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201 Rouse Boulevard
Philadelphia, Pennsylvania |
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19112
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(Address of principal executive offices)
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(Zip code)
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Annual report 2018 |
Finding value to generate income and growth
FS Global Credit
Opportunities Fund
Electronic Reports Disclosure — Beginning on January 1, 2021, as permitted by regulations adopted by the SEC, paper copies of FS Global Credit Opportunities Fund’s (the “Fund”), FS Global Credit Opportunities Fund–A’s (“Fund–A”), FS Global Credit Opportunities Fund–D’s (“Fund–D”), FS Global Credit Opportunities Fund–T’s (“Fund–T”), FS Global Credit Opportunities Fund–ADV’s (“Fund–ADV”) and FS Global Credit Opportunities Fund–T2’s (“Fund–T2” and, collectively with Fund–A, Fund–D, Fund–T and Fund–ADV, the “Feeder Funds” and, collectively with the Fund, the “Funds”), shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports from the Funds or from your financial intermediary (such as a broker-dealer or bank). Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. Shareholders who hold accounts directly may elect to receive shareholder reports and other communications from the Funds electronically by calling 877-628-8575 or emailing service@fsinvestments.com to make such arrangements. For shareholders who hold accounts through an investment advisor, bank or broker-dealer, please contact that financial intermediary directly for information on how to receive shareholder reports and other communications electronically.
You may elect to receive all future reports in paper free of charge. Shareholders who hold accounts directly may inform the Funds that you wish to continue receiving paper copies of your shareholder reports by calling 877-628-8575 or emailing service@fsinvestments.com. For shareholders who hold accounts through an investment advisor, bank or broker-dealer, please contact that financial intermediary directly to inform them that you wish to continue receiving paper copies of your shareholder reports. Your election to receive reports in paper will apply to all funds held through your financial intermediary or directly with the Funds.
Michael Forman President & Chief Executive Officer FS Global Credit Opportunities Fund |
Fellow Shareholder,
Last year marked an important milestone in our ongoing efforts to drive value for FS Global Credit Opportunities Fund’s (FSGCO, or the Fund) shareholders. During the second quarter, FS Global Advisor (the Adviser) assumed sole management of FSGCO with a focus on increasing the Fund’s allocation to high-conviction investments, growing net asset value (NAV), reducing portfolio volatility and improving distribution coverage over time.
Recognizing that there is still more work to be done, we believe our internal credit investment team made significant strides in accomplishing these goals in 2018. Since assuming all operational and investment management functions of FSGCO, the Adviser has focused on three key areas:
• | First, the Fund made significant progress toward its goal of rotating the portfolio out of investments that we believe have limited upside or are highly correlated to the broader high yield market and redeploying that capital into investments we believe offer the potential for strong returns and limited downside risk. We look for situations where yield premiums exist due to complexity, illiquidity or as a result of corporate events as opposed to elevated risk of loss. |
• | Second, FSGCO focused on stabilizing and improving its distribution coverage. We expect the continued rotation of the portfolio into high-conviction investments and the optimization of FSGCO’s borrowing facilities will help to improve distribution coverage over time. |
• | Finally, FSGCO made meaningful progress toward optimizing its capital structure. In 2018, the Fund closed on $200 million in term preferred shares. The financing provides the Fund with long-term capital and helps to better match the duration of the Fund’s assets and liabilities. |
Market review
U.S. equity and commodity price volatility negatively impacted the leveraged credit markets in the second half of 2018 as a mix of trade-related and global growth concerns had investors seeking safety in U.S. Treasuries. Higher-yielding areas of the market underperformed their higher-quality peers during the final quarter of the year. Both high yield bond mutual funds and bank loan mutual funds registered record outflows in the fourth quarter of 2018, helping to push high yield bond and senior secured loan prices to 2.5-year lows the last week of December.1,2
High yield bonds returned -2.3% for all of 2018 after registering a modestly positive return during the first half of the year.1 Senior secured loans posted a gain of 0.4% for all of 2018 after a decisively negative fourth quarter erased most of the gains achieved through the first nine months of the year.2
Against the backdrop of stable corporate fundamentals and evolving interest rate concerns, investor demand for higher-yielding corporate credit improved through the first three quarters of the year, only to reverse course during the fourth quarter as risk aversion sapped demand for lower-rated investments. In total, CCC rated high yield bonds and CCC rated senior secured loans returned -4.2% and 2.4%, respectively, during 2018.3,4
FSGCO’s feeder funds outperformed high yield bonds
and senior secured loans in 2018.1,2,5
Performance review
By focusing on select opportunities, such as event-driven opportunities, special situations and market-price inefficiencies, we aim to build a portfolio that offers the potential for higher total returns, comprised of both income and growth, compared to traditional investment strategies.
The feeder funds’ total returns outperformed high yield bonds, senior secured loans, CCC rated high yield bonds and CCC rated senior secured loans during 2018.1,2,3,4,5,6
2018 SHAREHOLDER RETURNS6
FSGCO-A | 7.9% |
FSGCO-D | 7.9% |
FSGCO-T | 6.9% |
FSGCO-ADV | 7.3% |
FSGCO-T2 | 6.3% |
High yield bonds1 | -2.3% |
Senior secured loans2 | 0.4% |
Investment activity during the year focused on reducing high-beta investments and redirecting the portfolio to investments whose returns are driven by idiosyncratic events in order to provide a differentiated way to deliver growth and income to our investors. Additionally, the team concentrated on reducing the number of portfolio holdings to create a higher-conviction portfolio.
During 2018, FSGCO continued to concentrate on investing at the top of the corporate capital structure. As of December 31, 2018, approximately 40% of the portfolio consisted of first-lien senior secured debt, up from 26% as of December 31, 2017. Concurrently, the allocation to unsecured bonds and equity/other declined to 20% and 7%, respectively, as of December 31, 2018, from 29% and 10%, respectively, as of December 31, 2017.
Amid tight and volatile high yield bond and senior secured loan markets, we believe our strategy of focusing on idiosyncratic, value-based opportunities across the capital structure offers the potential for stronger risk-adjusted returns. Our goal is to deliver higher total returns than traditional credit strategies with less market beta to generate value for our shareholders.
We will continue to seek out investments where yield premiums exist due to complexity, illiquidity or as a result of corporate events as opposed to elevated risk of loss. Meanwhile, we will continue to monetize the remaining investments in our portfolio that don’t meet our standards.
Thank you for your continued support and trust in us.
Sincerely,
Michael Forman
President & Chief Executive Officer
FS Global Credit Opportunities Fund
1 | ICE BofAML U.S. High Yield Master II Index. |
2 | S&P/LSTA Leveraged Loan Index. |
3 | ICE BofAML U.S. High Yield CCC Rated or Below Index. |
4 | S&P/LSTA Leveraged Loan CCC Only Index. |
5 | FS Global Credit Opportunities Fund’s feeder funds described herein are FS Global Credit Opportunities Fund–A (FSGCO–A or Fund–A), FS Global Credit Opportunities Fund–D (FSGCO–D or Fund–D), FS Global Credit Opportunities Fund–T (FSGCO–T or Fund–T), FS Global Credit Opportunities Fund–ADV (FSGCO–ADV or Fund–ADV) and FS Global Credit Opportunities Fund–T2 (FSGCO–T2 or Fund–T2). |
6 | The total return for each period presented is historical and is calculated by determining the percentage change in net asset value, assuming the reinvestment of all distributions in additional common shares of the feeder fund at the feeder fund’s NAV per share as of the share closing date occurring on or immediately following the distribution payment date. The total return does not consider the effect of the sales load from the sale of the feeder fund’s common shares. The payment of future distributions on Fund–A’s, Fund–D’s, Fund–T’s, Fund–ADV’s and Fund–T2’s common shares is subject to the discretion of their boards of trustees and applicable legal restrictions and, therefore, there can be no assurance as to the amount or timing of any such future distributions. |
FSGCO portfolio highlights |
As of December 31, 2018 (unless otherwise noted) |
Senior secured debt represented 71% of the Fund’s portfolio.
Portfolio composition | |
Senior secured loans — 1st lien | 40% |
Senior secured loans — 2nd lien | 14% |
Senior secured bonds | 17% |
Subordinated debt | 20% |
Collateralized securities | 2% |
Equity/other | 7% |
Industry classification (by fair value) | |
Energy | 18% |
Software & Services | 16% |
Capital Goods | 9% |
Consumer Services | 8% |
Diversified Financials | 7% |
Materials | 7% |
Retailing | 7% |
Health Care Equipment & Services | 4% |
Insurance | 4% |
Media | 4% |
Technology Hardware & Equipment | 4% |
Transportation | 3% |
Consumer Durables & Apparel | 2% |
Household & Personal Products | 2% |
Real Estate | 2% |
Telecommunication Services | 2% |
Food & Staples Retailing | 1% |
FSGCO Officers + Trustees |
Officers | |
Michael Forman | Stephen S. Sypherd |
President & Chief Executive Officer | Vice President, Treasurer & Secretary |
Edward T. Gallivan, Jr. | James F. Volk |
Chief Financial Officer | Chief Compliance Officer |
Board of Trustees | |
Michael Forman | Philip E. Hughes, Jr. |
Chairman | Trustee |
Chairman & Chief Executive Officer | Vice-Chairman |
FS Investments | Keystone Industries |
Walter W. Buckley, III | Oliver C. Mitchell, Jr. |
Trustee | Trustee |
Chairman & Chief Executive Officer | Attorney & Consultant |
Actua Corporation | |
Charles P. Pizzi | |
David L. Cohen | Trustee |
Trustee | Retired President, Director |
Senior Executive Vice President | & Chief Executive Officer |
Comcast Corporation | Tasty Baking Company |
Barbara J. Fouss | |
Trustee | |
Former Director of Strategic Initiatives & Chief Credit Policy Officer Sun National Bank |
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Portfolio Company(a)
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Footnotes
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Industry
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Rate(b)
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Floor
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Maturity
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Principal
Amount(c) |
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Amortized
Cost |
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Fair
Value(d) |
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Senior Secured Loans—First Lien—49.9% | | | | | | | | | | ||||||||||||||||||||||||||||
Acosta, Inc.
