FSCO 8-K
FS Credit Opportunities Corp. (FSCO)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): September 29, 2022
FS CREDIT OPPORTUNITIES CORP.
(Exact name of Registrant as specified in its charter)
Maryland (State or other jurisdiction of incorporation) |
811-22802 (Commission File Number) |
46-1882356 (I.R.S. Employer Identification No.) |
201 Rouse Boulevard Philadelphia, Pennsylvania (Address of principal executive offices) |
19112 (Zip Code) |
Registrant’s telephone number, including area code: (215) 495-1150
None
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
| N/A | N/A | N/A |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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. ☐
| Item 7.01 | Regulation FD Disclosures. |
Listing Overview & FAQs; Presentation Deck
In connection with the expected listing of FS Credit Opportunities Corp.’s (the “Company”) common stock on a national securities exchange (the “Listing”) in early to mid-November 2022, subject to market conditions and final board approval, on September 29, 2022, the Company has published an overview and frequently-asked-questions regarding the Listing, a copy of which is attached hereto as Exhibit 99.1. There can be no assurance that the Company will be able to complete the Listing in the expected timeframe or at all.
A summary timeline for the listing is furnished as Exhibit 99.2. A presentation of the operational considerations for the listing is furnished as Exhibit 99.3. A timeline of the operational considerations for the listing is furnished as Exhibit 99.4. A term sheet of the Company is furnished as Exhibit 99.5. Except as may be required by federal securities laws, the Company undertakes no duty or obligation to update or revise the information contained in these exhibits.
Cautionary Statement Concerning Forward-Looking Statements
Statements included herein may constitute “forward-looking” statements as that term is defined in Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995, including statements with regard to future events or the future performance or operations of the Company. Words such as “intends,” “will,” “expects,” and “may” or similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors could cause actual results to differ materially from those projected in these forward-looking statements. Factors that could cause actual results to differ materially include changes in the economy, geo-political risks, risks associated with possible disruption to the Company’s operations or the economy generally due to hostilities, terrorism, natural disasters or pandemics such as COVID-19, future changes in laws or regulations and conditions in the Company’s operating area, unexpected costs, the ability of the Company to complete the listing, the price at which the Company’s shares of common stock may trade on the New York Stock Exchange and such other factors that are disclosed in the Company’s filings with the Securities and Exchange Commission (the “SEC”). The inclusion of forward-looking statements should not be regarded as a representation that any plans, estimates or expectations will be achieved. Any forward-looking statements speak only as of the date of this communication. Except as required by federal securities laws, the Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Readers are cautioned not to place undue reliance on any of these forward-looking statements.
| Item 9.01 | Financial Statements and Exhibits. |
| (d) | Exhibits. |
EXHIBIT NUMBER
Exhibit 99.1 FS Credit Opportunities Corp. Listing Overview & FAQs
Exhibit 99.2 FS Credit Opportunities Corp. Listing Timeline
Exhibit 99.3 FS Credit Opportunities Corp. Operational Considerations Presentation
Exhibit 99.4 FS Credit Opportunities Corp. Operational Overview
Exhibit 99.5 FS Credit Opportunities Corp. Term Sheet
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| FS Credit Opportunities Corp. | |||
| Date: | October 3, 2022 | By: | /s/ Stephen S. Sypherd |
| Stephen S. Sypherd | |||
| Vice President, Treasurer and Secretary | |||
Exhibit 99.1
FS Credit Opportunities Corp. listing overview
Summary
FS Credit Opportunities Corp. (the “Fund” or “FSCO”) intends to list its shares on the New York Stock Exchange (NYSE) in early to mid-November through a direct listing, subject to market conditions and final board approval. Once listed, the Fund will rank as one of the largest credit-focused closed-end funds in the market with an attractive dividend yield, strong track record and differentiated strategy investing in public and private credit markets. There can be no assurance that the Fund will be able to complete the listing within the expected timeframe, or at all.
Overview
| Ticker | ● NYSE: FSCO |
| Expected listing | ● Early to mid-November, subject to market conditions and final board approval |
| Post-listing
liquidity |
● Shareholders and the Fund’s board of directors (the “Board”) approved a proposal for the Fund to implement a phased approach to the listing. Shares will be available for trading based on the following schedule: ‒ At listing: up to 1/3 of shares held by all shareholders will be available for trading ‒ 90 days post-listing: an additional 1/3 of shares held by all shareholders will be available for trading ‒ 180 days post-listing: the remaining 1/3 of shares held by all shareholders will be available for trading ● Accounts with balances of $15,000 or less prior to the listing will have all shares available for trading at listing. Please see further details below (Question 2). |
| Distributions | ● Pre-listing: To help ensure the Fund is operationally prepared for the listing, the Board approved accelerating the payment of the monthly distribution for October and the suspension of the distribution reinvestment plan (DRP) effective on or about October 3. As a result, the full October monthly distribution will be paid in cash on October 20 to shareholders of record as of October 18. ● We expect the Fund to increase the distribution at listing to support an annualized distribution rate of 8.25% or greater based on the Fund’s net asset value (NAV) as of August 31, 2022, subject to market conditions and board approval. ● Post-listing: The Board recently adopted an amended and restated distribution reinvestment plan (A&R DRP), which will become effective upon the listing ● The A&R DRP will be suspended at listing for 180 days, however, we expect the Fund to reinstate the A&R DRP 181 days following the listing ● Therefore, monthly distributions will be paid in cash during the three phases of the listing |
| Client accounts | ● Client accounts will reflect FSCO’s public market price at listing ● To account for the three phases of the listing, a shareholder’s shares will be split evenly across three separate accounts at the transfer agent with each account holding 1/3 of a shareholder’s total shares at listing ‒ Once each phase of the listing is complete, all shares will be automatically moved to a single account ‒ There is no action financial advisors or shareholders need to take to complete these transactions |
| Account freeze | ● An account maintenance freeze is expected to go into effect on October 17 ● We encourage shareholders to complete any desired changes and submit the paperwork to the Fund’s transfer agent by October 10. Please consult with your broker dealer of custodian for any firm-specific deadlines. |
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FS Credit Opportunities Corp. listing overview
