interest rate, including the effect of non-usage fees, for the nine months ended September 30, 2018 were $2,051,616 and 4.68%, respectively. As of September 30, 2018, the Company’s weighted average effective interest rate on borrowings was 5.03%.
Senior Secured Revolving Credit Facility
On August 9, 2018, or the Effective Date, the Company entered into a senior secured revolving credit facility, or the Senior Secured Revolving Credit Facility, with Corporate Capital Trust, Inc., or CCT, FS Investment Corporation, or FSIC, FS Investment Corporation III, or FSIC III, JPMorgan Chase Bank, N.A., or JPMorgan, as administrative agent, ING Capital LLC, or ING, as collateral agent and the lenders party thereto. The Senior Secured Revolving Credit Facility provides for borrowings in U.S. dollars and certain agreed upon foreign currencies in an initial aggregate amount of up to $3,435,000, with an option for the Company to request, at one or more times after the Effective Date, that existing or new lenders, at their election, provide up to $1,717,500 of additional commitments. As of the Effective Date, the Senior Secured Revolving Credit Facility provides for a sublimit available for the Company to borrow up to $650,000 of the total facility amount which sublimit may be reduced or increased from time to time pursuant to the terms of the Senior Secured Revolving Credit Facility and subject to the oversight and approval of the Company’s board of directors. A sublimit of the total facility amount also is available to each of CCT, FSIC and FSIC III, as additional borrowers, and the obligations of the other borrowers under the Senior Secured Revolving Credit Facility are several (and not joint) in all respects. The Senior Secured Revolving Credit Facility provides for the issuance of letters of credit on behalf of the Company in an aggregate face amount not to exceed $25,000. The Company’s obligations under the Senior Secured Revolving Credit Facility are guaranteed by certain of the Company’s subsidiaries, including Cobbs Creek LLC, IC II American Energy Investments, Inc., Wissahickon Creek LLC, FSIC II Investments, Inc., IC II Altus Investments, LLC, IC II Arches Investments, LLC and Dunning Creek LLC. The Company’s obligations under the Senior Secured Revolving Credit Facility are secured by a first priority security interest in substantially all of the assets of the Company and the subsidiary guarantors thereunder.
Availability under the Senior Secured Revolving Credit Facility will terminate on August 9, 2022, or the Revolver Termination Date, and the outstanding loans under the Senior Secured Revolving Credit Facility will mature on August 9, 2023. The Senior Secured Revolving Credit Facility also requires mandatory prepayment of interest and principal upon certain events during the term-out period commencing on the Revolver Termination Date.
The proceeds of the Senior Secured Revolving Credit Facility drawn by the Company on the Effective Date were used in part to prepay in full all loans outstanding on the Effective Date under (i) the Senior Secured Revolving Credit Agreement, dated as of February 23, 2016, by and among the Company, the lenders party thereto and ING as administrative agent (as amended, restated, amended and restated and otherwise modified on or prior to the Effective Date), or the FSIC II Revolving Credit Facility, (ii) the Credit Agreement, dated as of May 14, 2014, by and among Dunning Creek LLC, Deutsche Bank AG, New York Branch, as administrative agent and lender, and the other lenders party thereto (as amended, restated, amended and restated and otherwise modified on or prior to the Effective Date), or the Dunning Creek Credit Facility, and (iii) the Loan and Servicing Agreement, dated as of February 19, 2014, by and among Wissahickon Creek LLC, Wells Fargo Securities, LLC, as administrative agent, Wells Fargo Bank, National Association, as collateral agent, collateral bank and collateral custodians, and the lenders and lender agents party thereto (as amended, restated, amended and restated and otherwise modified on or prior to the Effective Date), or the Wissahickon Creek Credit Facility.
48
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 8. Financing Arrangements (continued)
 
Borrowings under the Senior Secured Revolving Credit Facility are subject to compliance with a borrowing base test. Interest under the Senior Secured Revolving Credit Facility for (i) loans for which the Company elects the base rate option, (A) if the value of the borrowing base is equal to or greater than 1.85 times the combined debt amount, is payable at an “alternate base rate” (which is the greatest of  (a) the prime rate as publicly announced by JPMorgan, (b) the sum of  (x) the greater of  (I) the federal funds effective rate and (II) the overnight bank funding rate plus (y) 0.5%, and (c) the one month LIBOR plus 1% per annum) plus 1.00% and, (B) if the value of the borrowing base is less than 1.85 times the combined debt amount, the alternate base rate plus 1.25%; and (ii) loans for which the Company elects the Eurocurrency option (A) if the value of the borrowing base is equal to or greater than 1.85 times the combined debt amount, is payable at a rate equal to LIBOR plus 2.00% and (B) if the value of the borrowing base is less than 1.85 times the combined debt amount, is payable at a rate equal to LIBOR plus 2.25%. The Company will pay a non-usage fee of at least 0.375% and up to 0.50% per annum (based on the immediately preceding quarter’s average usage) on the unused portion of its sublimit under the Senior Secured Revolving Credit Facility during the revolving period. The Company also will be required to pay letter of credit participation fees and a fronting fee on the average daily amount of any lender’s exposure with respect to any letters of credit issued under the Senior Secured Revolving Credit Facility.
In connection with the Senior Secured Revolving Credit Facility, the Company has made certain representations and warranties and must comply with various covenants and reporting requirements customary for facilities of this type. In addition, the Company must comply with the following financial covenants: (a) the Company must maintain a minimum shareholders’ equity, measured as of each fiscal quarter end; and (b) the Company must maintain at all times a 200% asset coverage ratio.
The Senior Secured Revolving Credit Facility contains events of default customary for facilities of this type. Upon the occurrence of an event of default, JPMorgan, at the instruction of the lenders, may terminate the commitments and declare the outstanding advances and all other obligations under the Senior Secured Revolving Credit Facility immediately due and payable.
The Company incurred costs in connection with obtaining the Senior Secured Revolving Credit Facility, which the Company has recorded as deferred financing costs, along with $131 of unamortized fees from the FSIC II Revolving Credit Facility, on its consolidated balance sheets and which the company amortizes to interest expense over the life of the facility. As of September 30, 2018, $4,403 of such deferred financing costs had yet to be amortized to interest expense.
Dunning Creek Credit Facility
In connection with entering into the Senior Secured Revolving Credit Facility, the Company repaid and terminated all loans outstanding under the Dunning Creek Credit Facility.
Wissahickon Creek Credit Facility
In connection with entering into the Senior Secured Revolving Credit Facility, the Company repaid and terminated all loans outstanding under the Wissahickon Creek Credit Facility. The $2,342 of remaining unamortized deferred financing costs for the Wissahickon Creek Credit Facility were charged to interest expense.
FSIC II Revolving Credit Facility
In connection with entering into the Senior Secured Revolving Credit Facility, the Company repaid and terminated all loans outstanding under the FSIC II Revolving Credit Facility. The Company incurred costs in connection with obtaining the FSIC II Revolving Credit Facility, which the Company had recorded as deferred financing costs on its consolidated balance sheets and amortized to interest expense over the life
49
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 8. Financing Arrangements (continued)
 
of the facility. As of August 9, 2018, $131 of such deferred financing costs had yet to be amortized to interest expense. Pursuant to the terms of the Senior Secured Revolving Credit Facility, the remaining unamortized deferred financing costs of  $131 will be amortized over the contractual term of the Senior Secured Revolving Credit Facility.
Cooper River Credit Facility
On September 10, 2018, Cooper River LLC entered into a fourth amendment to the Revolving Credit And Security Agreement, by and among Cooper River LLC, Citibank, N.A., as administrative agent, and the financial institutions and other lenders from time to time party thereto, which extended the reinvestment period from September 28, 2018 to November 30, 2018.
Note 9. Commitments and Contingencies
The Company enters into contracts that contain a variety of indemnification provisions. The Company’s maximum exposure under these arrangements is unknown; however, the Company has not had prior claims or losses pursuant to these contracts. Management of FS/KKR Advisor has reviewed the Company’s existing contracts and expects the risk of loss to the Company to be remote.
The Company is not currently subject to any material legal proceedings and, to the Company’s knowledge, no material legal proceedings are threatened against the Company. From time to time, the Company may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of the Company’s rights under contracts with its portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, the Company does not expect that any such proceedings will have a material effect upon its financial condition or results of operations.
See Note 6 for a discussion of the Company’s unfunded commitments.
50
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 10. Financial Highlights
The following is a schedule of financial highlights of the Company for the nine months ended September 30, 2018 and the year ended December 31, 2017:
​ ​ ​
Nine Months Ended
September 30, 2018
(Unaudited)
​ ​
Year Ended
December 31, 2017
​
Per Share Data:(1) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Net asset value, beginning of period
​ ​ ​ $ 8.73 ​ ​ ​ ​ $ 8.90 ​ ​
Results of operations(2) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Net investment income
​ ​ ​ ​ 0.55 ​ ​ ​ ​ ​ 0.83 ​ ​
Net realized and unrealized appreciation (depreciation) on investments,
gain/loss on foreign currency and secured borrowing
 ​ ​ ​ ​ (0.48) ​ ​ ​ ​ ​ (0.25) ​ ​
Net increase (decrease) in net assets resulting from operations
​ ​ ​ ​ 0.07 ​ ​ ​ ​ ​ 0.58 ​ ​
Stockholder distributions(3) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Distributions from net investment income
​ ​ ​ ​ (0.57) ​ ​ ​ ​ ​ (0.75) ​ ​
Distributions from net realized gain on investments
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Net decrease in net assets resulting from stockholder distributions
​ ​ ​ ​ (0.57) ​ ​ ​ ​ ​ (0.75) ​ ​
Capital share transactions ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Issuance of common stock(4)
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Repurchases of common stock(5)
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Net increase (decrease) in net assets resulting from capital share transactions
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Net asset value, end of period
​ ​ ​ $ 8.23 ​ ​ ​ ​ ​ 8.73 ​ ​
Shares outstanding, end of period
​ ​ ​ ​ 326,478,291 ​ ​ ​ ​ ​ 326,748,337 ​ ​
Total return(6)
 ​ ​ ​ ​ 0.67% ​ ​ ​ ​ ​ 6.59% ​ ​
Total return (without assuming reinvestment of distributions)(6)
 ​ ​ ​ ​ 0.80% ​ ​ ​ ​ ​ 6.52% ​ ​
Ratio/Supplemental Data: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Net assets, end of period
​ ​ ​ $ 2,688,126 ​ ​ ​ ​ $ 2,853,021 ​ ​
Ratio of net investment income to average net assets(7)
 ​ ​ ​ ​ 8.63% ​ ​ ​ ​ ​ 9.32% ​ ​
Ratio of operating expenses and excise taxes to average net assets(7)
 ​ ​ ​ ​ 8.16% ​ ​ ​ ​ ​ 9.10% ​ ​
Ratio of net operating expenses and excise taxes to average net assets(7)
 ​ ​ ​ ​ 7.99% ​ ​ ​ ​ ​ 8.66% ​ ​
Portfolio turnover(8)
 ​ ​ ​ ​ 30.31% ​ ​ ​ ​ ​ 39.62% ​ ​
Total amount of senior securities outstanding, exclusive of treasury securities
​ ​ ​ $ 1,893,394 ​ ​ ​ ​ $ 2,184,479 ​ ​
Asset coverage per unit(9)
 ​ ​ ​ ​ 2.42 ​ ​ ​ ​ ​ 2.31 ​ ​
​
(1)
Per share data may be rounded in order to recompute the ending net asset value per share.
​
(2)
The per share data was derived by using the weighted average shares outstanding during the applicable period.
​
(3)
The per share data for distributions reflects the actual amount of distributions paid per share during the applicable period.
