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Franklin Square Closes on $1.9B of Private Deals in Fourth Quarter

March 25, 2016, 07:53 AM
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Franklin Square Capital Partners announced that its BDC direct lending platform committed over $1.9 billion to private deals in the fourth quarter of 2015, and more than $5.6 billion for the full year 2015. New directly originated deals during the quarter included the addition of six new portfolio companies and 10 new commitments to existing portfolio companies. The $5.6 billion in new private deals in 2015 represents Franklin Square's highest annual total on record and an increase of more than $400 million from 2014. New directly originated deals in 2015 were completed with 46 portfolio companies headquartered in 22 different U.S. states.

"The scale of our direct lending platform is a competitive advantage for our investors, particularly when markets are experiencing volatility," said Michael C. Forman, Chairman and Chief Executive Officer of Franklin Square. "We believe our ability to put capital to work when traditional lenders are under pressure will prove beneficial to our investors in the long run."

Newly committed capital was provided by four BDCs managed by affiliates of Franklin Square and sub-advised by GSO Capital Partners LP (GSO) or its affiliate: FS Investment Corporation (NYSE: FSIC), FS Investment Corporation II (FSIC II), FS Investment Corporation III (FSIC III) and FS Energy and Power Fund (FSEP). Additionally, in January 2016 Franklin Square announced the launch of its newest BDC, FS Investment Corporation IV (FSIC IV), expanding the scale of its direct lending platform.

Franklin Square's directly originated deals, which are unique to its BDCs and not accessible elsewhere, included investments in the following companies in the fourth quarter:

5 Arches, LLC

FSIC, FSIC II and FSIC III originated a new senior secured credit facility and common equity investment in 5 Arches, LLC, an Irvine, California-headquartered, fully integrated specialty mortgage company focused on financing residential investment properties primarily for professional developers. The company currently operates in Arizona, California, Florida, Georgia, Nevada, Oregon, Texas and Washington. Franklin Square's financing will allow 5 Arches to expand its footprint and increase its scale in its existing markets.

Aeneas Buyer Corp. (dba Equian, LLC)

FSIC, FSIC II and FSIC III originated a senior secured term loan to finance the acquisition and combination of Equian, LLC and Trover Solutions, Inc. by New Mountain Capital, a New York, New York-based private equity investment firm. The combination of Equian and Trover brings together businesses with complementary expertise offering payment integrity solutions to commercial health plans and other insurance providers.

Harvey Industries, Inc. (dba Harvey Building Products)

FSIC, FSIC II and FSIC III originated a senior secured term loan to facilitate the buyout of Harvey Building Products by Dunes Point Capital, a Rye, New York-based private equity investment firm. Harvey is a Waltham, Massachusetts-headquartered manufacturer of premium vinyl windows and wholesale distributor of a broad range of exterior building products. In addition to providing senior secured capital to finance the acquisition, Franklin Square's BDCs also provided an equity co-investment alongside Dunes Point.

Global Jet Capital Holdings, L.P.

FSIC, FSIC II and FSIC III upsized their collective subordinated debt and equity investment in Global Jet Capital Holdings, L.P., a Boca Raton, Florida-headquartered provider of leasing and lending solutions for large-cabin, long-range aircraft. Franklin Square's incremental investment provided a portion of the financing for Global Jet's acquisition of GE Capital's $2.3 billion Fixed-Wing Corporate Aircraft Financing Portfolio in the Americas. In addition, the GE Capital Corporate Aircraft team joined Global Jet Capital.

Sunnova Holdings, LLC

FSIC, FSIC II, FSIC III and FSEP made a new equity investment in Sunnova Holdings, LLC, a Houston, Texas-headquartered leading provider of residential solar energy services. Franklin Square's equity commitment serves to expand Sunnova's access to debt capital, allowing the company to expand its residential solar project portfolio. The transaction represents the latest iteration in a series of investments by Franklin Square's BDCs that have allowed Sunnova to continue to execute its growth strategy.

FSIC Successfully Exits FullBeauty Brands Investment

In addition to new commitments made during the fourth quarter, FSIC realized its investment in FullBeauty Brands, Inc., earning a prepayment fee when the company's senior secured loan was paid off in connection with Apax Partners' acquisition of a majority stake in the company in October. FullBeauty Brands is a New York, New York-headquartered leading provider of men's and women's plus-size apparel. FSIC's partnership with FullBeauty began in February 2013 with its initial financing commitment, which was later upsized through three incremental commitments as the company grew.

"We invested a significant amount of capital during a period of time in which the primary market for syndicated loans froze for many companies and traditional loan funds experienced heavy outflows," added Michael Kelly, Chief Investment Officer of Franklin Square. "Our platform displayed its advantages in the fourth quarter by underwriting 16 new private deals and realizing a great outcome on our investment in FullBeauty."

Founded in Philadelphia in 2007, Franklin Square quickly established itself as a leader in the world of alternative investments by introducing innovative credit-based income funds, including the industry's first non-traded BDC. As of December 31, 2015, the firm managed approximately $16.8 billion in total assets, including $15.5 billion in BDC assets, making it the largest manager of BDCs.

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