Listing considerations
1. Why list FSCO’s shares on the NYSE?
| ● | In addition to providing shareholders with enhanced liquidity of their shares, we believe the Fund and portfolio will be competitively positioned in the public markets. |
| ‒ | Fully scaled credit platform: As of June 30, 2022, the Fund managed $2.1 billion in assets, ranking as one of the largest public credit-focused closed-end funds. The portfolio management team, led by Andrew Beckman and Nick Heilbut, leverages the full resources, infrastructure, and expertise of FS Investments, a $34 billion alternative asset manager. |
| ‒ | Strong track record: The Fund has returned 5.51% per year since Andrew Beckman and the FS Investments Liquid Credit & Special Situations team assumed all portfolio management responsibilities in January 2018 through August 31, 2022. Over that time, the Fund outperformed high yield bonds by 320 basis points per year and loans by 207 basis points per year.1 |
| ‒ | Competitive dividend: We expect the Fund to increase the distribution at listing to an annualized distribution rate of 8.25% or greater based on the Fund’s net asset value as of August 31, 2022. |
| ‒ | Diversified credit strategy: FSCO invests in non-traditional areas of the public and private credit markets where a yield or return premium may exist due to complexity, illiquidity or a result of corporate events. Especially in today’s challenging environment for traditional fixed income, we believe having a flexible strategy to invest across private and public credit markets is critical to generating differentiated returns and managing risk. |
| ▪ | Diversified portfolio:2 |
| $2.1 billion in total assets | 85 portfolio companies |
| 81% senior secured debt3 | $21 million average size by issuer |
| 64% floating rate assets4 | Low duration: 1.25 years |
2. When will FSCO’s shares be available for trading?
| ● | Shareholders and the Fund’s Board approved a proposal for the Fund to implement a phased approach to the listing. Shares will be available for trading based on the following schedule: |
| ‒ | At listing: up to 1/3 of shares held by all shareholders will be available for trading |
| ‒ | 90 days post-listing: an additional 1/3 of shares held by all shareholders will be available for trading |
| ‒ | 180 days post-listing: the remaining 1/3 of shares held by all shareholders will be available for trading |
| ● | Accounts with a balance of $15,000 or less will have all shares available for trading at listing. We expect the net asset value per share used to determine which accounts meet this threshold will be based on the Fund’s NAV per share on October 31, 2022. |
| ● | The $15,000 threshold was determined based on the Fund’s small balance tender offers through which the Fund repurchased shares from accounts that participated in the regular quarterly tender and held less than $5,000 in shares following the completion of the tender offer. Since there are three phases to the listing, setting the threshold at $15,000 ensures that no account will hold less than $5,000 in shares at any point during the phased listing process. |
3. What is the purpose of the phased approach for the listing?
| ● | The phased approach is intended to help ease the anticipated downward pressure on the market price of the Fund’s shares in the period shortly following the listing. |
| ● | While we believe there are compelling reasons for shareholders to continue holding their shares after a listing, we understand that some investors may prefer to have full liquidity of their shares in the period immediately following the listing. |
| ● | When studying prior direct listings, we recognize that there has been a tendency for shareholders to sell their shares in the period immediately after the listing, often regardless of underlying fund performance or the level of income paid by the fund. In some cases, the volume of shares sold significantly outweighed demand for the shares, resulting in downward pressure on stock prices. |
1 Bonds are represented by the ICE BofAML U.S. High Yield Bond Index. Loans are represented by the Credit Suisse Leveraged Loan Index.
2 Based on fair value as of June 30, 2022.
3 Senior secured debt includes first lien loans, second lien loans and senior secured bonds.
4 Includes floating rate assets on a look-through basis within the FSCO’s Asset Based Finance investments.
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| ● | Therefore, the phased approach is intended to ease the anticipated downward pressure on FSCO’s share price in the period immediately following the listing since FSCO’s public share price may be more influenced by an imbalance in supply (existing shareholders seeking to sell their shares) and demand (existing and new investors seeking to buy shares) than the Fund’s fundamental performance. |
4. What considerations should shareholders take into account at listing?
| ● | The difference between a direct listing and initial public offering: The Fund’s shares will commence trading through a direct listing of its shares on the NYSE – not an initial public offering, or IPO. |
| ‒ | This is an important distinction because in an IPO, a company issues new shares and raises new capital in the public markets at a pre-determined offering price. |
| ‒ | This compares to a direct listing like FSCO’s, where no new shares will be sold in the market and the stock price will not be determined prior to the listing. |
| ‒ | Rather, FSCO’s public share price will be determined based on supply from current shareholders seeking to sell their shares and demand from existing and new investors looking to purchase shares of the Fund’s common stock. |
| ‒ | If supply significantly outweighs demand at listing, meaning there are more sellers than buyers, FSCO’s share price may fall and trade at a discount to the Fund’s net asset value. If supply and demand is more balanced, however, FSCO share’s price may trade closer to its net asset value. |
| FSCO’s direct listing | Initial public offering (IPO) | |
| Initial trading price | Market-driven (supply & demand) | Set price prior to listing |
| New shares issued | No | Yes |
| New capital raised by company | No | Yes |
| Road shows with new potential investors | Yes | Yes |
| ● | FSCO’s NAV vs. public share price: If there is a high volume of selling in the period immediately following a listing, the Fund’s share price may not reflect its strong fundamentals, including the highlighted datapoints below. |
| ‒ | The Fund’s net asset value per share was $6.87 as of August 31, 2022. |
| ‒ | FSCO has fully covered its distributions through net investment income since Andrew Beckman and the FS Investments Liquid Credit & Special Situations Team took over full management of the Fund in January 2018. |
| ‒ | Senior secured debt represented 81% of the portfolio as of June 30, 2022, which we believe helps reduce the risk of loss compared to subordinated debt and equity investments. |
| ● | FSCO highly competitive vs. public closed-end fund peers |
| ‒ | Significant scale: As of June 30, 2022, the Fund managed $2.1 billion in assets, ranking as one of the largest public credit-focused closed-end funds. |
| ‒ | Attractive dividend: We expect the Fund to increase the distribution at listing to support an annualized distribution rate of 8.25% or greater based on the Fund’s net asset value (NAV) as of August 31, 2022, subject to market conditions and board approval. |
