September 21, 2016 Comments (0) Blog

Investor Alert: FS Investment Corporation

FS Investment Corporation
(Last Updated On: April 10, 2017)

FS Investment Corporation Investment Losses

Have you suffered losses investing in FS Investment Corporation (FSCI)? If so, The White Law Group may be able to help.

Founded in 2007, Franklin Square Capital Partners manage a variety of BDCs including non-traded, as well as a publicly traded BDC on the NYSE. Besides managing BDCs, Franklin Square manages a global credit opportunities fund.

A Business Development Company (“BDC”) is a form of investment company that invests in small and mid-sized businesses. Investors can buy shares in a BDC, and the money from their investment are used to fund the businesses. In turn, investors can profit from dividends paid on their investments, or, in some cases, the sale of their shares. For an in depth look at BDCs, go here.

Franklin Square has various BDCs, both traded and non-traded. The first, FS Investment Corporation, is publicly traded and focuses on providing customized credit solutions to middle market companies. This BDC seek to invest in the senior secured debt, as well as the subordinated debt of private middle market US companies. FSIC launched this publicly traded BDC in 2009 and has 23% of investments in capital goods, while 11% is invested in consumer services. More information can be found here.

Recently we wrote that the Canadian oil and gas company, Lightstream Resources, filed for bankruptcy protection. Based on reports, it appears that much of the Lightstream debt is held by FS Investment in Senior Secured Second Lien Notes. As of June 2016, the FS Investment funds reportedly has written down exposure to the Company by just 9% but given the recent bankruptcy the exposure to the investments seems much higher.

Additionally

FS Investments portfolio includes the following energy investments they may also be problematic in light of the enormous decline in oil:

-Four Point Energy

-Chesapeake Energy

-Ascent Resources

Like all investments, BDCs do not come without risks. Limited liquidity, distributions that may not be guaranteed in frequency or amount, and limited operating history are just a few risks that investors take on when investing in a BDC. Business Development Companies can be a good investment for the right investor, along with a diversified portfolio and sufficient due diligence. BDCs should only be recommended to those investors who are able to both weather substantial losses and those who are not in need of immediate liquidity. Investors should be particularly cautious of riskier non-public and non-traded BDCs.

Recovery of Investment Losses

If you invested in FS Investments or another BDC and would like a free consultation with a securities attorney, please call The White Law Group at 888-637-5510.

The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Vero Beach, Florida.  For more information on the firm and its representation of investors, visit http://www.whitesecuritieslaw.com.