​
​
51
FS Investment Corporation II
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
​
 
Note 10. Financial Highlights (continued)
 
(4)
The issuance of common stock on a per share basis reflects the incremental net asset value changes as a result of the issuance of shares of common stock pursuant to the Company’s DRP. The issuance of common stock at a price that is greater than the net asset value per share results in an increase in net asset value per share.
​
(5)
The per share impact of the Company’s repurchases of common stock is a reduction to net asset value of less than $0.01 per share during the period.
​
(6)
The total return for each period presented was calculated based on the change in net asset value during the applicable period, including the impact of distributions reinvested in accordance with the Company’s DRP. The total return (without assuming reinvestment of distributions) for each period presented was calculated by taking the net asset value per share as of the end of the applicable period, adding the cash distributions per share which were declared during the applicable period and dividing the total by the net asset value per share at the beginning of the applicable period. The total returns (with and without assuming reinvestment of distributions) do not consider the effect of any selling commissions or charges that may be incurred in connection with the sale of shares of the Company’s common stock. The total returns (with and without assuming reinvestment of distributions) include the effect of the issuance of shares at a net offering price that is greater than net asset value per share, which causes an increase in net asset value per share. The historical calculations of total returns (with and without assuming reinvestment of distributions) in the table should not be considered representations of the Company’s future total returns (with and without assuming reinvestment of distributions), which may be greater or less than the returns shown in the table due to a number of factors, including the Company’s ability or inability to make investments in companies that meet its investment criteria, the interest rates payable on the debt securities the Company acquires, the level of the Company’s expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which the Company encounters competition in its markets and general economic conditions. As a result of these factors, results for any previous period should not be relied upon as being indicative of performance in future periods. The total return calculations set forth above represent the total returns on the Company’s investment portfolio during the applicable period and do not represent actual returns to stockholders.
​
(7)
Weighted average net assets during the applicable period are used for this calculation. Ratios for the nine months ended September 30, 2018 are annualized. Annualized ratios for the nine months ended September 30, 2018 are not necessarily indicative of the ratios that may be expected for the year ending December 31, 2018. The following is a schedule of supplemental ratios for the nine months ended September 30, 2018 and the year ended December 31, 2017:
​
​ ​ ​
Nine Months Ended
September 30, 2018
(Unaudited)
​ ​
Year Ended
December 31, 2017
​
Ratio of subordinated income incentive fees to average net assets
 ​ ​ ​ ​ 0.92% ​ ​ ​ ​ ​ 2.11% ​ ​
Ratio of interest expense to average net assets
​ ​ ​ ​ 3.78% ​ ​ ​ ​ ​ 2.97% ​ ​
Ratio of excise taxes to average net assets
​ ​ ​ ​ — ​ ​ ​ ​ ​ 0.08% ​ ​
(8)
Portfolio turnover for the nine months ended September 30, 2018 is not annualized.
​
(9)
Asset coverage per unit is the ratio of the carrying value of the Company’s total consolidated assets, less liabilities and indebtedness not represented by senior securities, to the aggregate amount of senior securities representing indebtedness.
​
52
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(in thousands, except share and per share amounts)
​
The information contained in this section should be read in conjunction with our unaudited consolidated financial statements and related notes thereto appearing elsewhere in this quarterly report on Form 10-Q. In this report, “we,” “us,” “our” and the “Company” refer to FS Investment Corporation II.
Forward-Looking Statements
Some of the statements in this quarterly report on Form 10-Q constitute forward-looking statements because they relate to future events or our future performance or financial condition. The forward-looking statements contained in this quarterly report on Form 10-Q may include statements as to:
•
our future operating results;
​
•
our business prospects and the prospects of the companies in which we may invest;
​
•
the impact of the investments that we expect to make;
​
•
the ability of our portfolio companies to achieve their objectives;
​
•
our current and expected financings and investments;
​
•
changes in the general interest rate environment;
​
•
the adequacy of our cash resources, financing sources and working capital;
​
•
the timing and amount of cash flows, distributions and dividends, if any, from our portfolio companies;
​
•
our contractual arrangements and relationships with third parties;
​
•
actual and potential conflicts of interest with FS/KKR Advisor, FS Investments, KKR Credit or any of their respective affiliates;
​
•
the dependence of our future success on the general economy and its effect on the industries in which we may invest;
​
•
our use of financial leverage;
​
•
the ability of FS/KKR Advisor to locate suitable investments for us and to monitor and administer our investments;
​
•
the ability of FS/KKR Advisor or its affiliates to attract and retain highly talented professionals;
​
•
our ability to maintain our qualification as a RIC and as a BDC;
​
•
the impact on our business of the Dodd-Frank Wall Street Reform and Consumer Protection Act, as amended, and the rules and regulations issued thereunder;
​
•
the effect of changes to tax legislation on us and the portfolio companies in which we may invest and our and their tax position; and
​
•
the tax status of the enterprises in which we may invest.
​
In addition, words such as “anticipate,” “believe,” “expect” and “intend” indicate a forward-looking statement, although not all forward-looking statements include these words. The forward-looking statements contained in this quarterly report on Form 10-Q involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason. Factors that could cause actual results to differ materially include:
•
changes in the economy;
​
•
risks associated with possible disruption in our operations or the economy generally due to terrorism or natural disasters; and
​
•
future changes in laws or regulations and conditions in our operating areas.
​
​
53
We have based the forward-looking statements included in this quarterly report on Form 10-Q on information available to us on the date of this quarterly report on Form 10-Q. Except as required by the federal securities laws, we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise. Stockholders are advised to consult any additional disclosures that we may make directly to stockholders or through reports that we may file in the future with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. The forward-looking statements and projections contained in this quarterly report on Form 10-Q are excluded from the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act.
Overview
We were incorporated under the general corporation laws of the State of Maryland on July 13, 2011 and formally commenced investment operations on June 18, 2012. We are an externally managed, non-diversified, closed-end management investment company that has elected to be regulated as a BDC under the 1940 Act and has elected to be treated for U.S. federal income tax purposes, and intends to qualify annually, as a RIC under Subchapter M of the Code. In March 2014, we closed our continuous public offering of shares of common stock to new investors.
Our investment activities are managed by FS/KKR Advisor and supervised by our board of directors, a majority of whom are independent. Under the FS/KKR Advisor investment advisory and administrative services agreement, we have agreed to pay FS/KKR Advisor an annual base management fee based on the average weekly value of our gross assets and an incentive fee based on our performance.
Our investment activities were managed by FSIC II Advisor until April 9, 2018 and thereafter have been managed by FS/KKR Advisor. FSIC II Advisor previously engaged GDFM to act as our investment sub-adviser. GDFM resigned as our investment sub-adviser and terminated the investment sub-advisory agreement on April 9, 2018.
Our investment objectives are to generate current income and, to a lesser extent, long-term capital appreciation. We have identified and intend to focus on the following investment categories, which we believe will allow us to generate an attractive total return with an acceptable level of risk.
Direct Originations: We intend to directly source investment opportunities. Such investments are originated or structured for us or made by us and are not generally available to the broader market. These investments may include both debt and equity components, although we do not generally make equity investments independent of having an existing credit relationship. We believe directly originated investments may offer higher returns and more favorable protections than broadly syndicated transactions.
Opportunistic: We intend to seek to capitalize on market price inefficiencies by investing in loans, bonds and other securities where the market price of such investment reflects a lower value than deemed warranted by our fundamental analysis. We believe that market price inefficiencies may occur due to, among other things, general dislocations in the markets, a misunderstanding by the market of a particular company or an industry being out of favor with the broader investment community. We seek to allocate capital to these securities that have been misunderstood or mispriced by the market and where we believe there is an opportunity to earn an attractive return on our investment. Such opportunities may include event driven investments, anchor orders (i.e., opportunities that are originated and then syndicated by a commercial or investment bank but where we provide a capital commitment significantly above the average syndicate participant) and CLOs.
In the case of event driven investments, we intend to take advantage of dislocations that arise in the markets due to an impending event and where the market’s apparent expectation of value differs substantially from our fundamental analysis. Such events may include a looming debt maturity or default, a merger, spin-off or other corporate reorganization, an adverse regulatory or legal ruling, or a material contract expiration, any of which may significantly improve or impair a company’s financial position. Compared to other investment strategies, event driven investing depends more heavily on our ability to
54
successfully predict the outcome of an individual event rather than on underlying macroeconomic fundamentals. As a result, successful event driven strategies may offer both substantial diversification benefits and the ability to generate performance in uncertain market environments.
We may also invest in anchor orders. In these types of investments, we may receive fees, preferential pricing or other benefits not available to other lenders in return for our significant capital commitment. Our decision to provide an anchor order to a syndicated transaction is predicated on a rigorous credit analysis, our familiarity with a particular company, industry or financial sponsor, and the broader investment experiences of our investment adviser.
In addition, we opportunistically invest in CLOs. CLOs are a form of securitization where the cash flow from a pooled basket of syndicated loans is used to support distribution payments made to different tranches of securities. While collectively CLOs represent nearly fifty percent of the broadly syndicated loan universe, investing in individual CLO tranches requires a high degree of investor sophistication due to their structural complexity and the illiquid nature of their securities.
Broadly Syndicated/Other: Although our primary focus is to invest in directly originated transactions and opportunistic investments, in certain circumstances we will also invest in the broadly syndicated loan and high yield markets. Broadly syndicated loans and bonds are generally more liquid than our directly originated investments and provide a complement to our less liquid strategies. In addition, and because we typically receive more attractive financing terms on these positions than we do on our less liquid assets, we are able to leverage the broadly syndicated portion of our portfolio in such a way that maximizes the levered return potential of our portfolio.
Our portfolio is comprised primarily of investments in senior secured loans and second lien secured loans of private middle market U.S. companies and, to a lesser extent, subordinated loans of private U.S. companies. Although we do not expect a significant portion of our portfolio to be comprised of subordinated loans, there is no limit on the amount of such loans in which we may invest. We may purchase interests in loans or make other debt investments, including investments in senior secured bonds, through secondary market transactions in the “over-the-counter” market or directly from our target companies as primary market or directly originated investments. In connection with our debt investments, we may on occasion receive equity interests such as warrants or options as additional consideration. We may also purchase or otherwise acquire interests in the form of common or preferred equity or equity-related securities, such as rights and warrants that may be converted into or exchanged for common stock or other equity or the cash value of common stock or other equity, in our target companies, generally in conjunction with one of our debt investments, including through the restructuring of such investments, or through a co-investment with a financial sponsor, such as an institutional investor or private equity firm. In addition, a portion of our portfolio may be comprised of corporate bonds, CLOs, other debt securities and derivatives, including total return swaps and credit default swaps. FS/KKR Advisor will seek to tailor our investment focus as market conditions evolve. Depending on market conditions, we may increase or decrease our exposure to less senior portions of the capital structure or otherwise make opportunistic investments. The senior secured loans, second lien secured loans and senior secured bonds in which we invest generally have stated terms of three to seven years and subordinated debt investments that we make generally have stated terms of up to ten years, but the expected average life of such securities is generally between three and seven years. However, there is no limit on the maturity or duration of any security in our portfolio. Our debt investments may be rated by a NRSRO and, in such case, generally will carry a rating below investment grade.