5. How will FSCO’s initial trading price be determined on the day of listing?
| ● | A third-party market specialist at the NYSE will be responsible for creating an orderly market for the Fund’s common shares by aggregating buy and sell orders. |
| ● | Since this will be the first time that the Fund’s shares will trade in the public markets, it may take a few hours for the specialist to build the book and create an orderly market. |
| ● | Therefore, the Fund will likely not commence trading immediately at the market open at 9:30AM ET on the day of listing. In addition, there is typically a lag before prices are reported on third-party websites. |
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| ● | Once the market specialist believes it has received sufficient indications of interest to create an orderly market for FSCO’s shares, the Fund will commence trading on the NYSE. |
6. Will the Fund or its affiliates provide support for the Fund’s stock in the secondary market?
| ● | Following the listing, certain directors and officers of FSCO and its affiliates expect to make commitments to an investment fund that is currently intended to be established to invest from time to time in shares of FSCO. |
| ● | The investment fund would be managed by a third party and the FSCO-related investors would not exercise investment or voting control over the investment fund. As a result, FSCO does not expect to implement the previously disclosed open-market share repurchase program under Rule 10b5-1 under the Securities Exchange Act of 1934. |
Account maintenance & reporting
7. Will there be an account freeze prior to the listing?
| ● | Yes. We expect an account freeze will go into effect on October 17. |
| ● | During the account freeze, you will not be able to transfer shares or change your custodian, among other account maintenance requests. |
| ● | We recommend that shareholders complete and submit any account requests to the Fund’s transfer agent by October 10. Please consult with your broker dealer of custodian for any firm-specific deadlines. |
8. How can I sell my shares?
| ● | For shares held with a custodian such as Ameriprise, Cetera, Charles Schwab, LPL, Pershing, NFS, TD Ameritrade or Wells Fargo Clearing, there is no action you need to take prior to the listing. Your FSCO shares will be available for trading after each phase of the listing. You may also continue to hold your shares in your brokerage account or transfer the shares to a fee-based account, where applicable, upon the completion of each phase of the listing. |
| ● | For accounts where FSCO shares are not currently held by a custodian, your shares are likely held by SS&C Technologies, the Fund’s transfer agent (formerly known as DST Systems). There is no action required unless you would like to buy or sell shares after the completion of each phase of the listing. You can buy or sell shares through two ways: |
| ‒ | First, you can work with a financial advisor to open a new brokerage account or transfer your shares to an existing brokerage account once the Fund’s shares are listed. Contact your financial institution to discuss their preferred process for transferring shares. In most cases, the brokerage firm may require the submission of their proprietary transfer form along with a Direct Registration Transaction Advice, or DRTA. The Fund will mail your DRTA approximately one week prior to the listing. |
| ● | Moving shares typically takes 2-3 business days, depending on the brokerage firm’s policies and procedures. Please note that you will receive a DRTA for each phase of the listing in order to transfer your shares to your brokerage account. Again, there is no action you need to take unless you wish to buy additional shares or sell your shares at listing. |
| ‒ | If you do not wish to transfer your shares to a brokerage account, the second option is to sell your shares through the Direct Liquidation Program through the Fund’s transfer agent. You will need to complete the Fund’s liquidation form which will be available on our website at www.fsinvestments.com or www.fsproxy.com. |
9. What will happen to my shares during the phased listing process?
| ● | To account for the three phases of the listing, your shares will be split evenly across three separate accounts at the transfer agent, which we will refer to as Account 1, Account 2 and Account 3 below. Once listed, client accounts will reflect the public market price of FSCO’s common stock across all three accounts. |
| ‒ | Shares in Account 1 will be free to trade at listing and eligible to be moved to a brokerage account while shares in Accounts 2 & 3 will not be available for trading. |
| ‒ | 90 days following the listing, an additional 1/3 of shares will be available for trading through Account 1 and eligible to be moved to a brokerage account. The remaining 1/3 of shares in Account 3 will not be available for trading. |
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| ‒ | Then, 180 days following the listing, the final 1/3 of shares held in Account 3 will be available for trading through Account 1 and will be eligible to be moved to a brokerage account. |
| ‒ | For registered stockholders, the transfer agent will continue to issue quarterly statements until shares are moved to a brokerage account. |
Please note there is no action financial advisors or shareholders need to take for these transactions to occur. FS Investments will work closely with the Fund’s transfer agent, broker dealers and custodians to complete these transactions.
Distributions
10. Will FSCO continue to pay monthly distributions?
| ● | Upon listing, we expect the Fund will continue to pay monthly distributions. |
| ● | We expect the Fund to increase the distribution at listing to support an annualized distribution rate of 8.25% or greater based on the Fund’s net asset value (NAV) as of August 31, 2022, subject market conditions and board approval. |
| ● | To help ensure the Fund is operationally prepared for the listing, the Board approved accelerating the payment of the monthly distribution for October and the suspension of the distribution reinvestment plan (DRP). As a result, the full October monthly distribution will be paid in cash on October 20 to shareholders as of record on October 18. |
| ● | The Board also recently adopted an amended and restated distribution reinvestment plan (A&R DRP), which will become effective upon the listing. The A&R DRP will be suspended at listing until the completion of the third phase. We expect the Fund to reinstate the A&R DRP 181 days following the listing. |
| ● | Since the A&R DRP will be suspended, distributions will be paid in cash for the duration of the phased listing process. |
11. What should registered shareholders do to prepare their accounts?
| ● | Registered shareholders who do not hold their shares with a custodian (shares are likely held by the Fund’s transfer agent) are encouraged to add banking instructions to their account in order to receive monthly distributions electronically rather than a physical check delivered to the address on file. |
| ● | Any registered shareholders that would like to update the banking instructions on file can submit an account maintenance form to our transfer agent, SS&C Technologies, Inc. |
12. What is the targeted distribution rate at listing?
| ● | We expect the Fund to increase the distribution at listing to support an annualized distribution rate of 8.25% or greater based on the Fund’s net asset value (NAV) as of August 31, 2022, subject to market conditions and board approval. |
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Tax and other considerations
13. Will the listing create a taxable event?
| ● | The listing itself will not create a taxable event. However, if shareholders decide to sell their shares, they could be subject to taxes. |
| ● | Shareholders should consult with their financial and tax advisors before selling their shares in order to best understand their individual tax considerations. |
