Erez Law is currently investigating brokers across the country who recommended their clients invest in Franklin Square (Franklin Square KKR Capital Corp. II). It is alleged that brokers at brokerage firms across the country unsuitably recommended their clients invest in Franklin Square KKR Capital Corp. II without fully disclosing the risks of this business development company (BDC) to its clients. BCDs are high-risk, illiquid alternative investments that are not appropriate for many retail investors, especially retirees looking to preserve their capital.
FSKR earned brokers high commissions of 7-10%, compared to lower risk stocks that charge 1-2% commission.
According to public records, the company suspended its Share Redemption Program (SRP) in May 2020 in connection with its merger. Additionally, the company noted that it has changed the record and payment dates of its $0.15 per share quarterly distribution, which will now be paid on June 8, 2020 to stockholders of record as of June 8, 2020. The distribution payment was previously expected on July 2, 2020.
On March 16, 2020, Mackenzie Capital Partners LP launched an unsolicited tender offer to purchase shares of FS KKR Capital Corp. II for $4.10 per share, according to public records. In the letter to shareholders, it noted that since FSK II intends to list its shares on the New York Stock Exchange in 2020, it would be a good time to cash out on the investment since there could be no guarantee that the listing would occur. The original offering price for the BDC was $10 per share. On March 18, 2020 (in light of the COVID 19 global pandemic), Mackenzie reportedly amended the offer and lowered the price to $1.50 per share, according to public records.
The company listed FSKR on the NYSE on June 17, 2020. According to the press release announcing the new ticker, “On June 10, 2020, FSKR effected a 4 to 1 reverse split of its shares of common stock. As a result, every four shares of FSKR common stock issued and outstanding were automatically combined into one share of FSKR common stock, and the number of outstanding shares was reduced from approximately 691.2 million to approximately 172.9 million. As adjusted to give effect to the reverse stock split, FSKR’s net asset value per share as of March 31, 2020 would have been $24.68, instead of $6.17 per share. The reverse stock split does not modify the rights or preferences of FSKR’s common stock.”
Investors across the country are now finding that their investments are worth less than their original offering price.
Franklin Square KKR Capital Corp. II is a publicly-traded BDC that is focused on “providing customized credit solutions to private middle market U.S. companies,” according to their website. The fund seeks to invest primarily in the senior secured debt and the subordinated debt of private middle market United States companies to “achieve the best risk-adjusted returns for investors.” The BDC is “designed to provide a high level of current income.”
Franklin Square KKR Capital Corp. II, together with its affiliate, FS KKR Capital Corp., represents the second-largest publicly traded BDC platform in the market, which tout $16 billion in total assets under management as of March 31, 2020.
Franklin Square Capital Corp II was launched in 2019 as a merger of four non-traded BDCs:
- FS Investment Corporation II (FSIC II)
- FS Investment Corporation IV (FSIC IV)
- Corporate Capital Trust II (CCT II)
- FS Investment Corporation III (FSIC III)
Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, brokerage firms across the country may be liable for investment or other losses suffered by their customers.
Erez Law represents investors in the United States for claims against brokers and brokerage firms for wrongdoing. If and have experienced investment losses, please call us at 888-840-1571 or complete our contact form for a free consultation. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies on a contingency fee basis.
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