|
| |
(p)
|
| | Media | | |
L+325
|
| | | | 1.0% | | | |
9/26/21
|
| | | $ | 10,972 | | | | | $ | 8,558 | | | | | $ | 6,740 | | |
Aspect Software, Inc.
|
| |
(t)(u)
|
| | Software & Services | | |
L+1050
|
| | | | 1.0% | | | |
5/25/20
|
| | | | 6,870 | | | | | | 6,791 | | | | | | 5,118 | | |
Aspect Software, Inc.
|
| |
(t)(u)
|
| | Software & Services | | |
L+400, 650 PIK
(650 Max PIK) |
| | | | 1.0% | | | |
5/25/20
|
| | | | 9,407 | | | | | | 9,380 | | | | | | 7,008 | | |
BCP Raptor II, LLC
|
| |
(f)
|
| | Energy | | |
L+475
|
| | | | | | | |
11/3/25
|
| | | | 25,000 | | | | | | 24,577 | | | | | | 23,313 | | |
Brazos Delaware II, LLC
|
| |
(e)
|
| | Energy | | |
L+400
|
| | | | | | | |
5/21/25
|
| | | | 13,795 | | | | | | 13,730 | | | | | | 12,703 | | |
Casablanca US Holdings Inc.
|
| |
(e)
|
| | Consumer Services | | |
L+400
|
| | | | | | | |
3/29/24
|
| | | | 45,618 | | | | | | 45,193 | | | | | | 43,337 | | |
CCS-CMGC Holdings, Inc.
|
| | | | |
Health Care Equipment & Services
|
| |
L+550
|
| | | | | | | |
10/1/25
|
| | | | 20,000 | | | | | | 19,805 | | | | | | 19,500 | | |
CLP Issuer, LLC
|
| |
(t)
|
| | Diversified Financials | | |
L+1000
|
| | | | 1.0% | | | |
4/28/21
|
| | | | 18,000 | | | | | | 18,000 | | | | | | 18,180 | | |
CLP Issuer, LLC
|
| |
(g)(t)
|
| | Diversified Financials | | |
L+1000
|
| | | | 1.0% | | | |
4/28/21
|
| | | | 18,000 | | | | | | 18,000 | | | | | | 18,180 | | |
Commercial Barge Line Co.
|
| |
(e)
|
| | Transportation | | |
L+875
|
| | | | 1.0% | | | |
11/12/20
|
| | | | 24,988 | | | | | | 23,888 | | | | | | 18,141 | | |
Communications Sales & Leasing, Inc.
|
| |
(f)
|
| | Real Estate | | |
L+300
|
| | | | 1.0% | | | |
10/24/22
|
| | | | 17,954 | | | | | | 16,459 | | | | | | 16,308 | | |
Diamond Resorts International, Inc.
|
| |
(e)
|
| | Consumer Services | | |
L+375
|
| | | | 1.0% | | | |
9/2/23
|
| | | | 12,762 | | | | | | 12,415 | | | | | | 11,932 | | |
Diebold Nixdorf, Inc.
|
| |
(e)
|
| |
Technology Hardware & Equipment
|
| |
L+275
|
| | | | | | | |
11/6/23
|
| | | | 12,317 | | | | | | 10,752 | | | | | | 10,469 | | |
Diebold Nixdorf, Inc.
|
| | | | |
Technology Hardware & Equipment
|
| |
L+925
|
| | | | | | | |
8/30/22
|
| | | | 9,875 | | | | | | 9,875 | | | | | | 10,196 | | |
Fairway Group Acquisition Co.
|
| |
(i)(p)(t)(u)
|
| | Food & Staples Retailing | | |
10.0% PIK
(10.0% Max PIK) |
| | | | | | | |
11/27/23
|
| | | | 4,751 | | | | | | 4,193 | | | | | | 624 | | |
Fairway Group Acquisition Co.
|
| |
(t)(u)
|
| | Food & Staples Retailing | | |
12.0% PIK
(12.0% Max PIK) |
| | | | | | | |
11/27/23
|
| | | | 7,433 | | | | | | 7,433 | | | | | | 7,219 | | |
Fairway Group Acquisition Co.
|
| |
(t)(u)
|
| | Food & Staples Retailing | | |
L+400, 1,100 PIK
(1,100 Max PIK) |
| | | | | | | |
8/28/23
|
| | | | 514 | | | | | | 507 | | | | | | 514 | | |
Fairway Group Acquisition Co.
|
| |
(g)(t)(u)
|
| | Food & Staples Retailing | | |
L+400, 1,100 PIK
(1,100 Max PIK) |
| | | | | | | |
8/28/23
|
| | | | 1,101 | | | | | | 1,101 | | | | | | 1,101 | | |
Fairway Group Acquisition Co.
|
| |
(t)(u)
|
| | Food & Staples Retailing | | |
L+400, 1,100 PIK
(1,100 Max PIK) |
| | | | | | | |
8/28/23
|
| | | | 2,588 | | | | | | 2,433 | | | | | | 2,588 | | |
Getty Images, Inc.
|
| |
(e)(f)
|
| | Media | | |
L+350
|
| | | | 1.3% | | | |
10/18/19
|
| | | | 44,530 | | | | | | 41,654 | | | | | | 43,458 | | |
ION Trading Finance Ltd.
|
| |
(e)
|
| | Diversified Financials | | |
L+400
|
| | | | 1.0% | | | |
11/21/24
|
| | | | 17,761 | | | | | | 17,719 | | | | | | 16,828 | | |
J. Crew Group, Inc.
|
| | | | | Retailing | | |
L+322
|
| | | | 1.0% | | | |
3/5/21
|
| | | | 29,503 | | | | | | 19,939 | | | | | | 23,389 | | |
JC Penney Corp., Inc.
|
| |
(e)
|
| | Retailing | | |
L+425
|
| | | | 1.0% | | | |
6/23/23
|
| | | | 43,809 | | | | | | 40,643 | | | | | | 37,610 | | |
Kronos Acquisition Holdings Inc.
|
| |
(f)
|
| | Household & Personal Products | | |
L+400
|
| | | | | | | |
5/15/23
|
| | | | 2,479 | | | | | | 2,342 | | | | | | 2,346 | | |
LD Intermediate Holdings, Inc.
|
| |
(e)
|
| | Software & Services | | |
L+588
|
| | | | 1.0% | | | |
12/9/22
|
| | | | 28,500 | | | | | | 26,573 | | | | | | 25,864 | | |
LifeScan Global Corp.
|
| |
(e)(f)
|
| |
Health Care Equipment & Services
|
| |
L+600
|
| | | | | | | |
10/1/24
|
| | | | 34,000 | | | | | | 32,517 | | | | | | 32,215 | | |
Mavenir Systems, Inc.
|
| |
(e)
|
| | Software & Services | | |
L+600
|
| | | | 1.0% | | | |
5/8/25
|
| | | | 26,865 | | | | | | 26,362 | | | | | | 26,781 | | |
McDermott Technology Americas Inc.
|
| |
(f)
|
| | Capital Goods | | |
L+500
|
| | | | 1.0% | | | |
5/10/25
|
| | | | 3,000 | | | | | | 2,888 | | | | | | 2,809 | | |
Monitronics International, Inc.
|
| |
(e)(f)
|
| | Consumer Services | | |
L+550
|
| | | | 1.0% | | | |
9/30/22
|
| | | | 50,130 | | | | | | 49,073 | | | | | | 44,961 | | |
Portfolio Company(a)
|
| |
Footnotes
|
| |
Industry
|
| |
Rate(b)
|
| |
Floor
|
| |
Maturity
|
| |
Principal
Amount(c) |
| |
Amortized
Cost |
| |
Fair
Value(d) |
| ||||||||||||
Origami Owl, LLC
|
| |
(i)(p)(t)
|
| | Consumer Durables & Apparel | | |
L+700, 50 PIK
(50 Max PIK) |
| | | | 2.5% | | | |
12/5/19
|
| | | $ | 26,699 | | | | | $ | 21,167 | | | | | $ | 2,371 | | |
Origami Owl, LLC
|
| |
(i)(p)(t)
|
| | Consumer Durables & Apparel | | |
L+700, 50 PIK
(50 Max PIK) |
| | | | 2.5% | | | |
12/5/19
|
| | | | 2,811 | | | | | | 2,243 | | | | | | 250 | | |
O&M Halyard, Inc.
|
| |
(f)
|
| |
Health Care Equipment & Services
|
| |
L+450
|
| | | | | | | |
4/30/25
|
| | | | 10,921 | | | | | | 8,309 | | | | | | 8,491 | | |
P.F. Chang’s China Bistro, Inc.
|
| | | | | Consumer Services | | |
L+500
|
| | | | 1.0% | | | |
9/1/22
|
| | | | 14,813 | | | | | | 14,465 | | | | | | 14,416 | | |
Peninsula Pacific Entertainment, LLC
|
| | | | | Consumer Services | | |
L+725
|
| | | | | | | |
11/13/24
|
| | | | 9,000 | | | | | | 8,956 | | | | | | 8,955 | | |
Peninsula Pacific Entertainment, LLC
|
| |
(g)
|
| | Consumer Services | | |
L+725
|
| | | | | | | |
11/13/24
|
| | | | 1,000 | | | | | | 995 | | | | | | 995 | | |
Pioneer Energy Services Corp.
|
| |
(f)
|
| | Energy | | |
L+775
|
| | | | | | | |
11/8/22
|
| | | | 17,000 | | | | | | 16,915 | | | | | | 16,915 | | |
Propulsion Acquisition, LLC
|
| | | | | Capital Goods | | |
L+600
|
| | | | 1.0% | | | |
7/13/21
|
| | | | 17,521 | | | | | | 16,902 | | | | | | 17,346 | | |
Quest Software US Holdings Inc.