14. Will the listing change the management team or investment strategy?
| ● | No. The Fund will continue to be advised by FS Global Advisor, LLC, an affiliate of FS Investments, and managed by Andrew Beckman and the FS Investments Liquid Credit & Special Situations Team. There will be no change to the Fund’s investment strategy. |
15. Where can I find additional resources?
| ● | Visit www.fsproxy.com or www.fsinvestments.com |
Contacts
Advisors and SHAREHOLDERs
877-628-8575
Media (FS Investments)
Melanie Hemmert, [email protected], 215-309-6843
FORWARD-LOOKING STATEMENTS
Statements included herein may constitute “forward-looking” statements as that term is defined in Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995, including statements with regard to future events or the future performance or operations of the Company. Words such as “intends,” “will,” “expects,” and “may” or similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors could cause actual results to differ materially from those projected in these forward-looking statements. Factors that could cause actual results to differ materially include changes in the economy, geo-political risks, risks associated with possible disruption to the Company’s operations or the economy generally due to hostilities, terrorism, natural disasters or pandemics such as COVID-19, future changes in laws or regulations and conditions in the Company’s operating area, unexpected costs, the ability of the Company to complete the listing, the price at which the Company’s shares of common stock may trade on the New York Stock Exchange and such other factors that are disclosed in the Company’s filings with the Securities and Exchange Commission (the “SEC”). There can be no assurances that the investment fund will be established, and if it is, the amount or timing of any purchases of Company shares. The inclusion of forward-looking statements should not be regarded as a representation that any plans, estimates or expectations will be achieved. Any forward-looking statements speak only as of the date of this communication. Except as required by federal securities laws, the Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Readers are cautioned not to place undue reliance on any of these forward-looking statements.
6
Exhibit 99.2
FS Credit Opportunities Corp.
Anticipated ticker: FSCO
| Expected listing timeline | |
| On or around October 3 | ● Suspension of distribution reinvestment plan ● Distributions will be paid in cash through the phased listing |
| October 10 | Suggested date to submit account maintenance requests to the fund's transfer agent, subject to firm-specific deadlines |
| October 17 | Customer account freeze effective at transfer agent, SS&C/DST |
| October 20 | Payment of October distribution |
| October 31 | Strike NAV |
| Early November | ● Direct Registration Transaction Advice (DRTA) with instructions on how to move non-custodial shares into brokerage mailed to applicable shareholders. ● The fund’s net asset value as of October 31, 2022, will be used to determine accounts with balances of $15,000 or less. Such accounts will not be subject to the phased listing schedule and will have all shares available for trading at listing. ● Prior to the listing, the number of shares held in accounts will be rounded up to the nearest whole number in order to eliminate fractional shares. |
| Early to mid-November | Day of listing: 1/3 of each investor’s shares will be available for trading |
| 90 days post-listing | Additional 1/3 of each investor’s shares will be available for trading |
| 180 days post-listing | Final 1/3 of each investor’s shares will be available for trading |
| 181 days post-listing | Amended and restated distribution reinvestment plan effective |
Webinar calendar
To keep you as informed as possible as we approach the listing, we will be hosting regular webinars to provide updates and answer any questions.
| ● | Wednesday, Oct. 12 at 4:00 PM ET register now |
| ● | Wednesday, Oct. 26 at 4:00 PM ET register now |
| ● | Wednesday, Nov. 2 at 4:00 PM ET register now |
| ● | Wednesday, Nov. 9 at 4:00 PM ET register now |
For more information or to register for the webinars, visit FSProxy.com
There can be no assurance that the Fund will be able to complete the listing within the expected timeframe, or at all.
Cautionary Statement Concerning Forward-Looking Statements
Statements included herein may constitute “forward-looking” statements as that term is defined in Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995, including statements with regard to future events or the future performance or operations of the Company. Words such as “intends,” “will,” “expects,” and “may” or similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors could cause actual results to differ materially from those projected in these forward-looking statements. Factors that could cause actual results to differ materially include changes in the economy, geo- political risks, risks associated with possible disruption to the Company’s operations or the economy generally due to hostilities, terrorism, natural disasters or pandemics such as COVID-19, future changes in laws or regulations and conditions in the Company’s operating area, unexpected costs, the ability of the Company to complete the listing, the price at which the Company’s shares of common stock may trade on the New York Stock Exchange and such other factors that are disclosed in the Company’s filings with the Securities and Exchange Commission (the “SEC”). There can be no assurances that the investment fund will be established, and if it is, the amount or timing of any purchases of Company shares. The inclusion of forward-looking statements should not be regarded as a representation that any plans, estimates or expectations will be achieved. Any forward-looking statements speak only as of the date of this communication. Except as required by federal securities laws, the Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Readers are cautioned not to place undue reliance on any of these forward-looking statements.
© 2022 FS Investments
Exhibit 99.3
Preparing for FSCO’s listing NYSE: FSCO As of September 2022
FOR ADVISOR USE ONLY. NOT FOR INVESTOR USE. FS Credit Opportunities Fund highlights 2 Data as of June 30, 2022, unless otherwise noted. 1. Based on the Fund’s net asset value as of August 31, 2022. The actual dividend yield at listing may be higher or lower based on the then current NAV. The payment of future distributions on FSCO’s common shares is subject to the discretion of FSCO's board of directors and applicable legal restrictions and, therefore, there can be no assurance as to the amount or timing of any such future distributions. 2. Senior secured debt includes fist lien loans, second lien loans and senior secured bonds 3. Includes floating rate assets on a look-through basis within FSCO’s Asset Based Finance investments 4. Duration measures the sensitivity of a fixed income investment’s price to changes in interest rates and is measured in years. A duration of 1.xyrs suggests that a 1% change in interest rates would equate to a 1.x% change in FSCO’s net asset value. $2.1B 8.25%+ 81% 64% 1.25yrs Total assets Targeted annualized distribution rate at listing based on NAV1 Senior secured debt2 Floating rate assets3 Duration4 NYSE: FSCO
FOR ADVISOR USE ONLY. NOT FOR INVESTOR USE. A phased approach to the listing 3 The timing of the listing is subject to market conditions and the satisfaction of other customary conditions. There can be no assurance that the Fund will be able to complete the listing within the expected timeframe, or at all. Designed to help ease downward pressure on FSCO’s market share price shortly after listing An additional 1/3 of all shares available for trading Day of Listing 90 days post-listing 1/3 of all shares available for trading Final 1/3 of all shares available for trading 180 days post-listing Accounts with balances of $15,000 or less will not be subject to the phased liquidity schedule and will have all shares available for trading on the day of the listing
FOR ADVISOR USE ONLY. NOT FOR INVESTOR USE. Understanding a direct listing vs. an IPO 4 FSCO’s direct listing Initial public offering (IPO) Initial trading price Market-driven (supply & demand) Set price prior to listing New shares issued No Yes New capital raised by company No Yes Road shows with new potential investors Yes Yes Following the Listing, certain directors and officers of the Company and its affiliates expect to make commitments to an investment fund that is currently intended to be established to invest from time to time in shares of the Company. The investment fund would be managed by a third party and the Company-related investors would not exercise investment or voting control over the investment fund. The Company does not expect to implement the previously disclosed open-market share repurchase program under Rule 10b5-1 under the Securities Exchange Act of 1934.The information in this Item 7.01 is deemed to have been furnished to, and shall not be deemed to be “filed” with, the U.S. Securities and Exchange Commission.