Revenues
The principal measure of our financial performance is net increase in net assets resulting from operations, which includes net investment income, net realized gain or loss on investments, net realized gain or loss on credit default swaps, net realized gain or loss on foreign currency, net unrealized appreciation or depreciation on investments, net unrealized appreciation or depreciation on credit default swaps and net unrealized gain or loss on foreign currency. Net investment income is the difference between our income from interest, dividends, fees and other investment income and our operating and other expenses. Net realized gain or loss on investments is the difference between the proceeds received from dispositions of portfolio investments and their amortized cost, including the respective realized gain or loss on foreign
55
currency for those foreign denominated investment transactions. Net gain or loss on credit default swaps represents the amortized portion of swap premiums received, the periodic payments received and the net realized gain or loss resulting from the exit of our credit default swaps. Net realized gain or loss on foreign currency is the portion of realized gain or loss attributable to foreign currency fluctuations. Net unrealized appreciation or depreciation on investments is the net change in the fair value of our investment portfolio, including the respective unrealized gain or loss on foreign currency for those foreign denominated investments. Net unrealized appreciation or depreciation on credit default swaps is the net change in the market value of our credit default swaps. Net unrealized gain or loss on foreign currency is the net change in the value of receivables or accruals due to the impact of foreign currency fluctuations.
We principally generate revenues in the form of interest income on the debt investments we hold. In addition, we generate revenues in the form of non-recurring commitment, closing, origination, structuring or diligence fees, monitoring fees, fees for providing managerial assistance, consulting fees, prepayment fees and performance-based fees. We may also generate revenues in the form of dividends and other distributions on the equity or other securities we hold.
Expenses
Our primary operating expenses include the payment of management and incentive fees and other expenses under the FS/KKR Advisor investment advisory and administrative services agreement, interest expense from financing arrangements and other indebtedness, and other expenses necessary for our operations. The management and incentive fees compensate FS/KKR Advisor for its work in identifying, evaluating, negotiating, executing, monitoring and servicing our investments.
FS/KKR Advisor oversees our day-to-day operations, including the provision of general ledger accounting, fund accounting, legal services, investor relations, certain government and regulatory affairs activities, and other administrative services. FS/KKR Advisor also performs, or oversees the performance of, our corporate operations and required administrative services, which includes being responsible for the financial records that we are required to maintain and preparing reports for our stockholders and reports filed with the SEC. In addition, FS/KKR Advisor assists us in calculating our net asset value, overseeing the preparation and filing of tax returns and the printing and dissemination of reports to our stockholders, and generally overseeing the payment of our expenses and the performance of administrative and professional services rendered to us by others.
Pursuant to the FS/KKR Advisor investment advisory and administrative services agreement, we reimburse FS/KKR Advisor for expenses necessary to perform services related to our administration and operations, including FS/KKR Advisor’s allocable portion of the compensation and related expenses of certain personnel of FS Investments and KKR Credit providing administrative services to us on behalf of FS/KKR Advisor. We reimburse FS/KKR Advisor no less than monthly for expenses necessary to perform services related to our administration and operations. The amount of this reimbursement is set at the lesser of  (1) FS/KKR Advisor’s actual costs incurred in providing such services and (2) the amount that we estimate we would be required to pay alternative service providers for comparable services in the same geographic location. FS/KKR Advisor allocates the cost of such services to us based on factors such as total assets, revenues, time allocations and/or other reasonable metrics. Our board of directors reviews the methodology employed in determining how the expenses are allocated to us and the proposed allocation of administrative expenses among us and certain affiliates of FS/KKR Advisor. Our board of directors then assesses the reasonableness of such reimbursements for expenses allocated to us based on the breadth, depth and quality of such services as compared to the estimated cost to us of obtaining similar services from third-party service providers known to be available. In addition, our board of directors considers whether any single third-party service provider would be capable of providing all such services at comparable cost and quality. Finally, our board of directors compares the total amount paid to FS/KKR Advisor for such services as a percentage of our net assets to the same ratio as reported by other comparable BDCs.
We bear all other expenses of our operations and transactions, including all other expenses incurred by FS/KKR Advisor in performing services for us and administrative personnel paid by FS Investments and KKR Credit.
56
In addition, we have contracted with State Street Bank and Trust Company to provide various accounting and administrative services, including, but not limited to, preparing preliminary financial information for review by FS/KKR Advisor, preparing and monitoring expense budgets, maintaining accounting and corporate books and records, processing trade information provided by us and performing testing with respect to RIC compliance.
Portfolio Investment Activity for the Three and Nine Months Ended September 30, 2018 and for the Year Ended December 31, 2017
Total Portfolio Activity
The following tables present certain selected information regarding our portfolio investment activity for the three and nine months ended September 30, 2018:
Net Investment Activity
​ ​
For the Three Months Ended
September 30, 2018
​ ​
For the Nine Months Ended
September 30, 2018
​
Purchases
​ ​ ​ $ 731,019 ​ ​ ​ ​ $ 1,331,866 ​ ​
Sales and Repayments
​ ​ ​ ​ (665,229) ​ ​ ​ ​ ​ (1,458,900) ​ ​
Net Portfolio Activity
​ ​ ​ $ 65,790 ​ ​ ​ ​ $ (127,034) ​ ​
​
​ ​ ​
For the Three Months Ended
September 30, 2018
​ ​
For the Nine Months Ended
September 30, 2018
​
New Investment Activity by Asset Class
​ ​
Purchases
​ ​
Percentage
​ ​
Purchases
​ ​
Percentage
​
Senior Secured Loans—First Lien
​ ​ ​ $ 585,507 ​ ​ ​ ​ ​ 80% ​ ​ ​ ​ $ 1,014,755 ​ ​ ​ ​ ​ 76% ​ ​
Senior Secured Loans—Second Lien
​ ​ ​ ​ 100,328 ​ ​ ​ ​ ​ 14% ​ ​ ​ ​ ​ 132,003 ​ ​ ​ ​ ​ 10% ​ ​
Senior Secured Bonds
​ ​ ​ ​ 13,918 ​ ​ ​ ​ ​ 2% ​ ​ ​ ​ ​ 78,684 ​ ​ ​ ​ ​ 6% ​ ​
Subordinated Debt
​ ​ ​ ​ 30,707 ​ ​ ​ ​ ​ 4% ​ ​ ​ ​ ​ 74,088 ​ ​ ​ ​ ​ 6% ​ ​
Collateralized Securities
​ ​ ​ ​ 520 ​ ​ ​ ​ ​ 0% ​ ​ ​ ​ ​ 912 ​ ​ ​ ​ ​ 0% ​ ​
Equity/Other
​ ​ ​ ​ 39 ​ ​ ​ ​ ​ 0% ​ ​ ​ ​ ​ 31,424 ​ ​ ​ ​ ​ 2% ​ ​
Total
​ ​ ​ $ 731,019 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ $ 1,331,866 ​ ​ ​ ​ ​ 100% ​ ​
​
The following table summarizes the composition of our investment portfolio at cost and fair value as of September 30, 2018 and December 31, 2017:
​ ​ ​
September 30, 2018 (Unaudited)
​ ​
December 31, 2017
​
​ ​ ​
Amortized
Cost(1)
 ​ ​
Fair Value
​ ​
Percentage
of Portfolio
​ ​
Amortized
Cost(1)
 ​ ​
Fair Value
​ ​
Percentage
of Portfolio
​
Senior Secured Loans—First Lien
​ ​ ​ $ 3,400,523 ​ ​ ​ ​ $ 3,313,859 ​ ​ ​ ​ ​ 77% ​ ​ ​ ​ $ 3,408,133 ​ ​ ​ ​ $ 3,421,070 ​ ​ ​ ​ ​ 74% ​ ​
Senior Secured Loans—Second Lien
​ ​ ​ ​ 366,321 ​ ​ ​ ​ ​ 278,162 ​ ​ ​ ​ ​ 6% ​ ​ ​ ​ ​ 385,761 ​ ​ ​ ​ ​ 327,135 ​ ​ ​ ​ ​ 7% ​ ​
Senior Secured Bonds
​ ​ ​ ​ 182,439 ​ ​ ​ ​ ​ 179,191 ​ ​ ​ ​ ​ 4% ​ ​ ​ ​ ​ 123,045 ​ ​ ​ ​ ​ 124,673 ​ ​ ​ ​ ​ 3% ​ ​
Subordinated Debt
​ ​ ​ ​ 255,303 ​ ​ ​ ​ ​ 257,023 ​ ​ ​ ​ ​ 6% ​ ​ ​ ​ ​ 369,864 ​ ​ ​ ​ ​ 366,048 ​ ​ ​ ​ ​ 8% ​ ​
Collateralized Securities
​ ​ ​ ​ 19,752 ​ ​ ​ ​ ​ 23,435 ​ ​ ​ ​ ​ 1% ​ ​ ​ ​ ​ 20,435 ​ ​ ​ ​ ​ 25,763 ​ ​ ​ ​ ​ 1% ​ ​
Equity/Other
​ ​ ​ ​ 261,293 ​ ​ ​ ​ ​ 281,874 ​ ​ ​ ​ ​ 6% ​ ​ ​ ​ ​ 296,470 ​ ​ ​ ​ ​ 332,905 ​ ​ ​ ​ ​ 7% ​ ​
Total
​ ​ ​ $ 4,485,631 ​ ​ ​ ​ $ 4,333,544 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ $ 4,603,708 ​ ​ ​ ​ $ 4,597,594 ​ ​ ​ ​ ​ 100% ​ ​
​
​
(1)
Amortized cost represents the original cost adjusted for the amortization of premiums and/or accretion of discounts, as applicable, on investments.
​
​
57
The following table presents certain selected information regarding the composition of our investment portfolio as of September 30, 2018 and December 31, 2017:
​ ​ ​
September 30, 2018
​ ​
December 31, 2017
​
Number of Portfolio Companies
​ ​
152
​ ​
131
​
% Variable Rate (based on fair value)
​ ​
82.5%
​ ​
82.4%
​
% Fixed Rate (based on fair value)
​ ​
11.0%
​ ​
9.9%
​
% Income Producing Equity or Other Investments (based on fair value)
​ ​
0.8%
​ ​
0.4%
​
% Non-Income Producing Equity or Other Investments (based on
fair value)
​ ​
5.7%
​ ​
7.3%
​
Average Annual EBITDA of Portfolio Companies
​ ​
$168,200
​ ​
$108,500
​
Weighted Average Purchase Price of Debt Investments (as a % of par)
​ ​
98.6%
​ ​
98.8%
​
% of Investments on Non-Accrual (based on fair value)
​ ​
1.7%
​ ​
0.4%
​
Gross Portfolio Yield Prior to Leverage (based on amortized cost)
​ ​
9.3%
​ ​
9.1%
​
Gross Portfolio Yield Prior to Leverage (based on amortized cost)—Excluding Non-Income Producing Assets
​ ​
10.3%
​ ​
9.8%
 ​
Based on our regular monthly cash distribution amount of  $0.06283 per share as of September 30, 2018 and December 31, 2017 and our distribution reinvestment price of  $8.40 as of September 30, 2018 and $8.80 as of December 31, 2017, the annualized distribution rate to stockholders as of September 30, 2018 and December 31, 2017 was 8.98% and 8.57%, respectively. The annualized distribution rate to stockholders is expressed as a percentage equal to the projected annualized distribution amount per share divided by our distribution reinvestment price per share. Our annualized distribution rate to stockholders may include income, realized capital gains and a return of investors’ capital. During the nine months ended September 30, 2018, our total return was 0.67% and our total return without assuming reinvestment of distributions was 0.80%. During the year ended December 31, 2017, our total return was 6.59% and our total return without assuming reinvestment of distributions was 6.52%.
