Fs Investment Corporation: A Smart Buy?

FS Investment Corporation is a specialty finance company that invests primarily in the debt securities of private U.S. middle-market companies. The company's investment objectives are to generate current income and, to a lesser extent, long-term capital appreciation. The company is externally managed and has elected to be regulated as a business development company under the Investment Company Act of 1940. The company's 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. The company may also purchase interests in loans through secondary market transactions in the over-the-counter market for institutional loans or directly from target companies. In connection with its debt investments, the company may on occasion receive equity interests such as warrants or options as additional consideration. The company may also purchase minority interests in the form of common or preferred equity in its target companies, either in conjunction with one of its debt 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 and other debt securities.

FS Investment Corporation's investment objectives are to generate current income and, to a lesser extent, long-term capital appreciation

FS Investment Corporation is a specialty finance company that primarily invests in the debt securities of private U.S. middle-market companies. Its investment objectives are to generate current income and, to a lesser extent, long-term capital appreciation.

To meet these objectives, FS Investment Corporation utilises the experience and expertise of the management teams of FB Advisor and GDFM, a subsidiary of GSO, which is the credit platform of Blackstone. This includes accessing Blackstone's relationships and human capital. FS Investment Corporation also employs a defensive investment approach focused on long-term credit performance and principal protection.

The company focuses on investing in companies with attractive exit possibilities, such as repayment of investments, initial public offerings, mergers, sales, or recapitalisation, all of which have the potential for capital gains. FS Investment Corporation also considers the business models and growth prospects of these companies.

While FS Investment Corporation primarily invests in debt securities, it may also invest in senior secured loans, second-lien secured loans, senior secured bonds, subordinated debt, and equity of private U.S. companies, including middle-market companies. These investments carry a higher risk than investments in public companies, as private companies have reduced access to capital markets and may be unable to meet their debt obligations.

FS Investment Corporation intends to use the proceeds from the sale of its securities for general corporate purposes, including making investments in private U.S. companies and repaying indebtedness. However, there is a risk that they may be unable to invest the proceeds within the anticipated time frame due to market conditions and the availability of suitable investments.

FS Investment Corporation's portfolio is comprised primarily of investments in senior secured loans and second lien secured loans of private middle-market US companies and, to a lesser extent, subordinated loans of private US companies

FS Investment Corporation is a specialty finance company that primarily invests in the debt securities of private US middle-market companies. Its portfolio is primarily made up of investments in senior secured loans and second lien secured loans of these companies, with a smaller focus on subordinated loans.

Senior secured loans and second lien secured loans are often made to private companies, particularly middle-market companies within the United States. FS Investment Corporation believes that this market is underserved and presents a compelling investment opportunity. According to the US Census Bureau's 2007 economic census, there were approximately 40,000 middle-market companies in the US with annual revenues between $50 million and $2.5 billion. This large target market offers an opportunity for superior risk-adjusted returns.

The collateral securing these senior secured and second lien secured loans may decrease in value or lose its entire value over time. It may also be difficult to sell in a timely manner or fluctuate in value based on the performance of the portfolio company, potentially leading to a loss in principal. Despite these risks, FS Investment Corporation does not place limits on the amount of such investments it makes.

Subordinated debt investments, on the other hand, are typically unsecured and may involve a heightened level of risk, including the loss of the entire investment. While these investments form a smaller part of the FS Investment Corporation's portfolio, they still represent a significant opportunity for the company.

FS Investment Corporation may also 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 their target companies as primary market or directly originated investments

FS Investment Corporation is a specialty finance company that primarily invests in the debt securities of private U.S. middle-market companies. Its investment objectives are to generate current income and, to a lesser extent, long-term capital appreciation.

FS Investment Corporation may purchase interests in loans through secondary market transactions in the "over-the-counter" market for institutional loans or directly from their target companies as primary market or directly originated investments. In connection with its debt investments, FS Investment Corporation may occasionally receive equity interests, such as warrants or options, as additional consideration.

The company may also purchase minority interests in the form of common or preferred equity in its target companies. This can be done either in conjunction with one of its debt investments or through a co-investment with a financial sponsor, such as an institutional investor or private equity firm.

Additionally, FS Investment Corporation's portfolio may include corporate bonds and other debt securities. The company's investments in senior secured loans, second lien secured loans, subordinated debt, and equity may carry a high level of risk. There is no limit on the amount of such investments that the company can make.

It is important to note that investing in the securities of FS Investment Corporation may be considered speculative and involves a high degree of risk, including the possibility of losing a substantial portion of the investment. Prospective investors should carefully consider the "Risk Factors" outlined in the prospectus before making any investment decisions.

FS Investment Corporation may also purchase or otherwise acquire minority 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 their target companies, generally in conjunction with one of their debt investments or through a co-investment with a financial sponsor, such as an institutional investor or private equity firm

Investing in securities is often considered speculative and involves a high degree of risk. FS Investment Corporation is a specialty finance company that primarily invests in the debt securities of private U.S. middle-market companies. Its investment objectives are to generate current income and, to a lesser extent, long-term capital appreciation.

FS Investment Corporation may also purchase or otherwise acquire minority interests in the form of common or preferred equity or equity-related securities. These interests may be in the form of rights and warrants that can be converted into or exchanged for common stock or other equity, or even the cash value of common stock or other equity. These purchases are generally made in conjunction with their debt investments or through a co-investment with a financial sponsor, such as an institutional investor or private equity firm.

In addition to these minority interests, FS Investment Corporation may also invest in corporate bonds, CLOs, and other debt securities. They may also receive equity interests such as warrants or options as additional consideration in connection with their debt investments.

It is important to note that there are restrictions on FS Investment Corporation's ability to transact business with its officers, directors, and their affiliates. As a result, they may be prohibited from buying or selling securities from or to certain portfolio companies without prior approval from the SEC, which could limit their investment opportunities.

Overall, while investing in FS Investment Corporation may offer potential returns, it is essential for prospective investors to carefully consider the risks involved and review the prospectus and any accompanying supplements before making any investment decisions.

In addition, a portion of FS Investment Corporation'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

Total Return Swaps

Total return swaps are a type of derivative instrument that allows an investor to gain exposure to the total return of an underlying asset without actually owning it. In a total return swap, the total return of the underlying asset is exchanged for some other cash flow, usually tied to LIBOR or some other loan or credit-sensitive security.

In a total return swap, the investor takes over the entire credit risk. Should the issuer of the credit asset default, the investor bears the loss. Held until the maturity of the swap contract (usually three to five years), the investor receives a payment from the counterparty if the market value of the underlying credit asset has appreciated since the inception date of the swap. If not, the investor is required to pay the difference resulting from the depreciation.

Credit Default Swaps

Credit default swaps are a type of derivative instrument that offers insurance in case of default by a third-party borrower. In a credit default swap, one party makes periodic payments in return for receiving a payoff if an underlying security or loan defaults.

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