FOR ADVISOR USE ONLY. NOT FOR INVESTOR USE. What is the purpose of a phased approach to the listing? 5 1. Upon the completion of the listing, FS Investments or its affiliates intend to implement an open-market share repurchase program. Further details will be provided prior to listing. 1 2 3 Address the lessons of prior direct listings Potentially ease the anticipated downward pressure on FSCO’s share price shortly following the listing Minimize selling pressure before share repurchase program begins buying shares1
FOR ADVISOR USE ONLY. NOT FOR INVESTOR USE. Illustrative listing timeline 6 For illustrative purposes only. The timing of the listing is subject to market conditions and the satisfaction of other customary conditions. There can be no assurance that the Fund will be able to complete the listing within the expected timeframe, or at all. Phase 2 shares available for trading Nov 2022 Feb 2023 1/3 of all shares will be available for trading May 2023 Phase 3 shares available for trading Continue to hold in brokerage account or transfer shares to an advisory/fee-based account Shares held by a qualified custodian (i.e., Ameriprise, Cetera, Charles Schwab, LPL, Pershing, NFS, TD Ameritrade, Well Fargo) Shares not held by a qualified custodian (i.e., held by DST, the Fund’s transfer agent) Direct Registration Transaction Advice (DRTA) letter #1 mailed DRTA letter #2 mailed DRTA letter #3 mailed 181 days post-listing Transfer to brokerage account or sell through open market sell order
FOR ADVISOR USE ONLY. NOT FOR INVESTOR USE. Shareholder experience during the phased listing 7 The timing of the listing is subject to market conditions and the satisfaction of other customary conditions. There can be no assurance that the Fund will be able to complete the listing within the expected timeframe, or at all. Shares will be split into three accounts based on the three phases of the listing FSCO shares At listing Account 1 Account 2 Account 3 % of total shares 1/3 1/3 1/3 Statement value Stock price Stock price Stock price Available for trading? Yes No No 90 days Account 1 Account 3 % of total shares 2/3 1/3 Statement value Stock price Stock price Available for trading? Yes No 180 days Account 1 % of total shares 100% Statement value Stock price Available for trading? Yes
FOR ADVISOR USE ONLY. NOT FOR INVESTOR USE. Distributions 8 The timing of the listing is subject to market conditions and the satisfaction of other customary conditions. There can be no assurance that the Fund will be able to complete the listing within the expected timeframe, or at all. FSCO will continue to pay monthly distributions following the listing September November Regular monthly distribution to be paid in early October Amended & restated distribution reinvestment plan goes effective May 2023 Amended & restated Distribution reinvestment plan suspended. All monthly distributions to be paid in cash. FSCO listing October Suspension of distribution reinvestment plan October 3 Account freeze October 17 October distribution payment October 20
FOR ADVISOR USE ONLY. NOT FOR INVESTOR USE. Preparing accounts ahead of the listing 9 What is this? Do I need to take any action? Account freeze On October 17, the Fund will put an account freeze in place in order to operationally prepare for the listing. If you wish to transfer your shares, change the custodian on your account or perform any other maintenance to your account, we advise that you submit all requests to the Fund’s transfer agent by October 10. Please consult with your broker dealer / custodian for any firm-specific requirements. Update bank instructions for distributions The amended and restated distribution reinvestment plan will be suspended for 180 days upon the listing. Distributions will be paid in cash via check or deposited into the account on record. Custodial accounts: No action needed. The cash distribution will be delivered to the account of record. Non-custodial accounts: Complete an FS Account Maintenance form you wish to have distributions deposited to your bank account rather than mailed via check. Resource page at www.fsinvestments.com or www.FSproxy.com Fractional share roundup The Fund will eliminate fractional shares prior to the listing. No. This will be performed on your behalf.
FOR ADVISOR USE ONLY. NOT FOR INVESTOR USE. Questions? 10 For more information, visit FSproxy.com www.fsproxy.com FAQs SEC filings ? Webinar schedule Presentation
FOR ADVISOR USE ONLY. NOT FOR INVESTOR USE. Disclosures 11 FORWARD-LOOKING STATEMENTS Statements included herein may constitute “forward-looking” statements as that term is defined in Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995, including statements with regard to future events or the future performance or operations of the Fund. Words such as “believes,” “expects,” “projects,” and “future” or similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors could cause actual results to differ materially from those projected in these forward-looking statements. Factors that could cause actual results to differ materially include changes in the economy, geo-political risks, risks associated with possible disruption to the Fund’s operations or the economy generally due to terrorism, natural disasters or pandemics, future changes in laws or regulations and conditions in the Fund’s operating area, unexpected costs, the ability of the Fund to complete the listing of the common stock of the Fund on a national securities exchange, the price at which the Fund’s shares of common stock may trade on a national securities exchange, and failure to list the common stock of the Fund on a national securities exchange. Some of these factors are enumerated in the filings the Fund made with the Securities and Exchange Commission (the SEC) and are also contained in the Prospectus. The inclusion of forward-looking statements should not be regarded as a representation that any plans, estimates or expectations will be achieved. Any forward-looking statements speak only as of the date of this communication. Except as required by federal securities laws, the Fund undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Readers are cautioned not to place undue reliance on any of these forward-looking statements. For more information, visit FSproxy.com
Exhibit 99.4
 |
FS Credit Opportunities Corp. |
Liquidity
plan overview and update |
Listing overview
FS Credit Opportunities Corp. (formerly FS Global Credit Opportunities Fund) intends to list its common shares on the New York Stock Exchange early to mid-November under the ticker FSCO. Shares will be available on NYSE in a phased approach, with one-third available the day of listing, the second-third available 90 days after listing and the final-third available 180 days after listing.