Our estimated gross portfolio yield may be higher than a stockholder’s yield on an investment in shares of our common stock. Our estimated gross portfolio yield does not reflect operating expenses that may be incurred by us. In addition, our estimated gross portfolio yield and total return figures disclosed above do not consider the effect of any sales commissions or charges that may have been incurred in connection with the sale of shares of our common stock. Our estimated gross portfolio yield, total return and annualized distribution rate to stockholders do not represent actual investment returns to stockholders, are subject to change and in the future may be greater or less than the rates set forth above. See the section entitled “Item 1A. Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2017 and our other periodic reports filed with the SEC for a discussion of the uncertainties, risks and assumptions associated with these statements. See footnote 6 to the financial highlights table included in Note 10 to our unaudited consolidated financial statements included herein for information regarding the calculations of our total return.
Direct Originations
The following tables present certain selected information regarding our direct originations for the three and nine months ended September 30, 2018:
New Direct Originations
​ ​
For the Three Months Ended
September 30, 2018
​ ​
For the Nine Months Ended
September 30, 2018
​
Total Commitments (including unfunded commitments)
​ ​ ​ $ 559,069 ​ ​ ​ ​ $ 945,264 ​ ​
Exited Investments (including partial paydowns)
​ ​ ​ ​ (586,851) ​ ​ ​ ​ ​ (1,100,610) ​ ​
Net Direct Originations
​ ​ ​ $ (27,782) ​ ​ ​ ​ $ (155,346) ​ ​
​
58
​ ​ ​
For the Three Months Ended
September 30, 2018
​ ​
For the Nine Months Ended
September 30, 2018
​
New Direct Originations by Asset Class (including unfunded commitments)
​ ​
Commitment
Amount
​ ​
Percentage
​ ​
Commitment
Amount
​ ​
Percentage
​
Senior Secured Loans—First Lien
​ ​ ​ $ 481,773 ​ ​ ​ ​ ​ 86% ​ ​ ​ ​ $ 845,405 ​ ​ ​ ​ ​ 89% ​ ​
Senior Secured Loans—Second Lien
​ ​ ​ ​ 77,296 ​ ​ ​ ​ ​ 14% ​ ​ ​ ​ ​ 84,240 ​ ​ ​ ​ ​ 9% ​ ​
Senior Secured Bonds
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Subordinated Debt
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,389 ​ ​ ​ ​ ​ 0% ​ ​
Collateralized Securities
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Equity/Other
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 14,230 ​ ​ ​ ​ ​ 2% ​ ​
Total
​ ​ ​ $ 559,069 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ $ 945,264 ​ ​ ​ ​ ​ 100% ​ ​
​
​ ​ ​
For the Three Months Ended
September 30, 2018
​ ​
For the Nine Months Ended
September 30, 2018
​
Average New Direct Origination Commitment Amount
​ ​
$55,907
​ ​
$35,010
​
Weighted Average Maturity for New Direct Originations
​ ​
1/15/2023
​ ​
2/10/2024
​
Gross Portfolio Yield Prior to Leverage (based on amortized cost) of New Direct Originations Funded during Period
​ ​
8.7%
​ ​
9.6%
​
Gross Portfolio Yield Prior to Leverage (based on amortized cost) of New Direct Originations Funded during Period—Excluding Non-Income Producing Assets
​ ​
8.7%
​ ​
9.6%
​
Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Direct Originations Exited during Period
​ ​
10.4%
​ ​
9.9%
 ​
The following table presents certain selected information regarding our direct originations as of September 30, 2018 and December 31, 2017:
Characteristics of All Direct Originations Held in Portfolio
​ ​
September 30, 2018
​ ​
December 31, 2017
​
Number of Portfolio Companies
​ ​
76
​ ​
75
​
Average Annual EBITDA of Portfolio Companies
​ ​
$89,400
​ ​
$71,200
​
Average Leverage Through Tranche of Portfolio Companies—Excluding
Equity/Other and Collateralized Securities
​ ​
5.6x
​ ​
4.8x
​
% of Investments on Non-Accrual (based on fair value)
​ ​
2.1%
​ ​
—
 ​
Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Funded Direct Originations
​ ​
9.2%
​ ​
9.2%
​
Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Funded Direct Originations—Excluding Non-Income Producing
Assets
​ ​
10.3%
​ ​
9.8%
 ​
Portfolio Composition by Strategy
The table below summarizes the composition of our investment portfolio by strategy and enumerates the percentage, by fair value, of the total portfolio assets in such strategies as of September 30, 2018 and December 31, 2017:
​ ​ ​
September 30, 2018
​ ​
December 31, 2017
​
Portfolio Composition by Strategy
​ ​
Fair Value
​ ​
Percentage
of Portfolio
​ ​
Fair Value
​ ​
Percentage
of Portfolio
​
Direct Originations
​ ​ ​ $ 3,524,869 ​ ​ ​ ​ ​ 81% ​ ​ ​ ​ $ 3,812,590 ​ ​ ​ ​ ​ 83% ​ ​
Opportunistic
​ ​ ​ ​ 468,887 ​ ​ ​ ​ ​ 11% ​ ​ ​ ​ ​ 634,049 ​ ​ ​ ​ ​ 14% ​ ​
Broadly Syndicated/Other
​ ​ ​ ​ 339,788 ​ ​ ​ ​ ​ 8% ​ ​ ​ ​ ​ 150,955 ​ ​ ​ ​ ​ 3% ​ ​
Total
​ ​ ​ $ 4,333,544 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ $ 4,597,594 ​ ​ ​ ​ ​ 100% ​ ​
​
59
See Note 6 to our unaudited consolidated financial statements included herein for additional information regarding the composition of our investment portfolio by industry classification.
Portfolio Asset Quality
In addition to various risk management and monitoring tools, FS/KKR Advisor uses, and FSIC II Advisor historically used, an investment rating system to characterize and monitor the expected level of returns on each investment in our portfolio. FS/KKR Advisor uses, and FSIC II Advisor historically used, an investment rating scale of 1 to 5. The following is a description of the conditions associated with each investment rating:
Investment
Rating 		​ ​
Summary Description
​
1
​ ​ Investment exceeding expectations and/or capital gain expected. ​
2
​ ​ Performing investment generally executing in accordance with the portfolio company’s business plan—full return of principal and interest expected. ​
3
​ ​ Performing investment requiring closer monitoring. ​
4
​ ​ Underperforming investment—some loss of interest or dividend possible, but still expecting a positive return on investment. ​
5
​ ​ Underperforming investment with expected loss of interest and some principal. ​
The following table shows the distribution of our investments on the 1 to 5 investment rating scale at fair value as of September 30, 2018 and December 31, 2017:
​ ​ ​
September 30, 2018
​ ​
December 31, 2017
​
Investment Rating
​ ​
Fair
Value
​ ​
Percentage of
Portfolio
​ ​
Fair
Value
​ ​
Percentage of
Portfolio
​
1
​ ​ ​ $ 90,683 ​ ​ ​ ​ ​ 2% ​ ​ ​ ​ $ 353,707 ​ ​ ​ ​ ​ 8% ​ ​
2
​ ​ ​ ​ 3,521,105 ​ ​ ​ ​ ​ 81% ​ ​ ​ ​ ​ 3,821,037 ​ ​ ​ ​ ​ 83% ​ ​
3
​ ​ ​ ​ 612,329 ​ ​ ​ ​ ​ 14% ​ ​ ​ ​ ​ 332,397 ​ ​ ​ ​ ​ 7% ​ ​
4
​ ​ ​ ​ 5,977 ​ ​ ​ ​ ​ 0% ​ ​ ​ ​ ​ 6,771 ​ ​ ​ ​ ​ 0% ​ ​
5
​ ​ ​ ​ 103,450 ​ ​ ​ ​ ​ 3% ​ ​ ​ ​ ​ 83,682 ​ ​ ​ ​ ​ 2% ​ ​
Total
​ ​ ​ $ 4,333,544 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ $ 4,597,594 ​ ​ ​ ​ ​ 100% ​ ​
​
The amount of the portfolio in each grading category may vary substantially from period to period resulting primarily from changes in the composition of the portfolio as a result of new investment, repayment and exit activities. In addition, changes in the grade of investments may be made to reflect our expectation of performance and changes in investment values.
60
Results of Operations
Comparison of the Three and Nine Months Ended September 30, 2018 and September 30, 2017
Revenues
Our investment income for the three and nine months ended September 30, 2018 and 2017 was as follows:
​ ​ ​
Three Months Ended September 30,
​ ​
Nine Months Ended September 30,
​
​ ​ ​
2018
​ ​
2017
​ ​
2018
​ ​
2017
​
​ ​ ​
Amount
​ ​
Percentage of
Total Income
​ ​
Amount
​ ​
Percentage of
Total Income
​ ​
Amount
​ ​
Percentage of
Total Income
​ ​
Amount
​ ​
Percentage of
Total Income
​
Interest income
​ ​ ​ $ 97,381 ​ ​ ​ ​ ​ 83% ​ ​ ​ ​ $ 104,423 ​ ​ ​ ​ ​ 87% ​ ​ ​ ​ $ 297,917 ​ ​ ​ ​ ​ 87% ​ ​ ​ ​ $ 310,184 ​ ​ ​ ​ ​ 82% ​ ​
Paid-in-kind interest
income
​ ​ ​ ​ 5,356 ​ ​ ​ ​ ​ 5% ​ ​ ​ ​ ​ 9,256 ​ ​ ​ ​ ​ 7% ​ ​ ​ ​ ​ 13,547 ​ ​ ​ ​ ​ 4% ​ ​ ​ ​ ​ 20,188 ​ ​ ​ ​ ​ 6% ​ ​
Fee income
​ ​ ​ ​ 14,181 ​ ​ ​ ​ ​ 12% ​ ​ ​ ​ ​ 7,223 ​ ​ ​ ​ ​ 6% ​ ​ ​ ​ ​ 23,764 ​ ​ ​ ​ ​ 7% ​ ​ ​ ​ ​ 46,323 ​ ​ ​ ​ ​ 12% ​ ​
Dividend income
​ ​ ​ ​ 468 ​ ​ ​ ​ ​ 0% ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 7,962 ​ ​ ​ ​ ​ 2% ​ ​ ​ ​ ​ 11 ​ ​ ​ ​ ​ 0% ​ ​
Total investment income(1)
 ​ ​ ​ $ 117,386 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ $ 120,902 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ $ 343,190 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ $ 376,706 ​ ​ ​ ​ ​ 100% ​ ​
​
​
(1)
For the three months ended September 30, 2018 and 2017, such revenues represent $108,833 and $110,418, respectively, of cash income earned as well as $8,553 and $10,484, respectively, in non-cash portions relating to accretion of discount and PIK interest. For the nine months ended September 30, 2018 and 2017, such revenues represent $324,041 and $348,791, respectively, of cash income earned as well as $19,149 and $27,915, respectively, in non-cash portions relating to accretion of discount and PIK interest. Cash flows related to such non-cash revenues may not occur for a number of reporting periods or years after such revenues are recognized.
​
The level of interest income we receive is generally related to the balance of income-producing investments multiplied by the weighted average yield of our investments. Fee income is transaction based and typically consists of prepayment fees and structuring fees. As such, fee income is generally dependent on new direct origination investments and the occurrence of events at existing portfolio companies resulting in such fees.
The decrease in interest income and PIK interest income during the three and nine months ended September 30, 2018 compared to the three and nine months ended September 30, 2017 was primarily due to the prepayment of certain higher yielding assets during the three and nine months ended September 30, 2018. The increase in fee income during the three months ended September 30, 2018 compared to the three months ended September 30, 2017 was primarily due to increased prepayment activity during the three months ended September 30, 2018. The decrease in fee income during the nine months ended September 30, 2018 compared to the three and nine months ended September 30, 2017 was primarily due to the decrease of structuring activity during the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017.
The increase in dividend income during the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017 was primarily due to a one-time dividend paid in respect of one of our investments during the nine months ended September 30, 2018.
