Nontraded BDC to list shares on NYSE

FS Investment will be a first in the industry.
APR 29, 2014
Nontraded real estate investment trusts for the past year have been steadily listing on stock exchanges, merging with other REITs, or announcing such plans, providing investors with liquidity or hopes for liquidity. Now, a nontraded business development company will take a turn at a liquidity event. FS Investment Corp., with $4.6 billion in assets, said Wednesday that it would be the first nontraded BDC to have its shares listed on the New York Stock Exchange. The company expects trading to commence in April under the ticker symbol FSIC, according to a statement. FS Investment initially indicated last April that it planned to complete a liquidity event and return capital to investors. “This listing will be an important event for FSIC shareholders and certainly represents a significant milestone for our industry,” Michael Forman, chairman and chief executive of FS Investment, said in a statement. Nontraded BDCs represent a small but fast-growing segment of the illiquid alternative asset class of investments sold primarily through independent broker-dealers. Sales of such illiquid BDCs last year jumped to $4.8 billion from $2.8 billion in 2012, according to Robert A. Stanger & Co. Inc., an investment bank that focuses on nontraded REITs and BDCs. That was a 70.8% year-over-year increase, according to Stanger. FS Investment was launched in 2009 and was extremely popular with representatives at independent broker-dealers who were seeking alternative investments for clients in need of income in a zero-interest-rate environment. FS Investment had an offering price of $10.80 a share, and its net asset value was $10.10 at the end of September, according to its most recent quarterly report. In 2012, it stopped raising equity capital. The BDC's annualized distribution rate is 8.6%, according to a company statement. A half-dozen other nontraded BDCs have been launched in the wake of FS Investment's success. BDCs typically are closed-end investment companies that invest primarily in debt and equity of private companies. Yields can be attractive due to the BDCs' exposure to high credit risks amplified by leverage.

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