For shareholders who hold shares at a custodian (such as Ameriprise Financial, Charles Schwab, Community National Bank, LPL Financial, National Financial Services, Pershing and TD Ameritrade), no action is required to have their shares available for trading on the day of listing.
Investors whose shares are either not held at a custodian or shares are held by a custodian who does not participate in the Deposit/Withdrawal at Custodian (DWAC) process will need to take action if they wish to buy or sell shares of FS Credit Opportunities Corp. following the listing. We have created a simple one-page resource to aid in this process to use post-listing. Click here to access.
Resources
Note: Subject to change and board approval. There can be no assurance that the Fund will be able to complete the listing within the expected timeframe, or at all.
Shareholder experience during the phased listing
Shares will be split into three accounts based on the three phases of the listing
| FSCO shares | ||||
| At listing | Account 1 | Account 2 | Account 3 | |
| % of total shares | 1/3 | 1/3 | 1/3 | |
| Statement value | Stock price | Stock price | Stock price | |
| Available for trading? | Yes | No | No | |
| 90 days | Account 1 | Account 3 | ||
| % of total shares | 2/3 | 1/3 | ||
| Statement value | Stock price | Stock price | ||
| Available for trading? | Yes | No | ||
| 180 days | Account 1 | |||
| % of total shares | 100% | |||
| Statement value | Stock price | |||
| Available for trading? | Yes | |||
Cautionary Statement Concerning Forward-Looking Statements
Statements included herein may constitute “forward-looking” statements as that term is defined in Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995, including statements with regard to future events or the future performance or operations of the Company. Words such as “intends,” “will,” “expects,” and “may” or similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors could cause actual results to differ materially from those projected in these forward-looking statements. Factors that could cause actual results to differ materially include changes in the economy, geo- political risks, risks associated with possible disruption to the Company’s operations or the economy generally due to hostilities, terrorism, natural disasters or pandemics such as COVID-19, future changes in laws or regulations and conditions in the Company’s operating area, unexpected costs, the ability of the Company to complete the listing, the price at which the Company’s shares of common stock may trade on the New York Stock Exchange and such other factors that are disclosed in the Company’s filings with the Securities and Exchange Commission (the “SEC”). There can be no assurances that the investment fund will be established, and if it is, the amount or timing of any purchases of Company shares. The inclusion of forward-looking statements should not be regarded as a representation that any plans, estimates or expectations will be achieved. Any forward-looking statements speak only as of the date of this communication. Except as required by federal securities laws, the Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Readers are cautioned not to place undue reliance on any of these forward-looking statements.
| FS Investments 201 Rouse Boulevard, Philadelphia, PA 19112 877-628-8575 Member FINRA/SIPC | FL-CO-LIST |
| © 2022 FS Investments www.fsproxy.com | SE22 |
Exhibit 99.5
 |
Term sheet As of 8/31/2022 unless otherwise noted |
FSCO | FS Credit Opportunities Fund
A dynamic credit strategy investing across public and private markets
Public markets
Event-driven investing in opportunities with catalysts for price appreciation (M&A, refinancing, debt maturities, earnings growth)
Performing credit
| • | High quality credits in out-of-favor sectors |
| • | Opportunities created by dislocations |
| • | Complex situations in primary markets |
| • | Misunderstood or off-the-run credit |
Special situations: Idiosyncratic stressed and distressed borrowers
Structured credit/CLOs
Private markets
Unconventional borrowers outside the focus of banks, traditional business development companies and conventional lenders
Transitional capital
Rescue financing/distressed/stressed
Lending to dislocated sectors
Sponsored and non-sponsored transactions
Portfolio snapshot1
| $2.1B | 8.25%+ | 64% | 81% | 1.25 years |
| Total AUM | Expected NAV-based distribution yield at listing2 | Floating rate assets3 | Senior secured debt4 | Duration |
| Performance5 (as of 8/31/2022) | YTD | 1YR | 3YR | Since
1/1/2018 |
Sharpe
ratio since 1/1/20186 |
| FSCO (NAV) | -5.72% | -3.62% | 4.35% | 5.51% | 0.42 |
| Credit Suisse Leveraged Loan Index | -1.17% | 0.18% | 3.01% | 3.45% | 0.32 |
| ICE BofAML U.S. High Yield Index | -11.04% | -10.43% | 0.80% | 2.32% | 0.13 |
| HFRX Event-Driven Index | -5.12% | 0.00% | 3.43% | 0.30% | -0.16 |
Past
performance is not indicative of future results. FSCO’s returns are net of fees and expenses. All figures may be rounded.
Returns shown are historical and based on past performance. The benchmarks are shown for illustrative purposes only. An investment
cannot be made directly in an index.
| 1 | Based on fair value as of June 30, 2022. |
| 2 | Based on FSCO’s net asset value as of August 31, 2022. The actual dividend yield at listing may be higher or lower based on the then current NAV. The payment of future distributions on FSCO’s common shares is subject to the discretion of FSCO’s board of directors and applicable legal restrictions and, therefore, there can be no assurance as to the amount or timing of any such future distributions. |
| 3 | Includes floating rate assets on a look-through basis within the FSCO’s Asset Based Finance investments. |
| 4 | Senior secured debt includes first lien loans, second lien loans and senior secured bonds. |
| 5 | Returns for periods greater than one year are annualized. Returns assume distributions are invested pursuant to the Fund’s dividend reinvestment plan. FS Investments’ Liquid Credit & Special Situations Group took over all portfolio management responsibilities for FSCO in January 2018. Visit www.fsinvestments.com/investments for further performance information. |
| 6 | Sharpe ratio is a measure that indicates the average return minus the risk-free return divided by the standard deviation of return of an investment. |
An investment in the Fund involves risk, including loss of principal. Investment return and the value of shares will fluctuate. Shares may be worth more or less than original purchase price. Current performance may be lower or higher than the performance shown. Returns are calculated by determining the percentage change in NAV or market price (as applicable) in the specific period. The calculation assumes that all dividends and distributions, if any, have been reinvested. NAV and market price returns do not reflect broker sales charges, commissions or dealer manager fees, as applicable, in connection with the purchase or sales of Fund shares and includes the effect of any expense reductions. Returns for a period of less than one year are not annualized. Returns for a period of more than one year represents the average annual return. Performance at market price will differ from results at NAV. Although market price returns typically reflect investment results over time, during shorter periods returns at market price can also be influenced by factors such as changing views about the fund, market conditions, supply and demand for the fund’s shares or changes in fund dividends and distributions.