61
Expenses
Our operating expenses for the three and nine months ended September 30, 2018 and 2017 were as follows:
​ ​ ​
Three Months Ended
September 30,
​ ​
Nine Months Ended
September 30,
​
​ ​ ​
2018
​ ​
2017
​ ​
2018
​ ​
2017
​
Management fees
​ ​ ​ $ 17,567 ​ ​ ​ ​ $ 25,769 ​ ​ ​ ​ $ 61,739 ​ ​ ​ ​ $ 77,005 ​ ​
Subordinated income incentive fees
​ ​ ​ ​ 11,939 ​ ​ ​ ​ ​ 10,137 ​ ​ ​ ​ ​ 18,994 ​ ​ ​ ​ ​ 42,352 ​ ​
Administrative services expenses
​ ​ ​ ​ 799 ​ ​ ​ ​ ​ 799 ​ ​ ​ ​ ​ 2,371 ​ ​ ​ ​ ​ 2,530 ​ ​
Stock transfer agent fees
​ ​ ​ ​ 506 ​ ​ ​ ​ ​ 506 ​ ​ ​ ​ ​ 1,502 ​ ​ ​ ​ ​ 1,502 ​ ​
Accounting and administrative fees
​ ​ ​ ​ 395 ​ ​ ​ ​ ​ 434 ​ ​ ​ ​ ​ 1,227 ​ ​ ​ ​ ​ 1,303 ​ ​
Interest expense
​ ​ ​ ​ 26,924 ​ ​ ​ ​ ​ 22,786 ​ ​ ​ ​ ​ 77,958 ​ ​ ​ ​ ​ 62,971 ​ ​
Directors’ fees
​ ​ ​ ​ 254 ​ ​ ​ ​ ​ 278 ​ ​ ​ ​ ​ 1,053 ​ ​ ​ ​ ​ 849 ​ ​
Expenses associated with our independent audit and related fees
​ ​ ​ ​ 74 ​ ​ ​ ​ ​ 129 ​ ​ ​ ​ ​ 275 ​ ​ ​ ​ ​ 382 ​ ​
Legal fees
​ ​ ​ ​ 308 ​ ​ ​ ​ ​ 207 ​ ​ ​ ​ ​ 632 ​ ​ ​ ​ ​ 612 ​ ​
Printing fees
​ ​ ​ ​ 137 ​ ​ ​ ​ ​ 187 ​ ​ ​ ​ ​ 330 ​ ​ ​ ​ ​ 847 ​ ​
Other
​ ​ ​ ​ 698 ​ ​ ​ ​ ​ 579 ​ ​ ​ ​ ​ 2,302 ​ ​ ​ ​ ​ 1,137 ​ ​
Total operating expenses
​ ​ ​ $ 59,601 ​ ​ ​ ​ $ 61,811 ​ ​ ​ ​ $ 168,383 ​ ​ ​ ​ $ 191,490 ​ ​
Management fee waiver
​ ​ ​ ​ — ​ ​ ​ ​ ​ (3,222) ​ ​ ​ ​ ​ (3,432) ​ ​ ​ ​ ​ (9,626) ​ ​
Net operating expenses
​ ​ ​ $ 59,601 ​ ​ ​ ​ $ 58,589 ​ ​ ​ ​ $ 164,951 ​ ​ ​ ​ $ 181,864 ​ ​
​
The following table reflects selected expense ratios as a percent of average net assets for the three and nine months ended September 30, 2018 and 2017:
​ ​ ​
Three Months Ended
September 30,
​ ​
Nine Months Ended
September 30,
​
​ ​ ​
2018
​ ​
2017
​ ​
2018
​ ​
2017
​
Ratio of operating expenses to average net assets
​ ​ ​ ​ 2.21% ​ ​ ​ ​ ​ 2.13% ​ ​ ​ ​ ​ 6.12% ​ ​ ​ ​ ​ 6.56% ​ ​
Ratio of management fee waiver to average net assets
​ ​ ​ ​ — ​ ​ ​ ​ ​ (0.11)% ​ ​ ​ ​ ​ (0.12)% ​ ​ ​ ​ ​ (0.33)% ​ ​
Ratio of net operating expenses to average net assets
​ ​ ​ ​ 2.21% ​ ​ ​ ​ ​ 2.02% ​ ​ ​ ​ ​ 6.00% ​ ​ ​ ​ ​ 6.23% ​ ​
Ratio of incentive fees and interest expense to average net assets(1)
 ​ ​ ​ ​ 1.44% ​ ​ ​ ​ ​ 1.14% ​ ​ ​ ​ ​ 3.52% ​ ​ ​ ​ ​ 3.61% ​ ​
Ratio of net operating expenses, excluding certain expenses, to average net assets
​ ​ ​ ​ 0.77% ​ ​ ​ ​ ​ 0.88% ​ ​ ​ ​ ​ 2.48% ​ ​ ​ ​ ​ 2.62% ​ ​
​
(1)
Ratio data may be rounded in order to recompute the ending ratio of net operating expenses, excluding certain expenses, to average net assets.
​
Incentive fees and interest expense, among other things, may increase or decrease our expense ratios relative to comparative periods depending on portfolio performance and changes in amounts outstanding under our financing facilities and benchmark interest rates such as LIBOR, among other factors.
Net Investment Income
Our net investment income totaled $57,785 ($0.18 per share) and $62,313 ($0.19 per share) for the three months ended September 30, 2018 and 2017, respectively. The decrease in net investment income for the three months ended September 30, 2018 can be attributed to the decrease in interest income as discussed above.
Our net investment income totaled $178,239 ($0.55 per share) and $194,842 ($0.60 per share) for the nine months ended September 30, 2018 and 2017, respectively. The decrease in net investment income for the nine months ended September 30, 2018 can be attributed to the decrease in interest and fee income as discussed above.
62
Net Realized Gains or Losses
Our net realized gains (losses) on investments and foreign currency for the three and nine months ended September 30, 2018 and 2017 were as follows:
​ ​ ​
Three Months Ended
September 30,
​ ​
Nine Months Ended
September 30,
​
​ ​ ​
2018
​ ​
2017
​ ​
2018
​ ​
2017
​
Net realized gain (loss) on investments(1)
 ​ ​ ​ $ 18,504 ​ ​ ​ ​ $ (5,942) ​ ​ ​ ​ $ (10,805) ​ ​ ​ ​ $ (49,199) ​ ​
Net realized gain (loss) on foreign currency
​ ​ ​ ​ 446 ​ ​ ​ ​ ​ 122 ​ ​ ​ ​ ​ (220) ​ ​ ​ ​ ​ 439 ​ ​
Total net realized gain (loss)
​ ​ ​ $ 18,950 ​ ​ ​ ​ $ (5,820) ​ ​ ​ ​ $ (11,025) ​ ​ ​ ​ $ (48,760) ​ ​
​
​
(1)
We sold investments and received principal repayments, respectively, of  $377,864 and $287,365 during the three months ended September 30, 2018 and $131,102 and $260,991 during the three months ended September 30, 2017. We sold investments and received principal repayments, respectively, of  $653,396 and $805,504 during the nine months ended September 30, 2018 and $437,734 and $971,922 during the nine months ended September 30, 2017.
​
Net Change in Unrealized Appreciation (Depreciation) on Investments and Secured Borrowing and Unrealized Gain (Loss) on Foreign Currency
Our net change in unrealized appreciation (depreciation) on investments, secured borrowing and foreign currency for the three and nine months ended September 30, 2018 and 2017 were as follows:
​ ​ ​
Three Months Ended
September 30,
​ ​
Nine Months Ended
September 30,
​
​ ​ ​
2018
​ ​
2017
​ ​
2018
​ ​
2017
​
Net change in unrealized appreciation (depreciation) on investments
​ ​ ​ $ (40,039) ​ ​ ​ ​ $ 5,001 ​ ​ ​ ​ $ (145,973) ​ ​ ​ ​ $ 56,730 ​ ​
Net change in unrealized appreciation (depreciation) on secured
borrowing
​ ​ ​ ​ — ​ ​ ​ ​ ​ 10 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (26) ​ ​
Net change in unrealized gain (loss) on foreign currency
​ ​ ​ ​ (693) ​ ​ ​ ​ ​ (186) ​ ​ ​ ​ ​ 84 ​ ​ ​ ​ ​ (370) ​ ​
Total net change in unrealized appreciation (depreciation)
​ ​ ​ $ (40,732) ​ ​ ​ ​ $ 4,825 ​ ​ ​ ​ $ (145,889) ​ ​ ​ ​ $ 56,334 ​ ​
​
During the three and nine months ended September 30, 2018, the net change in unrealized appreciation (depreciation) was driven primarily by lower valuations in a few select investments.
Net Increase (Decrease) in Net Assets Resulting from Operations
For the three months ended September 30, 2018 and 2017, the net increase in net assets resulting from operations was $36,003 ($0.11 per share) and $61,318 ($0.19 per share), respectively.
For the nine months ended September 30, 2018, the net increase in net assets resulting from operations was $21,325 ($0.07 per share) compared to a net increase in net assets resulting from operations of  $202,416 ($0.62 per share) during the nine months ended September 30, 2017.
Financial Condition, Liquidity and Capital Resources
Overview
As of September 30, 2018, we had $287,374 in cash and foreign currency, which we and our wholly-owned financing subsidiaries held in custodial accounts, and $556,606 in borrowings available under our financing arrangements, subject to borrowing base and other limitations. As of September 30, 2018, we also had broadly syndicated investments and opportunistic investments that could be sold to create additional liquidity. As of September 30, 2018, we had nineteen senior secured loan investments with aggregate unfunded commitments of  $194,639, one subordinated debt investment with an unfunded commitment of  $15,000, one unfunded commitment to purchase up to $71 in shares of preferred stock. We maintain sufficient cash on hand, available borrowings and liquid securities to fund such unfunded commitments should the need arise.
63
We currently generate cash primarily from cash flows from fees, interest and dividends earned from our investments as well as from the issuance of shares under the DRP, and principal repayments and proceeds from sales of our investments. To seek to enhance our returns, we also employ leverage as market conditions permit and at the discretion of FS/KKR Advisor, but in no event will leverage employed exceed 50% of the value of our assets, as required by the 1940 Act. See “—Financing Arrangements.”
Prior to investing in securities of portfolio companies, we invest the cash received from fees, interest and dividends earned from our investments and from the issuance of shares under the DRP, as well as principal repayments and proceeds from sales of our investments primarily in cash, cash equivalents, including money market funds, U.S. government securities, repurchase agreements and high-quality debt instruments maturing in one year or less from the time of investment, consistent with our BDC election and our election to be taxed as a RIC.
Financing Arrangements
The following table presents summary information with respect to our outstanding financing arrangements as of September 30, 2018:
Arrangement(1)
 ​ ​
Type of Arrangement
​ ​
Rate
​ ​
Amount
Outstanding
​ ​
Amount
Available
​ ​
Maturity Date
​
Green Creek Credit Facility
​ ​
Term Loan Credit Facility
​ ​
L+2.50%
​ ​ ​ $ 500,000 ​ ​ ​ ​ $ — ​ ​ ​
December 15, 2019
​
Cooper River Credit Facility
​ ​
Revolving Credit Facility
​ ​
L+2.25%
​ ​ ​ ​ 132,000 ​ ​ ​ ​ ​ 68,000 ​ ​ ​
May 29, 2020
​
Darby Creek Credit Facility
​ ​
Revolving Credit Facility
​ ​
L+2.50%
​ ​ ​ ​ 135,000 ​ ​ ​ ​ ​ 115,000 ​ ​ ​
August 19, 2020
​
Juniata River Credit Facility
​ ​
Term Loan Credit Facility
​ ​
L+2.68%
​ ​ ​ ​ 850,000 ​ ​ ​ ​ ​ — ​ ​ ​
October 11, 2020
​
Senior Secured Revolving Credit Facility
​ ​
Revolving Credit Facility
​ ​
L+2.00%—2.25%(2)
 ​ ​ ​ ​ 276,394(3) ​ ​ ​ ​ ​ 373,606 ​ ​ ​
August 9, 2023
​
Total
​ ​ ​ ​ ​ ​ ​ ​ ​ $ 1,893,394 ​ ​ ​ ​ $ 556,606 ​ ​ ​ ​ ​
​
(1)
The carrying amount outstanding under the facility approximates its fair value.