|
| |
(e)
|
| | Software & Services | | |
L+425
|
| | | | | | | |
5/16/25
|
| | | | 36,500 | | | | | | 36,330 | | | | | | 35,405 | | |
RentPath, LLC
|
| | | | | Media | | |
L+475
|
| | | | 1.0% | | | |
12/17/21
|
| | | | 997 | | | | | | 831 | | | | | | 805 | | |
Salt Creek Aggregator HoldCo, LLC
|
| |
(t)
|
| | Energy | | |
L+550
|
| | | | | | | |
10/31/22
|
| | | | 30,000 | | | | | | 29,710 | | | | | | 29,063 | | |
Sheridan Investment Partners I, LLC
|
| |
(e)
|
| | Energy | | |
L+350
|
| | | | 0.8% | | | |
10/1/19
|
| | | | 23,326 | | | | | | 21,645 | | | | | | 20,760 | | |
Sheridan Production Partners I-A, L.P.
|
| |
(e)
|
| | Energy | | |
L+350
|
| | | | 0.8% | | | |
10/1/19
|
| | | | 3,092 | | | | | | 2,869 | | | | | | 2,752 | | |
Sheridan Production Partners I-M, L.P.
|
| |
(e)
|
| | Energy | | |
L+350
|
| | | | 0.8% | | | |
10/1/19
|
| | | | 1,888 | | | | | | 1,751 | | | | | | 1,680 | | |
Staples Canada, ULC
|
| |
(t)
|
| | Retailing | | |
L+700
|
| | | | 1.0% | | | |
9/12/24
|
| | | C$ | 25,274 | | | | | | 20,234 | | | | | | 18,522 | | |
STL Parent Corp.
|
| | | | | Capital Goods | | |
L+700
|
| | | | | | | |
12/5/22
|
| | | $ | 20,000 | | | | | | 19,309 | | | | | | 19,400 | | |
SunGard Availability Services Capital, Inc.
|
| | | | | Software & Services | | |
L+1000
|
| | | | 1.0% | | | |
10/1/22
|
| | | | 5,769 | | | | | | 5,526 | | | | | | 5,599 | | |
SunGard Availability Services Capital, Inc.
|
| |
(e)
|
| | Software & Services | | |
L+700
|
| | | | 1.0% | | | |
9/30/21
|
| | | | 24,319 | | | | | | 24,153 | | | | | | 20,768 | | |
Westbridge Technologies, Inc.
|
| |
(e)
|
| |
Technology Hardware & Equipment
|
| |
L+850
|
| | | | 1.0% | | | |
4/28/23
|
| | | | 40,059 | | | | | | 39,557 | | | | | | 40,159 | | |
Windstream Services, LLC
|
| |
(e)
|
| | Telecommunication Services | | |
L+400
|
| | | | 0.8% | | | |
3/29/21
|
| | | | 20,015 | | | | | | 19,393 | | | | | | 17,963 | | |
Total Senior Secured Loans—First Lien
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | 824,060 | | | | | | 772,047 | | |
Unfunded Loan Commitments
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | (20,096) | | | | | | (20,096) | | |
Net Senior Secured Loans—First Lien
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | 803,964 | | | | | | 751,951 | | |
Senior Secured Loans—Second Lien—17.2% | | | | | | | | | | ||||||||||||||||||||||||||||
American Bath Group, LLC
|
| | | | | Capital Goods | | |
L+975
|
| | | | 1.0% | | | |
9/30/24
|
| | | | 60,000 | | | | | | 57,971 | | | | | | 59,700 | | |
Fairway Group Acquisition Co.
|
| |
(i)(p)(t)(u)
|
| | Food & Staples Retailing | | |
11.0% PIK
(11.0% Max PIK) |
| | | | | | | |
2/24/24
|
| | | | 4,220 | | | | | | 3,679 | | | | | | — | | |
Gigamon, Inc.
|
| |
(e)
|
| | Software & Services | | |
L+850
|
| | | | 1.0% | | | |
12/26/25
|
| | | | 50,000 | | | | | | 49,179 | | | | | | 50,500 | | |
Ivanti Software, Inc.
|
| |
(e)
|
| | Software & Services | | |
L+900
|
| | | | 1.0% | | | |
1/20/25
|
| | | | 20,000 | | | | | | 19,759 | | | | | | 19,200 | | |
LBM Borrower, LLC
|
| | | | | Capital Goods | | |
L+925
|
| | | | 1.0% | | | |
8/20/23
|
| | | | 27,300 | | | | | | 27,174 | | | | | | 26,754 | | |
LifeScan Global Corp.
|
| |
(e)
|
| |
Health Care Equipment & Services
|
| |
L+950
|
| | | | | | | |
10/1/25
|
| | | | 5,000 | | | | | | 4,704 | | | | | | 4,650 | | |
MLN US Holdco LLC
|
| |
(e)
|
| | Telecommunication Services | | |
L+875
|
| | | | | | | |
11/30/26
|
| | | | 22,500 | | | | | | 21,665 | | | | | | 22,031 | | |
NGS US Finco, LLC
|
| | | | | Energy | | |
L+850
|
| | | | 1.0% | | | |
4/1/26
|
| | | | 30,000 | | | | | | 29,559 | | | | | | 30,375 | | |
UFC Holdings, LLC
|
| |
(e)
|
| | Media | | |
L+750
|
| | | | 1.0% | | | |
8/18/24
|
| | | | 25,000 | | | | | | 24,817 | | | | | | 24,844 | | |
Portfolio Company(a)
|
| |
Footnotes
|
| |
Industry
|
| |
Rate(b)
|
| |
Floor
|
| |
Maturity
|
| |
Principal
Amount(c) |
| |
Amortized
Cost |
| |
Fair
Value(d) |
| |||||||||
Virtus Partners Holdings, LLC
|
| |
(t)
|
| | Software & Services | | |
4.0%, 8.0% PIK
(8.0% Max PIK) |
| | | | |
11/17/22
|
| | | $ | 20,156 | | | | | $ | 19,770 | | | | | $ | 20,231 | | |
Total Senior Secured Loans—Second Lien
|
| | | | | | | | | | | | | | | | | | | | | | | | | 258,277 | | | | | | 258,285 | | |
Senior Secured Bonds—20.8% | | | | | | | | | | |||||||||||||||||||||||||
Ardonagh Midco 3 PLC
|
| |
(n)(o)
|
| | Diversified Financials | | |
8.6%
|
| | | | |
7/15/23
|
| | | $ | 20,010 | | | | | | 17,898 | | | | | | 17,058 | | |
CITGO Petroleum Corp.
|
| |
(n)(o)
|
| | Energy | | |
10.8%
|
| | | | |
2/15/20
|
| | | | 43,960 | | | | | | 44,221 | | | | | | 44,867 | | |
CSVC Acquisition Corp.
|
| |
(m)(n)(o)
|
| | Diversified Financials | | |
7.8%
|
| | | | |
6/15/25
|
| | | | 40,272 | | | | | | 36,082 | | | | | | 30,456 | | |
Diamond Resorts International, Inc.
|
| |
(n)(o)
|
| | Consumer Services | | |
7.8%
|
| | | | |
9/1/23
|
| | | | 1,630 | | | | | | 1,600 | | | | | | 1,573 | | |
Gogo Intermediate Holdings LLC
|
| |
(n)(o)
|
| | Software & Services | | |
12.5%
|
| | | | |
7/1/22
|
| | | | 73,400 | | | | | | 75,538 | | | | | | 78,935 | | |
J. Crew Brand, LLC
|
| |
(n)(o)
|
| | Retailing | | |
13.0%
|
| | | | |
9/15/21
|
| | | | 33,259 | | | | | | 33,054 | | | | | | 37,749 | | |
JW Aluminum Co.
|
| |
(n)(o)
|
| | Materials | | |
10.3%
|
| | | | |
6/1/26
|
| | | | 30,000 | | | | | | 30,000 | | | | | | 29,925 | | |
K. Hovnanian Enterprises, Inc.
|
| |
(n)(o)
|
| | Consumer Durables & Apparel | | |
10.0%
|
| | | | |
7/15/22
|
| | | | 20,173 | | | | | | 20,317 | | | | | | 17,601 | | |
K. Hovnanian Enterprises, Inc.
|
| |
(n)(o)
|
| | Consumer Durables & Apparel | | |
10.5%
|
| | | | |
7/15/24
|
| | | | 29,853 | | | | | | 31,359 | | | | | | 24,927 | | |
Navios Logistics Finance, Inc.
|
| |
(n)(o)
|
| | Transportation | | |
7.3%
|
| | | | |
5/1/22
|
| | | | 33,000 | | | | | | 31,050 | | | | | | 30,121 | | |
Total Senior Secured Bonds
|
| | | | | | | | | | | | | | | | | | | | | | | | | 321,119 | | | | | | 313,212 | | |
Subordinated Debt—25.3% | | | | | | | | | | |||||||||||||||||||||||||
Ascent Resources Utica Holdings, LLC
|
| |
(n)(o)
|
| | Energy | | |
10.0%
|
| | | | |
4/1/22
|
| | | | 9,538 | | | | | | 9,538 | | | | | | 9,762 | | |
Avantor, Inc.
|
| |
(f)(n)(o)
|
| | Materials | | |
9.0%
|
| | | | |
10/1/25
|
| | | | 42,671 | | | | | | 42,745 | | | | | | 42,698 | | |
CIS General Insurance Ltd.
|
| |
(o)
|
| | Insurance | | |
12.0%
|
| | | | |
5/8/25
|
| | | £ | 55,200 | | | | | | 81,601 | | | | | | 78,538 | | |
Diamond Resorts International, Inc.
|
| |
(n)(o)
|
| | Consumer Services | | |
10.8%
|
| | | | |
9/1/24
|
| | | $ | 31,219 | | | | | | 30,309 | | | | | | 28,178 | | |
Eclipse Resources Corp.
|
| |
(f)(m)(o)
|
| | Energy | | |
8.9%
|
| | | | |
7/15/23
|
| | | | 28,105 | | | | | | 26,875 | | | | | | 24,135 | | |
Enviva Partners, LP
|
| |
(m)(o)
|
| | Energy | | |
8.5%
|
| | | | |
11/1/21
|
| | | | 73,300 | | | | | | 75,758 | | | | | | 75,516 | | |
Extraction Oil & Gas, Inc.
|
| |
(n)(o)
|
| | Energy | | |
7.4%
|
| | | | |
5/15/24
|
| | | | 14,636 | | | | | | 14,020 | | | | | | 12,368 | | |
iHeartCommunications, Inc.