On December 14, 2020, FS Global Credit Opportunities Fund–A (FSGCO–A), FS Global Credit Opportunities Fund–ADV (FSGCO–ADV), FS Global Credit Opportunities Fund–D (FSGCO–D), FS Global Credit Opportunities Fund–T (FSGCO–T), and FS Global Credit Opportunities Fund–T2 (FSGCO– T2) (the Funds) merged into FS Global Credit Opportunities Fund (FSGCO). On March 23, 2022, the Fund was renamed FS Credit Opportunities Corp. (FSCO). Performance for shareholders who initially invested in the Funds would differ based on fees. Shareholder Returns do not include selling commissions and dealer manager fees, which could have totaled up to 8% of FSGCO–A’s public offering price, up to 2% of FSGCO–D’s public offering price, up to 4% of FSGCO–T’s public offering price, and up to 4% of FSGCO–T2’s public offering price. Had such selling commissions and dealer manager fees been included, performance would be lower. Market conditions may cause the actual values to be more or less than the values shown.
Investment Management team
| • | FS Liquid Credit & Special Situations team, led by Andrew Beckman and Nick Heilbut, assumed full management of FSCO in January 2018 |
| • | Ten investment professionals with 16 years average experience investing through five credit cycles |
| • | Benefits from the resources, relationships and infrastructure of FS Investments, a $35 billion alternative asset manager |
| • | $1.8 billion transaction volume over last 12-months with $1.1 billion in originated and primary purchases and $730 million in secondary purchases |
| 10 |
| Investment professionals |
| 16 |
| Average years experience |
| 300+ |
| Investments made since 2018 |
Portfolio highlights7
| Asset type | Industry | |
 |
 |
Key facts
| Adviser | FS Global Advisor, LLC | Portfolio companies | 85 | |
| Inception date | December 12, 2013 | Distribution frequency9 | Monthly | |
| Net asset value8 | $6.86 | Tax reporting | Form 1099-DIV | |
| Total assets under management | $2.1 billion | Structure | Closed-end fund |
| 7 | Based on fair value as of June 30, 2022. |
| 8 | FSCO’s net asset value (NAV) per common share as of the date indicated is the NAV determined by FSCO for purposes of complying with the requirements of Section 23(b) of the Investment Company Act of 1940, as amended, and has not been approved by FSCO’s board of directors. FSCO’s NAV per common share may increase or decrease in the future and any such change may be material. |
| 9 | The payment of future distributions on Shares is subject to the discretion of FSCO’s board of trustees and applicable legal restrictions and, therefore, there can be no assurance as to the amount or timing of any such future distributions. |
FSCO highlights
| Scaled portfolio | ● | $2.1 billion in total assets, ranking as of one the largest credit-focused closed-end funds in the market10 |
| Differentiated strategy | ● |
Flexibility to invest across private and public credit markets through changing economic cycles and market conditions |
| ● | Defensively oriented: 81% senior secured debt, 53% first lien debt, low duration and 64% floating rate assets | |
| Competitive distribution | ● |
8.25%+ expected annualized distribution yield at listing based on the Fund’s NAV as of August 31, 202211 |
| ● | Net investment income has averaged 119% of monthly distributions since January 1, 2018 | |
| Track record | ● | 5.51% annualized returns since January 2018, outperforming high yield bonds by 320 bps and loans by 207 bps per year12 |
| Closed-end fund structure | ● | Ability to hold higher allocation of less liquid and private assets compared to daily liquid funds not forced to meet redemptions |
Past performance is not a guarantee or a reliable indicator of future results.
Direct listing considerations
Phased approach to listing: Pre-listing shareholders will be able to trade their shares based on a phased approach to liquidity, which is intended to help ease the anticipated down pressure on FSCO’s share price in the period shortly following the listing.
| ● | At listing: 1/3 of shares held by all shareholders available for trading |
| ● | 90 days post listing: An additional 1/3 of shares held by all shareholders available for trading |
| ● | 180 days post-listing: The final 1/3 of shares held by all shareholders available for listing |
Share repurchase plan: We expect FS Investments or its affiliates to implement an open-market share repurchase program. Further details on the program will be provided prior to the listing.
Potential for supply/demand imbalance: When reviewing prior direct listings, there has been a tendency for shareholders to sell their shares in the period immediately following the listing, resulting in downward pressure on stock prices (see the chart below).
Historical direct listings in perspective
| Price-to-book value (indexed) | Daily trading volume as % of shares outstanding |
Source: Factset, Bloomberg, company filings. Analysis represents average performance of RiverNorth Specialty Finance Corporation (RSF), Vertical Capital Income Fund (VCIF), Corporate Capital Trust (CCT), FS KKR Capital Corp. II (FSKR) and FS KKR Capital Corp. (FSK).
For illustrative purposes only. Historical performance is not a guarantee or a reliable indicator of future results. Public listings are subject to current market and economic conditions which can impact performance.
| 10 | Based on fair value. |
| 11 | Based on FSCO’s net asset value as of August 31, 2022. The actual dividend yield at listing may be higher or lower based on the then current NAV. The payment of future distributions on FSCO’s common shares is subject to the discretion of FSCO’s board of directors and applicable legal restrictions and, therefore, there can be no assurance as to the amount or timing of any such future distributions. |
| 12 | As of August 31, 2022. High yield bonds are represented by the ICE Bank of America Merrill Lynch U.S. High Yield Bond Index. Loans are represented by the Credit Suisse Leveraged Loan Index. |
Following the Listing, certain directors and officers of the Company and its affiliates expect to make commitments to an investment fund that is currently intended to be established to invest from time to time in shares of the Company. The investment fund would be managed by a third party and the Company-related investors would not exercise investment or voting control over the investment fund. The Company does not expect to implement the previously disclosed open-market share repurchase program under Rule 10b5-1 under the Securities Exchange Act of 1934.The information in this Item 7.01 is deemed to have been furnished to, and shall not be deemed to be “filed” with, the U.S. Securities and Exchange Commission.