​
(2)
The spread over LIBOR is determined by reference to the ratio of the value of the borrowing base to a combined debt amount calculation.
​
(3)
Amount includes borrowings in U.S. Dollars and Canadian Dollars. Canadian dollar balance outstanding of CAD $73,000 has been converted to U.S. dollars at an exchange rate of CAD $1.00 to $0.77 as of September 30, 2018 to reflect total amount outstanding in U.S. dollars.
​
For additional information regarding our financing arrangements, see Notes 8 to our unaudited consolidated financial statements included herein.
RIC Status and Distributions
We have elected to be subject to tax as a RIC under Subchapter M of the Code. In order to qualify for RIC tax treatment, we must, among other things, make distributions of an amount at least equal to 90% of our “investment company taxable income,” determined without regard to any deduction for distributions paid, each tax year. As long as the distributions are declared by the later of the fifteenth day of the ninth month following the close of a tax year or the due date of the tax return for such tax year, including extensions, distributions paid up to twelve months after the current tax year can be carried back to the prior tax year for determining the distributions paid in such tax year. We intend to make sufficient distributions to our stockholders to qualify for and maintain our RIC tax status each tax year. We are also subject to a 4% nondeductible federal excise tax on certain undistributed income unless we make distributions in a timely manner to our stockholders generally of an amount at least equal to the sum of  (1) 98% of our net ordinary income (taking into account certain deferrals and elections) for the calendar year, (2) 98.2% of our capital gain net income, which is the excess of capital gains in excess of capital losses, or “capital gain net income” (adjusted for certain ordinary losses), for the one-year period ending October 31 of that calendar year and (3) any net ordinary income and capital gain net income for the preceding years that were not distributed during such years and on which we paid no U.S. federal income tax. Any distribution declared by us during October, November or December of any calendar year, payable to stockholders of record on a specified date in such a month and actually paid during January of the following calendar year, will be treated as if it had been paid by us, as well as received by our U.S. stockholders, on December 31 of the calendar year in which the distribution was declared. We can offer no assurance that we will achieve results
64
that will permit us to pay any cash distributions. If we issue senior securities, we will be prohibited from making distributions if doing so causes us to fail to maintain the asset coverage ratios stipulated by the 1940 Act or if distributions are limited by the terms of any of our borrowings.
Subject to applicable legal restrictions and the sole discretion of our board of directors, we intend to declare regular cash distributions on a quarterly basis and pay such distributions on a monthly basis. We will calculate each stockholder’s specific distribution amount for the period using record and declaration dates and each stockholder’s distributions will begin to accrue on the date that shares of our common stock are issued to such stockholder. From time to time, we may also pay special interim distributions in the form of cash or shares of our common stock at the discretion of our board of directors. The timing and amount of any future distributions to stockholders are subject to applicable legal restrictions and the sole discretion of our board of directors.
During certain periods, our distributions may exceed our earnings. As a result, it is possible that a portion of the distributions we make may represent a return of capital. A return of capital generally is a return of a stockholder’s investment rather than a return of earnings or gains derived from our investment activities. Each year a statement on Form 1099-DIV identifying the sources of the distributions (i.e., paid from ordinary income, paid from net capital gains on the sale of securities, and/or a return of capital, which is a non-taxable distribution) will be mailed to our stockholders.
We intend to continue to make our regular distributions in the form of cash, out of assets legally available for distribution, unless stockholders elect to receive their cash distributions in additional shares of our common stock under the DRP. Any distributions reinvested under the plan will nevertheless remain taxable to a U.S. stockholder.
The following table reflects the cash distributions per share that we have declared and paid on our common stock during the nine months ended September 30, 2018 and 2017:
​ ​ ​
Distribution
​
For the Three Months Ended
​ ​
Per Share
​ ​
Amount
​
Fiscal 2017 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
March 31, 2017
​ ​ ​ $ 0.1885 ​ ​ ​ ​ $ 61,436 ​ ​
June 30, 2017
​ ​ ​ ​ 0.1885 ​ ​ ​ ​ ​ 61,505 ​ ​
September 30, 2017
​ ​ ​ ​ 0.1885 ​ ​ ​ ​ ​ 61,277 ​ ​
Total
​ ​ ​ $ 0.5655 ​ ​ ​ ​ $ 184,218 ​ ​
Fiscal 2018 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
March 31, 2018
​ ​ ​ $ 0.1885 ​ ​ ​ ​ $ 61,153 ​ ​
June 30, 2018
​ ​ ​ ​ 0.1885 ​ ​ ​ ​ ​ 61,146 ​ ​
September 30, 2018
​ ​ ​ ​ 0.1885 ​ ​ ​ ​ ​ 61,137 ​ ​
Total
​ ​ ​ $ 0.5655 ​ ​ ​ ​ $ 183,436 ​ ​
​
See Note 5 to our unaudited consolidated financial statements included herein for additional information regarding our distributions, including a reconciliation of our GAAP-basis net investment income to our tax-basis net investment income for the nine months ended September 30, 2018 and 2017.
Critical Accounting Policies
Our financial statements are prepared in conformity with GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Critical accounting policies are those that require the application of management’s most difficult, subjective or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that may change in subsequent periods. In preparing the financial statements, management has made estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. In preparing the financial statements, management has utilized available information, including our past history, industry standards and the current economic environment, among other factors,
65
in forming its estimates and judgments, giving due consideration to materiality. Actual results may differ from these estimates. In addition, other companies may utilize different estimates, which may impact the comparability of our results of operations to those of companies in similar businesses. As we execute our operating plans, we will describe additional critical accounting policies in the notes to our future financial statements in addition to those discussed below.
Valuation of Portfolio Investments
We determine the net asset value of our investment portfolio each quarter. Securities are valued at fair value as determined in good faith by our board of directors. In connection with that determination, FS/KKR Advisor provides our board of directors with portfolio company valuations which are based on relevant inputs, including, but not limited to, indicative dealer quotes, values of like securities, recent portfolio company financial statements and forecasts, and valuations prepared by independent third-party valuation services.
ASC Topic 820, Fair Value Measurements and Disclosure, or ASC Topic 820, issued by the Financial Accounting Standards Board, or the FASB, clarifies the definition of fair value and requires companies to expand their disclosure about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. ASC Topic 820 defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 also establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, which includes inputs such as quoted prices for similar securities in active markets and quoted prices for identical securities where there is little or no activity in the market; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.
With respect to investments for which market quotations are not readily available, we undertake a multi-step valuation process each quarter, as described below:
•
our quarterly fair valuation process begins with FS/KKR Advisor’s management team reviewing and documenting valuations of each portfolio company or investment, which valuations may be obtained from an independent third-party valuation service, if applicable;
​
•
FS/KKR Advisor’s management team then provides the valuation committee with the preliminary valuations for each portfolio company or investment;
​
•
preliminary valuations are then discussed with the valuation committee;
​
•
the valuation committee reviews the preliminary valuations and FS/KKR Advisor’s management team, together with our independent third-party valuation services, if applicable, supplement the preliminary valuations to reflect any comments provided by the valuation committee;
​
•
following its review, the valuation committee will recommend that our board of directors approve our fair valuations; and
​
•
our board of directors discusses the valuations and determines the fair value of each such investment in our portfolio in good faith based on various statistical and other factors, including the input and recommendation of FS/KKR Advisor, the valuation committee and any independent third-party valuation services, if applicable.
​
Determination of fair value involves subjective judgments and estimates. Accordingly, the notes to our consolidated financial statements refer to the uncertainty with respect to the possible effect of such valuations and any change in such valuations on our consolidated financial statements. In making its determination of fair value, our board of directors may use any approved independent third-party pricing or valuation services. However, our board of directors is not required to determine fair value in accordance with the valuation provided by any single source, and may use any relevant data, including information obtained from FS/KKR Advisor or any approved independent third-party valuation or pricing service that
66
our board of directors deems to be reliable in determining fair value under the circumstances. Below is a description of factors that FS/KKR Advisor’s management team, any approved independent third party valuation services and our board of directors may consider when determining the fair value of our investments.
Valuation of fixed income investments, such as loans and debt securities, depends upon a number of factors, including prevailing interest rates for like securities, expected volatility in future interest rates, call features, put features and other relevant terms of the debt. For investments without readily available market prices, we may incorporate these factors into discounted cash flow models to arrive at fair value. Other factors that may be considered include the borrower’s ability to adequately service its debt, the fair market value of the borrower in relation to the face amount of its outstanding debt and the quality of collateral securing our debt investments.
For convertible debt securities, fair value generally approximates the fair value of the debt plus the fair value of an option to purchase the underlying security (i.e., the security into which the debt may convert) at the conversion price. To value such an option, a standard option pricing model may be used.
Our equity interests in portfolio companies for which there is no liquid public market are valued at fair value. Our board of directors, in its determination of fair value, may consider various factors, such as multiples of EBITDA, cash flows, net income, revenues or, in limited instances, book value or liquidation value. All of these factors may be subject to adjustments based upon the particular circumstances of a portfolio company or our actual investment position. For example, adjustments to EBITDA may take into account compensation to previous owners or acquisition, recapitalization, restructuring or other related items.
FS/KKR Advisor’s management team, any approved independent third-party valuation services and our board of directors may also consider private merger and acquisition statistics, public trading multiples discounted for illiquidity and other factors, valuations implied by third-party investments in the portfolio companies or industry practices in determining fair value. FS/KKR Advisor’s management team, any approved independent third-party valuation services and our board of directors may also consider the size and scope of a portfolio company and its specific strengths and weaknesses, and may apply discounts or premiums, where and as appropriate, due to the higher (or lower) financial risk and/or the smaller size of portfolio companies relative to comparable firms, as well as such other factors as our board of directors, in consultation with FS/KKR Advisor’s management team and any approved independent third party valuation services, if applicable, may consider relevant in assessing fair value. Generally, the value of our equity interests in public companies for which market quotations are readily available is based upon the most recent closing public market price. Portfolio securities that carry certain restrictions on sale are typically valued at a discount from the public market value of the security.
When we receive warrants or other equity securities at nominal or no additional cost in connection with an investment in a debt security, the cost basis in the investment will be allocated between the debt securities and any such warrants or other equity securities received at the time of origination. Our board of directors subsequently values these warrants or other equity securities received at their fair value.
The fair values of our investments are determined in good faith by our board of directors. Our board of directors is responsible for the valuation of our portfolio investments at fair value as determined in good faith pursuant to our valuation policy and consistently applied valuation process. Our board of directors has delegated day-to-day responsibility for implementing our valuation policy to FS/KKR Advisor’s management team, and has authorized FS/KKR Advisor’s management team to utilize independent third-party valuation and pricing services that have been approved by our board of directors. The valuation committee is responsible for overseeing FS/KKR Advisor’s implementation of the valuation process.
See Note 7 to our consolidated financial statements included herein for additional information regarding the fair value of our financial instruments.