|
| |
(i)(o)(p)
|
| | Media | | |
7.3%
|
| | | | |
10/15/27
|
| | | | 3,467 | | | | | | 1,474 | | | | | | 721 | | |
Kronos Acquisition Holdings Inc.
|
| |
(n)(o)
|
| | Household & Personal Products | | |
9.0%
|
| | | | |
8/15/23
|
| | | | 48,550 | | | | | | 45,205 | | | | | | 37,942 | | |
PriSo Acquisition Corp.
|
| |
(n)(o)
|
| | Capital Goods | | |
9.0%
|
| | | | |
5/15/23
|
| | | | 36,867 | | | | | | 36,639 | | | | | | 37,673 | | |
SunGard Availability Services Capital, Inc.
|
| |
(n)(o)
|
| | Software & Services | | |
8.8%
|
| | | | |
4/1/22
|
| | | | 37,860 | | | | | | 28,844 | | | | | | 8,485 | | |
Uniti Group LP
|
| |
(n)(o)
|
| | Real Estate | | |
7.1%
|
| | | | |
12/15/24
|
| | | | 16,000 | | | | | | 14,776 | | | | | | 13,270 | | |
Uniti Group LP
|
| |
(o)
|
| | Real Estate | | |
8.3%
|
| | | | |
10/15/23
|
| | | | 14,000 | | | | | | 13,399 | | | | | | 12,241 | | |
Total Subordinated Debt
|
| | | | | | | | | | | | | | | | | | | | | | | | | 421,183 | | | | | | 381,527 | | |
Collateralized Securities—2.8% | | | | | | | | | | |||||||||||||||||||||||||
Deutsche Bank AG Frankfurt (CRAFT 2016-1)
|
| |
(m)(n)(t)
|
| | Diversified Financials | | |
8.8%
|
| | | | |
1/28/24
|
| | | | 7,101 | | | | | | 6,899 | | | | | | 7,083 | | |
Deutsche Bank AG Frankfurt (CRAFT 2017-1)
|
| |
(m)(n)(t)
|
| | Diversified Financials | | |
14.4%
|
| | | | |
10/20/26
|
| | | | 35,000 | | | | | | 34,795 | | | | | | 34,913 | | |
Total Collateralized Securities
|
| | | | | | | | | | | | | | | | | | | | | | | | | 41,694 | | | | | | 41,996 | | |
|
Portfolio Company(a)
|
| |
Footnotes
|
| |
Industry
|
| |
Rate(b)
|
| |
Number of
Shares/ Contracts |
| |
Cost
|
| |
Fair
Value(d) |
| |||||||||
Equity/Other—8.6% | | | | | | | | |||||||||||||||||||||
Aspect Software Parent, Inc., Common Equity
|
| |
(i)(t)(u)
|
| | Software & Services | | | | | | | | 79,006 | | | | | $ | 39,206 | | | | | $ | — | | |
Avantor, Inc., Warrants, 11/21/2024
|
| |
(i)(t)
|
| | Materials | | | | | | | | 39,135 | | | | | | 2,752 | | | | | | 3,095 | | |
Avantor, Inc., Preferred Equity
|
| |
(m)(n)(t)
|
| | Materials | | |
12.5% PIK (12.5% Max PIK)
|
| | | | 62,353 | | | | | | 57,886 | | | | | | 61,231 | | |
Avaya Inc., Common Equity
|
| |
(i)(o)
|
| |
Technology Hardware & Equipment
|
| | | | | | | 1,007,112 | | | | | | 19,562 | | | | | | 14,663 | | |
Chinos Holdings, Inc., Series A Preferred Equity
|
| |
(m)(n)(t)
|
| | Retailing | | |
5.0%, 2.0% PIK (2.0% Max PIK)
|
| | | | 18,103 | | | | | | 5,684 | | | | | | 11,280 | | |
Chinos Holdings, Inc., Common Equity
|
| |
(i)(t)
|
| | Retailing | | | | | | | | 1,568,652 | | | | | | 172 | | | | | | 1,961 | | |
Enviva Partners, LP, Common Equity
|
| |
(f)(m)
|
| | Energy | | | | | | | | 518,942 | | | | | | 8,510 | | | | | | 14,401 | | |
Fairway Group Holdings Corp., Common Equity
|
| |
(i)(t)(u)
|
| | Food & Staples Retailing | | | | | | | | 76,517 | | | | | | 2,458 | | | | | | — | | |
Northern Oil and Gas, Inc., Put Option, Strike: $1.50
|
| |
(i)(m)(s)
|
| | Energy | | | | | | | | 15,000 | | | | | | 276 | | | | | | 274 | | |
Northern Oil and Gas, Inc., Put Option, Strike: $2.00
|
| |
(i)(m)(r)
|
| | Energy | | | | | | | | 15,000 | | | | | | 180 | | | | | | 351 | | |
Northern Oil and Gas, Inc., Common Equity
|
| |
(i)(m)(n)
|
| | Energy | | | | | | | | 3,057,559 | | | | | | 10,549 | | | | | | 6,910 | | |
Northern Oil and Gas, Inc., Warrants, 4/30/2019
|
| |
(i)(t)
|
| | Energy | | | | | | | | 1 | | | | | | 1,930 | | | | | | 3,241 | | |
Ridgeback Resources Inc., Common Equity
|
| |
(i)(t)
|
| | Energy | | | | | | | | 1,960,162 | | | | | | 12,044 | | | | | | 9,696 | | |
Selecta Group B.V., Contingent Value Notes
|
| |
(h)(i)
|
| | Retailing | | | | | | | | 7 | | | | | | 3 | | | | | | 2 | | |
Selecta Group B.V., Warrants, 6/20/2020
|
| |
(h)(i)
|
| | Retailing | | | | | | | | 98 | | | | | | 2 | | | | | | 2 | | |
TE Holdings, LLC, Preferred Equity
|
| | | | | Energy | | |
8.0% PIK (8.0% Max PIK)
|
| | | | 216,711 | | | | | | 2,164 | | | | | | 650 | | |
TE Holdings, LLC, Common Equity
|
| |
(i)(q)
|
| | Energy | | | | | | | | 326,925 | | | | | | 2,779 | | | | | | 204 | | |
White Star Petroleum Holdings, LLC, Common Equity
|
| |
(i)(q)(t)
|
| | Energy | | | | | | | | 2,969,914 | | | | | | 2,524 | | | | | | 965 | | |
Total Equity/Other
|
| | | | | | | | | | | | | | | | | | | 168,681 | | | | | | 128,926 | | |
TOTAL INVESTMENTS—124.6%
|
| | | | | | | | | | | | | | | | | | $ | 2,014,918 | | | | | | 1,875,897 | | |
Credit Facilities Payable—(20.7)%
|
| | | | | | | | | | | | | | | | | | | | | | | |
|
(312,133)
|
| |
Term Preferred Shares, at Liquidation Value, Net—(13.2)%
|
| | | | | | | | | | | | | | | | | | | | | | | |
|
(198,502)
|
| |
Other Assets in Excess of Liabilities—9.3%
|
| |
(j)
|
| | | | | | | | | | | | | | | | | | | | | | 140,711 | | |
NET ASSETS—100.0%
|
| | | | | | | | | | | | | | | | | | | | | | | |
$
|
1,505,973
|
| |
|
Portfolio Company(a)
|
| |
Footnotes
|
| |
Industry
|
| |
Number of
Shares |
| |
Proceeds
|
| |
Fair
Value(d) |
| ||||||
Investments Sold Short—(4.8)% | | | | | | | ||||||||||||||||
iShares iBoxx $ High Yield Corporate Bond ETF
|
| |
(i)(m)
|
| |
Diversified Financials
|
| |
(391,491)
|
| | | $ | (32,424) | | | | | $ | (31,750) | | |
SPDR S&P 500 ETF
|
| |
(i)(m)
|
| |
Diversified Financials
|
| |
(160,000)
|
| | | | (39,133) | | | | | | (39,987) | | |
Total Investments Sold Short
|
| | | | | | | | | | | | $ | (71,557) | | | | | $ | (71,737) | | |
|
Counterparty
|
| |
Contract Settlement
Date |
| |
Currency to be
Received |
| |
Value
|
| |
Currency to be
Delivered |
| |
Value
|
| |
Unrealized
Appreciation (Depreciation) |
| ||||||||||||
JPMorgan Chase Bank, N.A.
|
| |
1/22/19
|
| |
USD
|
| | | | 31,201 | | | | | | CAD | | | | | | 42,000 | | | | | $ | 406 | | |
JPMorgan Chase Bank, N.A.
|
| |
1/22/19
|
| |
USD
|
| | | | 78,605 | | | | | | GBP | | | | | | 62,000 | | | | | | (584) | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | (178) | | |
|
Reference Entity
|
| |
Counterparty
|
| |
Implied Credit
Spread at December 31, 2018(k) |
| |
Industry
|
| |
Fixed
Deal Pay Rate |
| |
Maturity
|
| |
Notional(l)
|
| |
Fair
Value(d) |
| |
Unamortized
Premiums Paid (Received) |
| |
Unrealized
Appreciation (Depreciation) |
| ||||||||||||||||||
High Yield ETF CDS
|
| |
JPMorgan Chase Bank, N.A.
|
| | | | 4.5% | | | | Diversified Financials | | | | | 5.0% | | | |
12/20/23
|
| | | $ | (40,000) | | | | | $ | (808) | | | | | $ | (223) | | | | | $ | (585) | | |
Frontier Communications Corp.
|
| |
JPMorgan Chase Bank, N.A.
|
| | | | 16.6% | | | |
Telecommunication Services
|
| | | | 5.0% | | | |
3/20/19
|
| | | $ | (5,000) | | | | | | 121 | | | | | | 172 | | | | | | (51) | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | (687) | | | | | $ | (51) | | | | | $ | (636) | | |
|
Reference Entity
|
| |
Counterparty
|
| |
Implied Credit
Spread at December 31, 2018(k) |
| |
Industry
|
| |
Fixed Deal
Receive Rate |
| |
Maturity
|
| |
Notional(l)
|
| |
Fair
Value(d) |
| |
Unamortized
Premiums Paid (Received) |
| |
Unrealized
Appreciation (Depreciation) |
| ||||||||||||||||||
Frontier Communications Corp.