Cautionary Statement Concerning Forward-Looking Statements
Statements included herein may constitute “forward-looking” statements as that term is defined in Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995, including statements with regard to future events or the future performance or operations of the Company. Words such as “intends,” “will,” “expects,” and “may” or similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors could cause actual results to differ materially from those projected in these forward-looking statements. Factors that could cause actual results to differ materially include changes in the economy, geo- political risks, risks associated with possible disruption to the Company’s operations or the economy generally due to hostilities, terrorism, natural disasters or pandemics such as COVID-19, future changes in laws or regulations and conditions in the Company’s operating area, unexpected costs, the ability of the Company to complete the listing, the price at which the Company’s shares of common stock may trade on the New York Stock Exchange and such other factors that are disclosed in the Company’s filings with the Securities and Exchange Commission (the “SEC”). There can be no assurances that the investment fund will be established, and if it is, the amount or timing of any purchases of Company shares. The inclusion of forward-looking statements should not be regarded as a representation that any plans, estimates or expectations will be achieved. Any forward-looking statements speak only as of the date of this communication. Except as required by federal securities laws, the Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Readers are cautioned not to place undue reliance on any of these forward-looking statements.
RISK FACTORS
FS Credit Opportunities Corp. (FSCO or the Company) is a non-diversified, closed-end management investment company that carries out the investment strategies generally described herein. An investment in FSCO involves a high degree of risk and may be considered speculative. The following are some of the risks an investment in the Shares involves; however, investors should carefully consider all of the risks discussed in FSCO’s reports filed with the SEC before deciding to invest in the Shares.
| • | An investment in common shares of beneficial interest of the Company (the Shares) is not suitable for an investor if they need access to the money they invest. |
| • | Shareholders of FSCO (Shareholders) should consider that they may not have access to the money they invest for an indefinite period of time. |
| • | Unlike an investor in most closed-end funds, the Shareholders should not expect to be able to sell their Shares regardless of how FSCO performs. |
| • | If a Shareholder is able to sell their Shares, the Shareholder will likely receive less than their purchase price and the then-current net asset value, or NAV, per Share. |
| • | Unlike most closed-end funds, the Shares are not listed on any securities exchange and FSCO intends to evaluate completing a liquidity event within seven years following the date on which it commenced investment operations. |
| • | To provide Shareholders with limited liquidity, FSCO intends to conduct quarterly repurchases of Shares. Although FSCO has implemented a share repurchase program, it may be discontinued at any time and only a limited number of Shares are eligible for repurchase. |
| • | FSCO’s distributions may be funded from unlimited amounts of offering proceeds or borrowings, which may constitute a return of capital and reduce the amount of capital available to FSCO for investment. Any capital returned to Shareholders through distributions will be distributed after payment of fees and expenses, as well as the sales load. |
| • | FSCO’s previous distributions to Shareholders were funded in significant part from the reimbursement of certain expenses, including through the waiver of certain investment advisory fees, and additional support payments that may be subject to repayment to FSCO’s affiliate, Franklin Square Holdings, L.P. (FS Investments), and FSCO’s future distributions may be funded from such waivers, reimbursements or payments. Significant portions of these distributions were not based on FSCO’s investment performance and such waivers, reimbursements and payments by FS Investments may not continue in the future. If FS Investments had not agreed to reimburse certain of FSCO’s expenses, including through the waiver of certain advisory fees payable by FSCO, and provide additional support payments, significant portions of FSCO’s distributions would have come from offering proceeds or borrowings. The repayment of any amounts owed to FS Investments will reduce the future distributions to which the Shareholders would otherwise be entitled. |
| • | Even if FSCO does eventually list its Shares, shares of closed-end funds frequently trade at a discount to NAV and this creates a risk of loss for investors who purchased Shares at the offering price. This risk is separate and distinct from the risk that FSCO’s NAV will decrease. |
| • | FSCO’s investments in securities and other obligations of companies that are experiencing distress involve a substantial degree of risk, require a high level of analytical sophistication for successful investment and require active monitoring. |
| • | FSCO’s investments in various types of debt securities and instruments may be secured, unsecured, rated or unrated, are subject to non-payment risk, and may be speculative in nature. |
| • | Below investment grade instruments (commonly referred to as “high yield” securities or “junk bonds”) may be particularly susceptible to economic downturns, which could cause losses. |
| • | FSCO may invest in illiquid and restricted securities that may be difficult to dispose of at a fair price. |
| • | FSCO’s use of leverage could result in special risks for FSCO Shareholders and can magnify the effect of any losses. |
| • | Investments in certain securities or other instruments of non-U.S. issuers or borrowers may involve factors not typically associated with investing in the United States or other developed countries. |
| • | Securities or other instruments of non-U.S. securities may be traded in underdeveloped, inefficient and less liquid markets and may experience greater price volatility, illiquidity and changes in value. |
| • | FS Global Advisor, LLC and certain of its affiliates may experience conflicts of interest in connection with the management of FSCO. |
| • | FSCO seeks to achieve its investment objectives by focusing on a limited number of opportunities across the investment universe. |
| • | The global outbreak of COVID-19 (commonly known as the coronavirus) has caused volatility, severe market dislocations and liquidity constraints in many markets, including securities FSCO holds, and may adversely affect FSCO’s investments and operations. Such impacts may adversely affect the performance of FSCO’s investments and FSCO. |
| • | We expect that the current market conditions may have a lasting and, in some instances, permanent impact on some of our portfolio companies as they struggle to meet covenant obligations and face insolvency in future periods. Poor performance or insolvency of our portfolio companies could have a material adverse impact on our financial condition and results of operations. |
| FS Investment Solutions, LLC 201 Rouse Boulevard, Philadelphia, PA 19112 www.fsinvestmentsolutions.com 877-628-8575 Member FINRA/SIPC | TS-CO |
| © 2022 FS Investments www.fsinvestments.com | SE22 |