Revenue Recognition
Security transactions are accounted for on the trade date. We record interest income on an accrual basis to the extent that we expect to collect such amounts. We record dividend income on the ex-dividend date. We do not accrue as a receivable interest or dividends on loans and securities if we have reason to
67
doubt our ability to collect such income. Our policy is to place investments on non-accrual status when there is reasonable doubt that interest income will be collected. We consider many factors relevant to an investment when placing it on or removing it from non-accrual status including, but not limited to, the delinquency status of the investment, economic and business conditions, the overall financial condition of the underlying investment, the value of the underlying collateral, bankruptcy status, if any, and any other facts or circumstances relevant to the investment. If there is reasonable doubt that we will receive any previously accrued interest, then the interest income will be written-off. Payments received on non-accrual investments may be recognized as income or applied to principal depending upon the collectability of the remaining principal and interest. Non-accrual investments may be restored to accrual status when principal and interest become current and are likely to remain current based on our judgment.
Loan origination fees, original issue discount and market discount are capitalized and we amortize such amounts as interest income over the respective term of the loan or security. Upon the prepayment of a loan or security, any unamortized loan origination fees and original issue discount are recorded as interest income. We record prepayment premiums on loans and securities as fee income when we receive such amounts.
Effective January 1, 2018, we adopted ASC Topic 606, Revenue from Contracts with Customers, using the cumulative effect method applied to in-scope contracts with customers that have not been completed as of the date of adoption. We did not identify any in-scope contracts that had not been completed as of the date of adoption and, as a result, we did not recognize a cumulative effect on stockholders’ equity in connection with the adoption of the new revenue recognition guidance.
The new revenue recognition guidance applies to all entities and all contracts with customers to provide goods or services in the ordinary course of business, excluding, among other things, financial instruments as well as certain other contractual rights and obligations. Under the new revenue recognition guidance, which we have applied to all new in-scope contracts as of the date of adoption, structuring and other upfront fees are recognized as revenue based on the transaction price as the performance obligation is fulfilled. The related performance obligation consists of structuring activities and is satisfied over time as such activities are performed. Consideration is variable and is constrained from being included in the transaction price until the uncertainty associated with the variable consideration is resolved, typically as of the trade date of the related transaction. Payment is typically due on the settlement date of the related transaction.
For the nine months ended September 30, 2018, we recognized $7,168 in structuring fee revenue under the new revenue recognition guidance and included such revenue in the fee income line item on our consolidated statement of operations. Comparative periods are presented in accordance with revenue recognition guidance effective prior to January 1, 2018, under which we recorded structuring and other non-recurring upfront fees as income when earned. We have determined that the adoption of the new revenue recognition guidance did not have a material impact on the amount of revenue recognized for the nine months ended September 30, 2018.
Net Realized Gains or Losses, Net Change in Unrealized Appreciation or Depreciation and Net Change in Unrealized Gains or Losses on Foreign Currency
Gains or losses on the sale of investments are calculated by using the specific identification method. We measure realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized, but considering unamortized fees. Net change in unrealized appreciation or depreciation reflects the change in portfolio investment values during the reporting period, including any reversal of previously recorded unrealized gains or losses when gains or losses are realized. Net change in unrealized gains or losses on foreign currency reflects the change in the value of receivables or accruals during the reporting period due to the impact of foreign currency fluctuations.
We follow the guidance in ASC Topic 860 when accounting for loan participations and other partial loan sales. This guidance requires a participation or other partial loan sale to meet the definition of a participating interest, as defined in the guidance, in order for sale treatment to be allowed. Participations or other partial loan sales which do not meet the definition of a participating interest remain on our
68
consolidated balance sheets and the proceeds are recorded as a secured borrowing until the participation or other partial loan sale meets the definition. Secured borrowings are carried at fair value to correspond with the related investments, which are carried at fair value.
Uncertainty in Income Taxes
We evaluate our tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax benefits or liabilities in our consolidated financial statements. Recognition of a tax benefit or liability with respect to an uncertain tax position is required only when the position is “more likely than not” to be sustained assuming examination by taxing authorities. We recognize interest and penalties, if any, related to unrecognized tax liabilities as income tax expense in our consolidated statements of operations. During the nine months ended September 30, 2018 and 2017, we did not incur any interest or penalties.
See Note 2 to our unaudited consolidated financial statements included herein for additional information regarding our significant accounting policies.
Contractual Obligations
We have entered into an agreement with FS/KKR Advisor to provide us with investment advisory and administrative services. Payments for investment advisory services under the FS/KKR Advisor investment advisory and administrative services agreement are equal to (a) an annual base management fee based on the average weekly value of our gross assets and (b) an incentive fee based on our performance. FS/KKR Advisor is reimbursed for administrative expenses incurred on our behalf. See Note 4 to our unaudited consolidated financial statements included herein for a discussion of these agreements and for the amount of fees and expenses accrued under similar agreements with FSIC II Advisor during the nine months ended September 30, 2018 and 2017.
A summary of our significant contractual payment obligations related to the repayment of our outstanding indebtedness at September 30, 2018 is as follows:
​ ​ ​
Payments Due By Period
​
​ ​ ​
Maturity Date(1)
 ​ ​
Total
​ ​
Less than
1 year
​ ​
1-3 years
​ ​
3-5 years
​ ​
More than
5 years
​
Green Creek Credit Facility(2)
 ​ ​
December 15, 2019​
 ​ ​ ​ $ 500,000 ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 500,000 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Cooper River Credit Facility(3)
 ​ ​
May 29, 2020​
 ​ ​ ​ $ 132,000 ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 132,000 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Darby Creek Credit Facility(4)
 ​ ​
August 19, 2020​
 ​ ​ ​ $ 135,000 ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 135,000 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Juniata River Credit Facility(2)
 ​ ​
October 11, 2020​
 ​ ​ ​ $ 850,000 ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 850,000 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Senior Secured Revolving Credit Facility(5)
 ​ ​
August 9, 2023​
 ​ ​ ​ $ 276,394 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 276,394 ​ ​ ​ ​ ​ — ​ ​
​
(1)
Amounts outstanding under the financing arrangements will mature, and all accrued and unpaid interest thereunder will be due and payable, on the maturity date.
​
(2)
At September 30, 2018, no amounts remained unused under the financing arrangement.
​
(3)
At September 30, 2018, $68,000 remained unused under the Cooper River credit facility.
​
(4)
At September 30, 2018, $115,000 remained unused under the Darby Creek credit facility.
​
(5)
At September 30, 2018, $373,606 remained unused under the Senior Secured Revolving Credit Facility. Borrowings in U.S. Dollars and Canadian Dollars. Canadian dollar balance outstanding of CAD $73,000 has been converted to U.S. dollars at an exchange rate of CAD $1.00 to $0.77 as of September 30, 2018 to reflect total amount outstanding in U.S. dollars.
​
Off-Balance Sheet Arrangements
We currently have no off-balance sheet arrangements, including any risk management of commodity pricing or other hedging practices.
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Item 3.
Quantitative and Qualitative Disclosures About Market Risk.
(dollar amounts in thousands)
​
We are subject to financial market risks, including changes in interest rates. As of September 30, 2018, 82.5% of our portfolio investments (based on fair value) paid variable interest rates, 11.0% paid fixed interest rates, 5.7% were non-income producing senior secured loans or equity/other investments and the remaining 0.8% were income producing equity/other investments. A rise in the general level of interest rates can be expected to lead to higher interest rates applicable to any variable rate investments we hold and to declines in the value of any fixed rate investments we hold. To the extent that a substantial portion of our investments may be in variable rate investments, an increase in interest rates beyond this threshold would make it easier for us to meet or exceed the hurdle rate applicable to the subordinated incentive fee on income under the FS/KKR Advisor investment advisory and administrative services agreement, and may result in a substantial increase in our net investment income and to the amount of incentive fees payable to FS/KKR Advisor with respect to our increased pre-incentive fee net investment income.
Pursuant to the terms of all of our financing arrangements, borrowings are at a floating rate based on LIBOR. To the extent that any present or future credit facilities, total return swap agreements or other financing arrangements that we or any of our subsidiaries enter into are based on a floating interest rate, we will be subject to risks relating to changes in market interest rates. In periods of rising interest rates when we or our subsidiaries have such debt outstanding or financing arrangements in effect, our interest expense would increase, which could reduce our net investment income, especially to the extent we hold fixed rate investments.
The following table shows the effect over a twelve month period of changes in interest rates on our interest income, interest expense and net interest income, assuming no changes in the composition of our investment portfolio, including the accrual status of our investments, and our financing arrangements in effect as of September 30, 2018:
Basis Point Change in Interest Rates
​ ​
Increase
(Decrease)
in Interest
Income(1)
 ​ ​
Increase
(Decrease)
in Interest
Expense
​ ​
Increase
(Decrease)
in Net Interest
Income
​ ​
Percentage
Change in
Net Interest
Income
​
Down 100 basis points
​ ​ ​ $ (34,125) ​ ​ ​ ​ $ (17,185) ​ ​ ​ ​ $ (16,940) ​ ​ ​ ​ ​ (5.2)% ​ ​
No change
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Up 100 basis points
​ ​ ​ $ 35,028 ​ ​ ​ ​ $ 17,185 ​ ​ ​ ​ $ 17,843 ​ ​ ​ ​ ​ 5.5% ​ ​
Up 300 basis points
​ ​ ​ $ 105,687 ​ ​ ​ ​ $ 51,556 ​ ​ ​ ​ $ 54,131 ​ ​ ​ ​ ​ 16.6% ​ ​
Up 500 basis points
​ ​ ​ $ 176,473 ​ ​ ​ ​ $ 85,927 ​ ​ ​ ​ $ 90,546 ​ ​ ​ ​ ​ 27.8% ​ ​
​
(1)
Assumes no defaults or prepayments by portfolio companies over the next twelve months.
​
We expect that our long-term investments will be financed primarily with equity and debt. If deemed prudent, we may use interest rate risk management techniques in an effort to minimize our exposure to interest rate fluctuations. These techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act. Adverse developments resulting from changes in interest rates or hedging transactions could have a material adverse effect on our business, financial condition and results of operations. During the nine months ended September 30, 2018 and 2017, we did not engage in interest rate hedging activities.
In addition, we may have risk regarding portfolio valuation. See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Valuation of Portfolio Investments.”
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Item 4.
Controls and Procedures.
​
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2018.
Based on the foregoing, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that we would meet our disclosure obligations.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) promulgated under the Exchange Act) that occurred during the three-month period ended September 30, 2018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II—OTHER INFORMATION
Item 1.   Legal Proceedings.
We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us. From time to time, we may be party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. While the outcome of any legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material adverse effect upon our financial condition or results of operations.
Item 1A.   Risk Factors.
There have been no material changes from the risk factors set forth in our annual report on Form 10-K for the year ended December 31, 2017, as supplemented by our quarterly report on Form 10-Q for the quarter ended March 31, 2018.
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds.
The table below provides information concerning our repurchases of shares of our common stock during the three months ended September 30, 2018, pursuant to our share repurchase program.
Period
​ ​
Total Number
of Shares
Purchased
​ ​
Average
Price Paid
per Share
​ ​
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
​ ​
Maximum Number of
Shares that May Yet
Be Purchased
Under the
Plans or Programs
​
July 1, 2018 through July 31, 2018
​ ​ ​ ​ 3,296,879 ​ ​ ​ ​ $ 8.50 ​ ​ ​ ​ ​ 3,296,879 ​ ​ ​ ​
​
​ (1)
​ ​
August 1, 2018 through August 31, 2018
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
September 1, 2018 through September 30, 2018
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Total
​ ​ ​ ​ 3,296,879 ​ ​ ​ ​ $ 8.50 ​ ​ ​ ​ ​ 3,296,879 ​ ​ ​ ​
​
             (1)
​ ​
​
​
(1)
The maximum number of shares available for repurchase on July 2, 2018 was 3,296,879. A description of the calculation of the maximum number of shares of our common stock that may be repurchased under our share repurchase program is set forth in Note 3 to our unaudited consolidated financial statements included herein.