|
| |
JPMorgan Chase Bank, N.A.
|
| | | | 19.8% | | | |
Telecommunication Services
|
| | | | 5.0% | | | |
6/20/20
|
| | | $ | 8,000 | | | | | $ | (1,376) | | | | | $ | (882) | | | | | $ | (494) | | |
Frontier Communications Corp.
|
| |
JPMorgan Chase Bank, N.A.
|
| | | | 19.6% | | | |
Telecommunication Services
|
| | | | 5.0% | | | |
12/20/20
|
| | | $ | 43,000 | | | | | | (9,312) | | | | | | (5,157) | | | | | | (4,155) | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | (10,688) | | | | | $ | (6,039) | | | | | $ | (4,649) | | |
|
Portfolio Company
|
| |
Fair Value at
December 31, 2017 |
| |
Gross
Additions(1) |
| |
Gross
Reductions(2) |
| |
Net Realized
Gain (Loss) |
| |
Net Change in
Unrealized Appreciation (Depreciation) |
| |
Fair Value at
December 31, 2018 |
| |
Interest
Income(3) |
| |
PIK
Income(3) |
| |
Fee
Income(3) |
| |||||||||||||||||||||||||||
Senior Secured Loans—First Lien | | | | | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||
Aspect Software, Inc.
|
| | | $ | 3,559 | | | | | $ | — | | | | | $ | (3,559) | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | 208 | | | | | $ | — | | | | | $ | — | | |
Aspect Software, Inc.
|
| | | | 6,395 | | | | | | 136 | | | | | | (259) | | | | | | — | | | | | | (1,154) | | | | | | 5,118 | | | | | | 664 | | | | | | 136 | | | | | | 205 | | |
Aspect Software, Inc.
|
| | | | (1,296) | | | | | | 1,296 | | | | | | (1,296) | | | | | | — | | | | | | 1,296 | | | | | | — | | | | | | 18 | | | | | | — | | | | | | — | | |
Aspect Software, Inc.
|
| | | | — | | | | | | 9,543 | | | | | | (163) | | | | | | — | | | | | | (2,372) | | | | | | 7,008 | | | | | | 306 | | | | | | 212 | | | | | | — | | |
Aspect Software, Inc.
|
| | | | — | | | | | | 391 | | | | | | (394) | | | | | | 3 | | | | | | — | | | | | | — | | | | | | 5 | | | | | | — | | | | | | — | | |
Fairway Group Acquisition Co.
|
| | | | — | | | | | | 8,386 | | | | | | (4,193) | | | | | | — | | | | | | (3,569) | | | | | | 624 | | | | | | — | | | | | | — | | | | | | — | | |
Fairway Group Acquisition Co.
|
| | | | — | | | | | | 14,573 | | | | | | (7,140) | | | | | | — | | | | | | (214) | | | | | | 7,219 | | | | | | 3 | | | | | | 839 | | | | | | — | | |
Fairway Group Acquisition Co.(4)
|
| | | | — | | | | | | 507 | | | | | | — | | | | | | — | | | | | | 7 | | | | | | 514 | | | | | | (74) | | | | | | 112 | | | | | | 96 | | |
Fairway Group Acquisition Co.
|
| | | | — | | | | | | 2,547 | | | | | | (114) | | | | | | — | | | | | | 155 | | | | | | 2,588 | | | | | | 132 | | | | | | — | | | | | | — | | |
Senior Secured Loans—Second Lien | | | | | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||
Fairway Group Acquisition Co.
|
| | | | — | | | | | | 7,358 | | | | | | (3,679) | | | | | | — | | | | | | (3,679) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Equity/Other | | | | | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||
Aspect Software Parent, Inc., Common Equity
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Fairway Group Holdings Corp., Common Equity
|
| | | | — | | | | | | 2,458 | | | | | | — | | | | | | — | | | | | | (2,458) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Total
|
| | | $ | 8,658 | | | | | $ | 47,195 | | | | | $ | (20,797) | | | | | $ | 3 | | | | | $ | (11,988) | | | | | $ | 23,071 | | | | | $ | 1,262 | | | | | $ | 1,299 | | | | | $ | 301 | | |
|
| | |
December 31, 2018
|
| |||
Assets | | | |||||
Investments, at fair value—unaffiliated (amortized cost—$1,938,838)
|
| | | $ | 1,852,826 | | |
Investments, at fair value—affiliated (amortized cost—$76,080)
|
| | | | 23,071 | | |
Cash
|
| | | | 267,444 | | |
Foreign currency (cost—$2,945)
|
| | | | 2,876 | | |
Interest receivable
|
| | | | 26,618 | | |
Collateral held at broker
|
| | | | 64,153 | | |
Receivable for investments sold and repaid
|
| | | | 45,291 | | |
Receivable on credit default swaps
|
| | | | 85 | | |
Unamortized swap premiums paid
|
| | | | 172 | | |
Unrealized appreciation on forward foreign currency exchange contracts
|
| | | | 406 | | |
Deferred financing costs
|
| | | | 51 | | |
Total assets
|
| | |
$
|
2,282,993
|
| |
Liabilities | | | |||||
Payable for investments purchased
|
| | | $ | 169,128 | | |
Credit facilities payable(1)
|
| | | | 312,133 | | |
Term preferred shares, at liquidation value of $1,000 per share (net of discount and deferred financing costs of $956 and $542, respectively)(1)
|
| | | | 198,502 | | |
Investments sold short, at fair value (proceeds—$71,557)
|
| | | | 71,737 | | |
Interest expense payable
|
| | | | 2,237 | | |
Shareholder distributions payable
|
| | | | 43 | | |
Management fees payable
|
| | | | 8,581 | | |
Unamortized swap premiums received
|
| | | | 6,262 | | |
Administrative services expense payable
|
| | | | 283 | | |
Accounting and administrative fees payable
|
| | | | 316 | | |
Professional fees payable
|
| | | | 230 | | |
Trustees’ fees payable
|
| | | | 226 | | |
Unrealized depreciation on credit default swaps
|
| | | | 5,285 | | |
Unrealized depreciation on forward foreign currency exchange contracts
|
| | | | 584 | | |
Other accrued expenses and liabilities
|
| | | | 1,473 | | |
Total liabilities
|
| | | $ | 777,020 | | |
Net assets
|
| | |
$
|
1,505,973
|
| |
Commitments and contingencies ($10,108)(2)
|
| | |||||
Composition of net assets | | | |||||
Common shares, $0.001 par value, unlimited shares authorized, 198,727,405 shares issued
and outstanding |
| | | $ | 199 | | |
Capital in excess of par value
|
| | | | 1,688,399 | | |
Accumulated earnings (deficit)
|
| | | | (182,625) | | |
Net assets
|
| | |
$
|
1,505,973
|
| |
Net asset value per common share at year end
|
| | | $ | 7.58 | | |
| | |
Year Ended
December 31, 2018 |
| |||
Investment income | | | |||||
Interest income—unaffiliated
|
| | | $ | 178,801 | | |
Interest income—affiliated
|
| | | | 1,262 | | |
Paid-in-kind interest income—unaffiliated
|
| | | | 8,043 | | |
Paid-in-kind interest income—affiliated
|
| | | | 1,299 | | |
Dividend income—unaffiliated
|
| | | | 7,050 | | |
Fee income—unaffiliated
|
| | | | 5,270 | | |
Fee income—affiliated
|
| | | | 301 | | |
Total investment income
|
| | | | 202,026 | | |
Operating expenses | | | |||||
Management fees(1)
|
| | | | 44,640 | | |
Administrative services expenses
|
| | | | 2,153 | | |
Accounting and administrative fees
|
| | | | 1,514 | | |
Interest expense
|
| | | | 20,557 | | |
Dividend expense on investments sold short
|
| | | | 2,963 | | |
Professional fees
|
| | | | 1,217 | | |
Trustees’ fees
|
| | | | 993 | | |
Other general and administrative expenses
|
| | | | 1,868 | | |
Total operating expenses
|
| | | | 75,905 | | |
Less: Management fee waiver(1)
|
| | | | (11,160) | | |
Net operating expenses
|
| | | | 64,745 | | |
Net investment income before taxes
|
| | | | 137,281 | | |
Excise taxes
|
| | | | 1,000 | | |
Net investment income
|
| | | | 136,281 | | |
Realized and unrealized gain/loss | | | |||||
Net realized gain (loss) on investments—unaffiliated
|
| | | | 24,106 | | |
Net realized gain (loss) on investments—affiliated
|
| | | | 3 | | |
Net realized gain (loss) on credit default swaps
|
| | | | 4,428 | | |
Net realized gain (loss) on options written
|
| | | | 9 | | |
Net realized gain (loss) on investments sold short
|
| | | | 365 | | |
Net realized gain (loss) on forward foreign currency exchange contracts
|
| | | | 8,555 | | |
Net realized gain (loss) on foreign currency
|
| | | | 2,530 | | |
Net change in unrealized appreciation (depreciation) on investments—unaffiliated
|
| | | | (55,318) | | |
Net change in unrealized appreciation (depreciation) on investments—affiliated
|
| | | | (11,988) | | |
Net change in unrealized appreciation (depreciation) on credit default swaps
|
| | | | (7,273) | | |
Net change in unrealized appreciation (depreciation) on investments sold short
|
| | | | 22,573 | | |
Net change in unrealized appreciation (depreciation) on forward foreign currency exchange contracts
|
| | | | 2,505 | | |
Net change in unrealized gain (loss) on foreign currency
|
| | | | (4,543) | | |
Total net realized gain (loss) and unrealized appreciation (depreciation)
|
| | | | (14,048) | | |
Net increase (decrease) in net assets resulting from operations
|
| | |
$
|
122,233
|
| |
|
| | |
Year Ended December 31,
|
| | ||||||||||||||
| | |
2018
|
| |
2017(1)
|
| | |||||||||||
Operations | | | | | |||||||||||||||
Net investment income
|
| | | $ | 136,281 | | | | | $ | 150,320 | | | | |||||
Net realized gain (loss)
|
| | | | 39,996 | | | | | | 30,253 | | | | |||||
Net change in unrealized appreciation (depreciation) on investments
|
| | | | (67,306) | | | | | | (114,693 | | | | | | ) | | |
Net change in unrealized appreciation (depreciation) on credit default swaps
|
| | | | (7,273) | | | | | | 1,908 | | | | |||||
Net change in unrealized appreciation (depreciation) on investments sold short
|
| | | | 22,573 | | | | | | (22,753 | | | | | | ) | | |
Net change in unrealized appreciation (depreciation) on forward foreign currency exchange contracts
|
| | | | 2,505 | | | | | | (4,123 | | | | | | ) | | |
Net change in unrealized gain (loss) on foreign currency
|
| | | | (4,543) | | | | | | 480 | | | | |||||
Net increase (decrease) in net assets resulting from operations
|
| | | | 122,233 | | | | | | 41,392 | | | | |||||
Shareholder distributions(2) | | | | | |||||||||||||||
Distributions to shareholders
|
| | | | (109,031) | | | | | | (153,970 | | | | | | ) | | |
Net decrease in net assets resulting from shareholder distributions
|
| | | | (109,031) | | | | | | (153,970 | | | | | | ) | | |
Capital share transactions(3) | | | | | |||||||||||||||
Issuance of common shares
|
| | | | 52,131 | | | | | | 279,931 | | | | |||||
Repurchases of common shares
|
| | | | (83,372) | | | | | | (54,014 | | | | | | ) | | |
Net increase (decrease) in net assets resulting from capital share transactions
|
| | | | (31,241) | | | | | | 225,917 | | | | |||||
Total increase (decrease) in net assets
|
| | | | (18,039) | | | | | | 113,339 | | | | |||||
Net assets at beginning of year
|
| | | | 1,524,012 | | | | | | 1,410,673 | | | | |||||
Net assets at end of year
|
| | | $ | 1,505,973 | | | | | $ | 1,524,012 | | | | |||||
|
| | |
Year Ended
December 31, 2018 |
| |||
Cash flows from operating activities | | | |||||
Net increase (decrease) in net assets resulting from operations
|
| | | $ | 122,233 | | |
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
|
| | |||||
Purchases of investments
|
| | | | (1,372,109) | | |
Paid-in-kind interest
|
| | | | (9,342) | | |
Proceeds from sales and repayments of investments
|
| | | | 1,460,004 | | |
Purchases to cover investments sold short
|
| | | | (177,724) | | |
Proceeds from investments sold short
|
| | | | 211,901 | | |
Premiums paid on credit default swaps—buy, net
|
| | | | 577 | | |
Premiums received on credit default swaps—sell, net
|
| | | | 6,262 | | |
Repurchase agreement repaid
|
| | | | (11,086) | | |
Premiums received on options written
|
| | | | 8,209 | | |
Premiums received on exit of options written
|
| | | | (8,200) | | |
Net realized (gain) loss on investments
|
| | | | (24,109) | | |
Net realized (gain) loss on options written
|
| | | | (9) | | |
Net realized (gain) loss on investments sold short
|
| | | | (365) | | |
Net change in unrealized (appreciation) depreciation on investments
|
| | | | 67,306 | | |
Net change in unrealized (appreciation) depreciation on credit default swaps
|
| | | | 7,273 | | |
Net change in unrealized (appreciation) depreciation on investments sold short
|
| | | | (22,573) | | |
Net change in unrealized (appreciation) depreciation on forward foreign currency exchange contracts
|
| | | | (2,505) | | |
Accretion of discount
|
| | | | (18,301) | | |
Amortization of deferred financing costs
|
| | | | 586 | | |
(Gain) loss on borrowings in foreign currency
|
| | | | (881) | | |
(Increase) decrease in collateral held at broker
|
| | | | (60,909) | | |
(Increase) decrease in expense reimbursement due from sponsor(1)
|
| | | | 1,647 | | |
(Increase) decrease in receivable for investments sold and repaid
|
| | | | 43,699 | | |
(Increase) decrease in interest receivable
|
| | | | 9,772 | | |
(Increase) decrease in receivable on credit default swaps
|
| | | | (85) | | |
(Increase) decrease in prepaid expenses and other assets
|
| | | | 580 | | |
Increase (decrease) in payable for investments purchased
|
| | | | 98,155 | | |
Increase (decrease) in interest expense payable
|
| | | | (11,655) | | |
Increase (decrease) in management fees payable
|
| | | | (3,131) | | |
Increase (decrease) in incentive fees payable
|
| | | | (9,717) | | |
Increase (decrease) in administrative services expense payable
|
| | | | 178 | | |
Increase (decrease) in accounting and administrative fees payable
|
| | | | 261 | | |
Increase (decrease) in professional fees payable
|
| | | | (93) | | |
Increase (decrease) in trustees’ fees payable
|
| | | | (7) | | |
Increase (decrease) in other accrued expenses and liabilities
|
| | | | (52) | | |
Net cash provided by (used in) operating activities
|
| | | | 305,790 | | |
Cash flows from financing activities | | | |||||
Issuance of common shares
|
| | | | 62,246 | | |
Repurchases of common shares
|
| | | | (83,372) | | |
Issuance of term preferred shares, net of discount(2)
|
| | | | 199,044 | | |
Shareholder distributions
|
| | | | (109,027) | | |
Borrowings under credit facilities(2)
|
| | | | 214,539 | | |
Repayments under credit facilities(2)
|
| | | | (522,737) | | |
Deferred financing costs paid
|
| | | | (763) | | |
Net cash provided by (used in) financing activities
|
| | | | (240,070) | | |
Total increase (decrease) in cash and foreign currency(3)
|
| | | | 65,720 | | |
Cash and foreign currency at beginning of year
|
| | | | 204,600 | | |
Cash and foreign currency at end of year
|
| | | $ | 270,320 | | |
|
| | |
Year Ended December 31,
|
| |||||||||||||||||||||||||||
| | |
2018
|
| |
2017
|
| |
2016
|
| |
2015
|
| |
2014
|
| |||||||||||||||
Per Share Data:(1) | | | | | | | |||||||||||||||||||||||||
Net asset value, beginning of year
|
| | | $ | 7.51 | | | | | $ | 8.07 | | | | | $ | 7.11 | | | | | $ | 8.91 | | | | | $ | 10.02 | | |
Results of operations | | | | | | | |||||||||||||||||||||||||
Net investment income(2)
|
| | | | 0.69 | | | | | | 0.78 | | | | | | 0.80 | | | | | | 0.87 | | | | | | 0.87 | | |
Net realized gain (loss) and unrealized appreciation (depreciation)
|
| | | | (0.07) | | | | | | (0.54) | | | | | | 0.97 | | | | | | (1.80) | | | | | | (1.11) | | |
Net increase (decrease) in net assets resulting from operations
|
| | | | 0.62 | | | | | | 0.24 | | | | | | 1.77 | | | | | | (0.93) | | | | | | (0.24) | | |
Shareholder distributions(3) | | | | | | | |||||||||||||||||||||||||
Distributions from net investment income
|
| | | | (0.55) | | | | | | (0.80) | | | | | | (0.81) | | | | | | (0.87) | | | | | | (0.87) | | |
Net decrease in net assets resulting from shareholder distributions
|
| | | | (0.55) | | | | | | (0.80) | | | | | | (0.81) | | | | | | (0.87) | | | | | | (0.87) | | |
Net asset value, end of year
|
| | | $ | 7.58 | | | | | $ | 7.51 | | | | | $ | 8.07 | | | | | $ | 7.11 | | | | | $ | 8.91 | | |
Shares outstanding, end of year
|
| | | | 198,727,405 | | | | | | 202,807,462 | | | | | | 174,763,703 | | | | | | 130,181,842 | | | | | | 65,529,194 | | |
Total return(4)
|
| | | | 8.29% | | | | | | 2.96% | | | | | | 26.66% | | | | | | (11.37)% | | | | | | (2.94)% | | |
Ratio/Supplemental Data: | | | | | | | |||||||||||||||||||||||||
Net assets, end of year
|
| | | $ | 1,505,973 | | | | | $ | 1,524,012 | | | | | $ | 1,410,673 | | | | | $ | 925,770 | | | | | $ | 583,619 | | |
Ratio of net investment income to average net assets(5)(6)
|
| | | | 8.79% | | | | | | 9.80% | | | | | | 10.84% | | | | | | 10.53% | | | | | | 9.01% | | |