​
See Note 3 to our unaudited consolidated financial statements included herein for a more detailed discussion of the terms of our share repurchase program.
Item 3.   Defaults upon Senior Securities.
Not applicable.
Item 4.   Mine Safety Disclosures.
Not applicable.
Item 5.   Other Information.
Not applicable.
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Item 6.   Exhibits.
Item 15.b.   Exhibits.
​ 3.1 ​ ​ Articles of Amendment and Restatement of the Company. (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on June 14, 2012.) ​
​ 3.2 ​ ​ Articles Supplementary of the Company. (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on June 1, 2017.) ​
​ 3.3 ​ ​ Articles Supplementary of the Company. (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on June 13, 2017.) ​
​ 3.4 ​ ​ Third Amended and Restated Bylaws of the Company. (Incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on June 13, 2017.) ​
​ 4.1 ​ ​ Amended and Restated Distribution Reinvestment Plan of the Company, effective as of March 26, 2014. (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on February 24, 2014.) ​
​ 10.1 ​ ​ Investment Advisory and Administrative Services Agreement, dated as of April 9, 2018, by and between FS Investment Corporation II and FS/KKR Advisor, LLC. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on April 9, 2018.) ​
​ 10.2 ​ ​ Investment Advisory and Administrative Services Agreement, dated as of February 8, 2012, by and between the Company and FSIC II Advisor, LLC. (Incorporated by reference to Exhibit (g)(1) filed with Pre-Effective Amendment No. 3 to the Company’s registration statement on Form N-2 (File No. 333-175654) filed on February 10, 2012.) ​
​ 10.3 ​ ​ Investment Sub-Advisory Agreement, dated as of February 8, 2012, by and between FSIC II Advisor, LLC and GSO / Blackstone Debt Funds Management LLC. (Incorporated by reference to Exhibit (g)(2) filed with Pre-Effective Amendment No. 3 to the Company’s registration statement on Form N-2 (File No. 333-175654) filed on February 10, 2012.) ​
​ 10.4 ​ ​ Custodian Agreement, dated as of February 8, 2012, by and between the Company and State Street Bank and Trust Company. (Incorporated by reference to Exhibit (j) filed with Pre-Effective Amendment No. 3 to the Company’s registration statement on Form N-2 (File No. 333-175654) filed on February 10, 2012.) ​
​ 10.5 ​ ​ Amended and Restated Credit Agreement, dated as of May 29, 2015, by and among Cooper River LLC, as borrower, Citibank, N.A., as administrative agent, Citibank, N.A. acting through its Agency and Trust division, as collateral custodian and collateral agent, each of the lenders from time to time party thereto and Virtus Group, LP, as collateral administrator. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 4, 2015.) ​
​ 10.6 ​ ​ Second Amendment, dated as of June 1, 2018, by and among Cooper River LLC, as borrower, Citibank, N.A., as administrative agent, Citibank, N.A. acting through its Agency and Trust division, as collateral custodian and collateral agent, each of the lenders from time to time party thereto and Virtus Group, LP, as collateral administrator. (Incorporated by reference to Exhibit 10.12 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2018 filed on August 14, 2018.) ​
​ 10.7* ​ ​ Third Amendment, dated as of July 30, 2018, by and among Cooper River LLC, as borrower, Citibank, N.A., as administrative agent, Citibank, N.A. acting through its Agency and Trust division, as collateral custodian and collateral agent, each of the lenders from time to time party thereto and Virtus Group, LP, as collateral administrator. ​
​ 10.8* ​ ​ Fourth Amendment, dated as of September 10, 2018, by and among Cooper River LLC, as borrower, Citibank, N.A., as administrative agent, Citibank, N.A. acting through its Agency and Trust division, as collateral custodian and collateral agent, each of the lenders from time to time party thereto and Virtus Group, LP, as collateral administrator. ​
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​ 10.9 ​ ​ Amended and Restated Account Control Agreement, dated as of May 29, 2015, by and among Cooper River LLC, as pledgor, Citibank, N.A., as secured party, and Citibank, N.A., as securities intermediary. (Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on June 4, 2015.) ​
​ 10.10 ​ ​ Security Agreement, dated as of March 27, 2013, by and between Cooper River LLC and Citibank, N.A. (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on March 28, 2013.) ​
​ 10.11 ​ ​ Agreement and Plan of Merger, dated as of March 27, 2013, by and among Cooper River LLC, Cooper River CBNA Loan Funding LLC and Citibank, N.A. (Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on March 28, 2013.) ​
​ 10.12 ​ ​ Amended and Restated Investment Management Agreement, dated as of May 29, 2015, by and between the Company, as investment manager, and Cooper River LLC. (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on June 4, 2015.) ​
​ 10.13 ​ ​ Amended and Restated Sale and Contribution Agreement, dated as of May 29, 2015, by and between the Company, as seller, and Cooper River LLC, as purchaser. (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on June 4, 2015.) ​
​ 10.14 ​ ​ Loan Financing and Servicing Agreement, dated as of February 20, 2014, by and among Darby Creek LLC, as borrower, Deutsche Bank AG, New York Branch, as administrative agent, Wells Fargo Bank, National Association, as collateral agent and collateral custodian, and the other lenders and lender agents from time to time party thereto. (Incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on February 25, 2014.) ​
​ 10.15 ​ ​ Amendment No. 1 to Loan Financing and Servicing Agreement, dated as of January 12, 2015, by and among Darby Creek LLC, as borrower, Deutsche Bank AG, New York Branch, as administrative agent, Wells Fargo Bank, National Association, as collateral agent and collateral custodian, and the other lenders and lender agents from time to time party thereto. (Incorporated by reference to Exhibit 10.27 to the Company’s Annual Report on Form 10-K filed on March 25, 2016.) ​
​ 10.16 ​ ​ Amendment No. 2 to Loan Financing and Servicing Agreement, dated as of February 3, 2015, by and among Darby Creek LLC, as borrower, Deutsche Bank AG, New York Branch, as administrative agent, Wells Fargo Bank, National Association, as collateral agent and collateral custodian, and the other lenders and lender agents from time to time party thereto. (Incorporated by reference to Exhibit 10.28 to the Company’s Annual Report on Form 10-K filed on March 25, 2016.) ​
​ 10.17 ​ ​ Amendment No. 3 to Loan Financing and Servicing Agreement, dated as of May 7, 2015, by and among Darby Creek LLC, as borrower, Deutsche Bank AG, New York Branch, as administrative agent, Wells Fargo Bank, National Association, as collateral agent and collateral custodian, and the other lenders and lender agents from time to time party thereto. (Incorporated by reference to Exhibit 10.29 to the Company’s Annual Report on Form 10-K filed on March 25, 2016.) ​
​ 10.18 ​ ​ Amendment No. 4 to Loan Financing and Servicing Agreement, dated as of October 8, 2015, by and among Darby Creek LLC, as borrower, Deutsche Bank AG, New York Branch, as administrative agent, Wells Fargo Bank, National Association, as collateral agent and collateral custodian, and the other lenders and lender agents from time to time party thereto. (Incorporated by reference to Exhibit 10.30 to the Company’s Annual Report on Form 10-K filed on March 25, 2016.) ​
​ 10.19 ​ ​ Amendment No. 6 to Loan Financing and Servicing Agreement, dated as of August 19, 2016, by and among Darby Creek LLC, as borrower, Deutsche Bank AG, New York Branch, as administrative agent, Wells Fargo Bank, National Association, as collateral agent and collateral custodian, and the other lenders and lender agents from time to time party thereto. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 22, 2016.) ​
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​ 10.20 ​ ​ Sale and Contribution Agreement, dated as of February 20, 2014, by and between Darby Creek LLC, as purchaser, and the Company, as seller. (Incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on February 25, 2014.) ​
​ 10.21 ​ ​ Investment Management Agreement, dated as of February 20, 2014, by and between Darby Creek LLC and the Company, as investment manager. (Incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed on February 25, 2014.) ​
​ 10.22 ​ ​ Securities Account Control Agreement, dated as of February 20, 2014, by and among Darby Creek LLC, as pledgor, Wells Fargo Bank, National Association, as secured party, and Wells Fargo Bank, National Association, as securities intermediary. (Incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K filed on February 25, 2014.) ​
​ 10.23 ​ ​ Loan Agreement, dated as of November 14, 2014, by and among Juniata River LLC, as borrower, JPMorgan Chase Bank, National Association, as administrative agent and lender, Citibank, N.A., as collateral agent and Virtus Group, LP as collateral administrator. (Incorporated by reference to Exhibit 10.51 to the Company’s Annual Report on Form 10-K filed on March 18, 2015.) ​
​ 10.24 ​ ​ Amendment No. 1 to Loan Agreement, dated as of October 11, 2016, by and among Juniata River LLC, as borrower, JPMorgan Chase Bank, National Association, as administrative agent and lender, Citibank, N.A., as collateral agent and Virtus Group, LP as collateral administrator. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 13, 2016.) ​
​ 10.25 ​ ​ Sale and Contribution Agreement, dated as of November 14, 2014, between Juniata River LLC, as purchaser, and the Company, as seller. (Incorporated by reference to Exhibit 10.52 to the Company’s Annual Report on Form 10-K filed on March 18, 2015.) ​
​ 10.26 ​ ​ Investment Management Agreement, dated as of November 14, 2014, between Juniata River LLC and FS Investment Corporation, as investment manager. (Incorporated by reference to Exhibit 10.53 to the Company’s Annual Report on Form 10-K filed on March 18, 2015.) ​
​ 10.27 ​ ​ Collateral Administration Agreement, dated as of November 14, 2014, by and among Juniata River LLC, JPMorgan Chase Bank, National Association, as administrative agent, the Company, as investment manager and Virtus Group, LP, as collateral administrator. (Incorporated by reference to Exhibit 10.54 to the Company’s Annual Report on Form 10-K filed on March 18, 2015.) ​
​ 10.28 ​ ​ Credit Agreement, dated as of May 15, 2017, among Green Creek LLC, Goldman Sachs Bank USA, as lender, sole lead arranger and administrative agent, Citibank, N.A., as collateral agent, and Virtus Group, LP, as collateral administrator. (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on May 16, 2017.) ​
​ 10.29 ​ ​ Senior Secured Revolving Credit Agreement, dated as of August 9, 2018, among Corporate Capital Trust, Inc., FS Investment Corporation, FS Investment Corporation II, FS Investment Corporation III, each other person designated as a “borrower” thereunder pursuant to section 9.19 thereof, the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and ING Capital LLC, as collateral agent. (Incorporated by reference to Exhibit 10.56 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2018 filed on August 14, 2018.) ​
​ 31.1* ​ ​ Certification of Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended. ​
​ 31.2* ​ ​ Certification of Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended. ​
​ 32.1* ​ ​ Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002. ​
​
*
Filed herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this quarterly report to be signed on its behalf by the undersigned, thereunto duly authorized on November 14, 2018.
​ ​ ​ ​ FS INVESTMENT CORPORATION II ​
​ ​ ​ ​
By:
​ ​
/s/ Michael C. Forman
​
Michael C. Forman
Chief Executive Officer
(Principal Executive Officer)
 ​
​ ​ ​ ​
By:
​ ​
/s/ William Goebel
​
William Goebel
Chief Financial Officer
(Principal Financial and Accounting Officer)
 ​
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FS KKR Capital Corp. II Reports