Ratio of total operating expenses to average net assets(5)
|
| | | | 4.90% | | | | | | 5.51% | | | | | | 4.61% | | | | | | 4.69% | | | | | | 3.72% | | |
Ratio of expense reimbursement from sponsor to average net
assets(5) |
| | | | — | | | | | | (0.11)% | | | | | | (0.74)% | | | | | | (1.51)% | | | | | | (3.10)% | | |
Ratio of expense recoupment to sponsor to average net assets(5)
|
| | | | — | | | | | | 0.01% | | | | | | — | | | | | | — | | | | | | — | | |
Ratio of management fee waiver to average net assets(5)
|
| | | | (0.72)% | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Ratio of net operating expenses to average net assets(5)
|
| | | | 4.24% | | | | | | 5.41% | | | | | | 3.87% | | | | | | 3.18% | | | | | | 0.62% | | |
Portfolio turnover
|
| | | | 72% | | | | | | 94% | | | | | | 92% | | | | | | 125% | | | | | | 165% | | |
Total amount of senior securities outstanding exclusive of treasury securities
|
| | | $ | 312,133 | | | | | $ | 621,212 | | | | | $ | 507,230 | | | | | $ | 346,525 | | | | | $ | 157,721 | | |
Asset coverage per unit of total debt(7)
|
| | | | 6.07 | | | | | | 3.33 | | | | | | 3.78 | | | | | | 3.63 | | | | | | 4.45 | | |
Total amount of term preferred shares outstanding
|
| | | $ | 198,502 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Asset coverage per unit of total leverage (debt and term preferred shares)(8)
|
| | | | 3.71 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | |
Year Ended December 31,
|
| |||||||||||||||||||||
| | |
2018
|
| |
2017
|
| ||||||||||||||||||
| | |
Shares
|
| |
Amount
|
| |
Shares
|
| |
Amount
|
| ||||||||||||
Gross Proceeds from Issuance of Common Shares
|
| | | | 6,673,631 | | | | | $ | 52,131 | | | | | | 34,845,148 | | | | | $ | 279,931 | | |
Aggregate Consideration for Repurchased Shares
|
| | | | (10,753,688) | | | | | | (83,372) | | | | | | (6,801,389) | | | | | | (54,014) | | |
Net Proceeds from Share Transactions
|
| | | | (4,080,057) | | | | | $ | (31,241) | | | | | | 28,043,759 | | | | | $ | 225,917 | | |
|
| | |
Year Ended December 31,
|
| |||||||||||||||||||||
| | |
2018
|
| |
2017
|
| ||||||||||||||||||
| | |
Shares
|
| |
Amount
|
| |
Shares
|
| |
Amount
|
| ||||||||||||
FS Global Credit Opportunities Fund—A
|
| | | | 4,835,228 | | | | | $ | 37,759 | | | | | | 9,015,370 | | | | | $ | 71,487 | | |
FS Global Credit Opportunities Fund—D
|
| | | | 982,214 | | | | | | 7,669 | | | | | | 1,994,772 | | | | | | 15,816 | | |
FS Global Credit Opportunities Fund—T
|
| | | | 613,896 | | | | | | 4,807 | | | | | | 17,015,952 | | | | | | 137,723 | | |
FS Global Credit Opportunities Fund—ADV
|
| | | | 214,879 | | | | | | 1,681 | | | | | | 5,971,321 | | | | | | 48,197 | | |
FS Global Credit Opportunities Fund—T2
|
| | | | 27,414 | | | | | | 215 | | | | | | 847,733 | | | | | | 6,708 | | |
Total Gross Proceeds from Issuance of Common Shares
|
| | | | 6,673,631 | | | | | $ | 52,131 | | | | | | 34,845,148 | | | | | $ | 279,931 | | |
|
| | |
Year Ended December 31,
|
| |||||||||||||||||||||
| | |
2018
|
| |
2017
|
| ||||||||||||||||||
| | |
Shares
|
| |
Amount
|
| |
Shares
|
| |
Amount
|
| ||||||||||||
FS Global Credit Opportunities Fund—A
|
| | | | 7,340,773 | | | | | $ | 56,890 | | | | | | 5,635,126 | | | | | $ | 44,774 | | |
FS Global Credit Opportunities Fund—D
|
| | | | 1,675,929 | | | | | | 12,973 | | | | | | 1,062,160 | | | | | | 8,418 | | |
FS Global Credit Opportunities Fund—T
|
| | | | 1,130,391 | | | | | | 8,776 | | | | | | 72,438 | | | | | | 571 | | |
FS Global Credit Opportunities Fund—ADV
|
| | | | 412,336 | | | | | | 3,203 | | | | | | 31,665 | | | | | | 251 | | |
FS Global Credit Opportunities Fund—T2
|
| | | | 20,262 | | | | | | 161 | | | | | | — | | | | | | — | | |
Total Aggregate Consideration for Repurchased Shares
|
| | | | 10,579,691 | | | | | $ | 82,003 | | | | | | 6,801,389 | | | | | $ | 54,014 | | |
|
Related Party
|
| |
Source Agreement
|
| |
Description
|
| |
Amount
|
| |||
FS Global Advisor | | |
Investment Advisory Agreement
|
| | Management Fee(1) | | | | $ | 33,480 | | |
FS Global Advisor | | |
Investment Advisory Agreement
|
| | Incentive Fee(2) | | | | | — | | |
FS Global Advisor | | | Administration Agreement | | |
Administrative Services Expenses(3)
|
| | | $ | 2,153 | | |
Quarter Ended(1)
|
| |
Amount of
Expense Reimbursements |
| |
Annualized
“Other Operating Expenses” Ratio as of the Date of Support Payment |
| |
Annualized Rate of
Distributions Per Common Share(2) |
| |
Reimbursement
Eligibility Expiration |
| |||||||||
Fiscal 2016 | | | | | | |||||||||||||||||
March 31, 2016
|
| | | $ | 6,071 | | | | | | 0.47% | | | | | | 12.69% | | | |
March 31, 2019
|
|
June 30, 2016
|
| | | | 2,123 | | | | | | 0.42% | | | | | | 9.77% | | | |
June 30, 2019
|
|
September 30, 2016
|
| | | | 267 | | | | | | 0.42% | | | | | | 9.24% | | | |
September 30, 2019
|
|
Total
|
| | | $ | 8,461 | | | | | | ||||||||||||
Fiscal 2017 | | | | | | |||||||||||||||||
December 31, 2017
|
| | | $ | 1,647 | | | | | | 0.39% | | | | | | 9.49% | | | |
December 31, 2020
|
|
Total
|
| | | $ | 1,647 | | | | | | ||||||||||||
|
| | |
Distribution
|
| |||||||||
Year Ended December 31,
|
| |
Per Share
|
| |
Amount
|
| ||||||
2017
|
| | | $ | 0.7969 | | | | | $ | 153,970 | | |
2018
|
| | | $ | 0.5500 | | | | | $ | 109,031 | | |
| | |
Year Ended December 31,
|
| |||||||||||||||||||||
| | |
2018
|
| |
2017
|
| ||||||||||||||||||
Source of Distribution
|
| |
Distribution
Amount |
| |
Percentage
|
| |
Distribution
Amount |
| |
Percentage
|
| ||||||||||||
Net investment income (prior to expense reimbursement from sponsor)(1)
|
| | | $ | 109,031 | | | | | | 100% | | | | | $ | 148,673 | | | | | | 97% | | |
Distributions on account of common equity
|
| | | | — | | | | | | — | | | | | | 3,650 | | | | | | 2% | | |
Expense reimbursement from sponsor
|
| | | | — | | | | | | — | | | | | | 1,647 | | | | | | 1% | | |
Total
|
| | | $ | 109,031 | | | | | | 100% | | | | | $ | 153,970 | | | | | | 100% | | |
|
|
GAAP-basis net investment income
|
| | | $ | 136,281 | | |
|
Reclassification of unamortized original issue discount and prepayment fees
|
| | | | (7,670) | | |
|
Reclassification of mark-to-market unrealized appreciation (depreciation) on certain investments
|
| | | | (2,780) | | |
|
Foreign currency gains (losses)
|
| | | | 11,085 | | |
|
Reversal of late-year ordinary specified losses
|
| | | | (652) | | |
|
Excise tax
|
| | | | 1,000 | | |
|
Term Preferred Shares interest expense non-deductible for tax
|
| | | | 2,705 | | |
|
Other miscellaneous differences
|
| | | | 1,239 | | |
|
Tax-basis net investment income
|
| | | $ | 141,208 | | |
|
|
Distributable ordinary income
|
| | | $ | 31,421 | | |
|
Capital loss carryover(1)
|
| | | | (77,374) | | |
|
Net unrealized appreciation (depreciation)
|
| | | | (136,672) | | |
| | | | | $ | (182,625) | | |
|
| | |
Fair Value
|
| |||||||||
Derivative
|
| |
Asset Derivative
|
| |
Liability Derivative
|
| ||||||
Foreign Currency Risk | | | | ||||||||||
Forward foreign currency exchange contracts
|
| | | $ | 406(1) | | | | | $ | 584(2) | | |
Credit Risk | | | | ||||||||||
Credit default swap contracts
|
| | | $ | 172(3) | | | | | $ | 11,547(4) | | |
Market Risk | | | | ||||||||||
Options purchased
|
| | | $ | 625(5) | | | | | $ | — | | |
Counterparty
|
| |
Derivative Assets
Subject to Master Netting Agreement |
| |
Derivatives
Available for Offset |
| |
Non-cash
Collateral Received(1) |
| |
Cash
Collateral Received(1) |
| |
Net
Amount of Derivative Assets(2) |
| |||||||||||||||
JPMorgan Chase Bank, N.A.
|
| | | $ | 578 | | | | | $ | 578 | | | | | | — | | | | | | — | | | | | | — | | |
Counterparty
|
| |
Derivative
Liabilities Subject to Master Netting Agreement |
| |
Derivatives
Available for Offset |
| |
Non-cash
Collateral Pledged(1) |
| |
Cash
Collateral Pledged(1) |
| |
Net
Amount of Derivative Liabilities(3) |
| |||||||||||||||
JPMorgan Chase Bank, N.A.
|
| | | $ | 12,131 | | | | | $ | 578 | | | | | | — | | | | | $ | 11,553 | | | | | | — | | |
Derivative
|
| |
Realized Gain (Loss) on
Derivatives Recognized in Income |
| |
Net Change in Unrealized
Appreciation (Depreciation) on Derivatives Recognized in Income |
| ||||||
Foreign Currency Risk | | | | ||||||||||
Forward foreign currency exchange contracts
|
| | | $ | 8,555(1) | | | | | $ | 2,505(2) | | |
Credit Risk | | | | ||||||||||
Credit default swap contracts
|
| | | $ | 4,428(3) | | | | | $ | (7,273)(4) | | |
Market Risk | | | | ||||||||||
Options purchased
|
| | | $ | 18,042(5) | | | | | $ | 169(6) | | |
Options written
|
| | | $ | 9(7) | | | | | $ | — | | |
| | |
Options Written
|
| |||
Fair value at beginning of period
|
| | | $ | — | | |
Net realized gain (loss)
|
| | | | 9 | | |
Net change in unrealized appreciation (depreciation)
|
| | | | — | | |
Premiums received on options written
|
| | | | (8,209) | | |
Premiums paid on exit
|
| | | | 8,200 | | |
Fair value at end of period
|
| | | $ | — | | |
|
| | |
Amortized
Cost(1) |
| |
Fair Value
|
| |
Percentage of
Portfolio |
| |||||||||
Senior Secured Loans—First Lien
|
| | | $ | 803,964 | | | | | $ | 751,951 | | | | | | 40% | | |
Senior Secured Loans—Second Lien
|
| | | | 258,277 | | | | | | 258,285 | | | | | | 14% | | |
Senior Secured Bonds
|
| | | | 321,119 | | | | | | 313,212 | | | | | | 17% | | |
Subordinated Debt
|
| | | | 421,183 | | | | | | 381,527 | | | | | | 20% | | |
Collateralized Securities
|
| | | | 41,694 | | | | | | 41,996 | | | | | | 2% | | |
Equity/Other
|
| | | | 168,681 | | | | | | 128,926 | | | | | | 7% | | |
Total
|
| | | $ | 2,014,918 | | | | | $ | 1,875,897 | | | | | | 100% | | |
Investments Sold Short
|
| | | $ | (71,557) | | | | | $ | (71,737) | | | | |||||
|
Industry Classification
|
| |
Fair Value
|
| |
Percentage of
Portfolio |
| ||||||
Capital Goods
|
| | | $ | 163,682 | | | | | | 9% | | |
Consumer Durables & Apparel
|
| | | | 45,149 | | | | | | 2% | | |
Consumer Services
|
| | | | 153,352 | | | | | | 8% | | |
Diversified Financials
|
| | | | 124,698 | | | | | | 7% | | |
Energy | | | | | 340,901 | | | | | | 18% | | |
Food & Staples Retailing
|
| | | | 10,945 | | | | | | 1% | | |
Health Care Equipment & Services
|
| | | | 64,856 | | | | | | 4% | | |
Household & Personal Products
|
| | | | 40,288 | | | | | | 2% | | |
Insurance | | | | | 78,538 | | | | | | 4% | | |
Materials | | | | | 136,949 | | | | | | 7% | | |
Media | | | | | 76,568 | | | | | | 4% | | |
Real Estate
|
| | | | 41,819 | | | | | | 2% | | |
Retailing | | | | | 130,515 | | | | | | 7% | | |
Software & Services
|
| | | | 303,894 | | | | | | 16% | | |
Technology Hardware & Equipment
|
| | | | 75,487 | | | | | | 4% | | |
Telecommunication Services
|
| | | | 39,994 | | | | | | 2% | | |
Transportation | | | | | 48,262 | | | | | | 3% | | |
Total | | | | $ | 1,875,897 | | | | | | 100% | | |
|
Geographic Locations(1)
|
| |
Fair Value
|
| |
Percentage of
Portfolio |
| ||||||
United States
|
| | | $ | 1,693,255 | | | | | | 90% | | |
Europe
|
| | | | 154,424 | | | | | | 8% | | |
Other
|
| | | | 28,218 | | | | | | 2% | | |
Total
|
| | | $ | 1,875,897 | | | | | | 100% | | |
|
Asset Description
|
| |
Level 1
|
| |
Level 2
|
| |
Level 3
|
| |
Total
|
| ||||||||||||
Senior Secured Loans—First Lien
|
| | | $ | — | | | | | $ | 660,314 | | | | | $ | 91,637 | | | | | $ | 751,951 | | |
Senior Secured Loans—Second Lien
|
| | | | — | | | | | | 238,054 | | | | | | 20,231 | | | | | | 258,285 | | |
Senior Secured Bonds
|
| | | | — | | | | | | 313,212 | | | | | | — | | | | | | 313,212 | | |
Subordinated Debt
|
| | | | — | | | | | | 381,527 | | | | | | — | | | | | | 381,527 | | |
Collateralized Securities
|
| | | | — | | | | | | — | | | | | | 41,996 | | | | | | 41,996 | | |
Equity/Other
|
| | | | 36,599 | | | | | | 858 | | | | | | 91,469 | | | | | | 128,926 | | |
Total Investments
|
| | | | 36,599 | | | | | | 1,593,965 | | | | | | 245,333 | | | | | | 1,875,897 | | |
Forward Foreign Currency Exchange Contracts
|
| | | | — | | | | | | 406 | | | | | | — | | | | | | 406 | | |
Credit Default Swaps—Buy Protection
|
| | | | — | | | | | | — | | | | | | 172 | | | | | | 172 | | |
Total
|
| | | $ | 36,599 | | | | | $ | 1,594,371 | | | | | $ | 245,505 | | | | | $ | 1,876,475 | | |
|
Liability Description
|
| |
Level 1
|
| |
Level 2
|
| |
Level 3
|
| |
Total
|
| ||||||||||||
Investments Sold Short
|
| | | $ | (71,737) | | | | | $ | — | | | | | $ | — | | | | | $ | (71,737) | | |
Forward Foreign Currency Exchange Contracts
|
| | | | — | | | | | | (584) | | | | | | — | | | | | | (584) | | |
Credit Default Swaps—Buy Protection
|
| | | | — | | | | | | — | | | | | | (859) | | | | | | (859) | | |
Credit Default Swaps—Sell Protection
|
| | | | — | | | | | | — | | | | | | (10,688) | | | | | | (10,688) | | |
Total
|
| | | $ | (71,737) | | | | | $ | (584) | | | | | $ | (11,547) | | | | | $ | (83,868) | | |
|
| | |
For the Year Ended December 31, 2018
|
| |||||||||||||||||||||||||||||||||||||||
| | |
Senior
Secured Loans— First Lien |
| |
Senior
Secured Loans— Second Lien |
| |
Senior
Secured Bonds |
| |
Subordinated
Debt |
| |
Collateralized
Securities |
| |
Equity/Other
|
| |
Total
|
| |||||||||||||||||||||
Fair value at beginning of period
|
| | | $ | 505,379 | | | | | $ | 256,162 | | | | | $ | 385,119 | | | | | $ | 573,156 | | | | | $ | 68,587 | | | | | $ | 104,368 | | | | | $ | 1,892,771 | | |
Accretion of discount (amortization of premium)
|
| | | | 44 | | | | | | 14 | | | | | | — | | | | | | — | | | | | | — | | | | | | 441 | | | | | | 499 | | |
Net realized gain (loss)
|
| | | | (336) | | | | | | — | | | | | | 13 | | | | | | — | | | | | | 1,559 | | | | | | 120 | | | | | | 1,356 | | |
Net change in unrealized appreciation
(depreciation) |
| | | | (5,800) | | | | | | (390) | | | | | | (13) | | | | | | — | | | | | | (608) | | | | | | 12,853 | | | | | | 6,042 | | |
Purchases
|
| | | | 44,830 | | | | | | 19,600 | | | | | | — | | | | | | — | | | | | | — | | | | | | 1,930 | | | | | | 66,360 | | |
Paid-in-kind interest
|
| | | | 1,299 | | | | | | 156 | | | | | | — | | | | | | — | | | | | | — | | | | | | 7,669 | | | | | | 9,124 | | |
Sales and repayments
|
| | | | (4,416) | | | | | | — | | | | | | (794) | | | | | | — | | | | | | (18,556) | | | | | | (125) | | | | | | (23,891) | | |
Net transfers in or out of Level 3(1)
|
| | | | (449,363) | | | | | | (255,311) | | | | | | (384,325) | | | | | | (573,156) | | | | | | (8,986) | | | | | | (35,787) | | | | | | (1,706,928) | | |
Fair value at end of period
|
| | | $ | 91,637 | | | | | $ | 20,231 | | | | | $ | — | | | | | $ | — | | | | | $ | 41,996 | | | | | $ | 91,469 | | | | | $ | 245,333 | | |
The amount of total gains or losses for the period
included in changes in net assets attributable to the change in unrealized gains or losses relating to investments still held at the reporting date |
| | | $ | (10,321) | | | | | $ | 461 | | | | | $ | — | | | | | $ | — | | | | | $ | (607) | | | | | $ | 12,852 | | | | | $ | 2,385 | | |
|
Fair value at beginning of period
|
| | | $ | 2,737 | | |
|
Net realized gain (loss)
|
| | | | (939) | | |
|
Net change in unrealized appreciation (depreciation)
|
| | | | (2,624) | | |
|
Swap premiums paid
|
| | | | 172 | | |
|
Coupon payments paid
|
| | | | 301 | | |
|
Premiums received on exit
|
| | | | (334) | | |
|
Net transfers in or out of Level 3
|
| | | | — | | |
|
Fair value at end of period
|
| | | $ | (687) | | |
|
The amount of total gains or losses for the period included in changes in net assets attributable to the change in unrealized gains or losses relating to centrally cleared credit default swaps—buy protection still held at the reporting date
|
| | | $ | (636) | | |
|
|
Fair value at beginning of period
|
| | | $ | — | | |
|
Net realized gain (loss)
|
| | | | 5,367 | | |
|
Net change in unrealized appreciation (depreciation)
|
| | | | (4,649) | | |
|
Swap premiums received
|
| | | | (9,060) | | |
|
Coupon payments received
|
| | | | (2,346) | | |
|
Premiums paid on exit
|
| | | | — | | |
|
Net transfers in or out of Level 3
|
| | | | — | | |
|
Fair value at end of period
|
| | | $ | (10,688) | | |
|
The amount of total gains or losses for the period included in changes in net assets attributable to the change in unrealized gains or losses relating to centrally cleared credit default swaps—sell protection still held at the reporting date
|
| | | $ | (4,649) | | |
|
Type of Investment
|
| |
Fair Value
|
| |
Valuation
Technique(1) |
| |
Unobservable
Input |
| |
Range
|
| |
Weighted
Average |
| |||
Senior Secured Loans—First
Lien |
| | | $ | 65,945 | | | |
Market Comparables
|
| | Market Yield (%) | | |
8.6% – 12.3%
|
| |
9.9%
|
|
| | | | | 12,126 | | | | | | | EBITDA Multiples (x) | | |
7.0x – 7.5x
|
| |
7.3x
|
|
| | | | | 10,945 | | | | | | | Revenue Multiples (x) | | |
0.1x – 0.1x
|
| |
0.1x
|
|
| | | | | 2,621 | | | | | | | Liquidation Coverage (%) | | |
8.3% – 9.5%
|
| |
8.9%
|
|
Senior Secured Loans—Second
Lien |
| | | | 20,231 | | | |
Market Comparables
|
| | Market Yield (%) | | |
12.4% – 12.9%
|
| |
12.6%
|
|
| | | | | | | | | | | | Revenue Multiples (x) | | |
0.1x – 0.1x
|
| |
0.1x
|
|
Collateralized Securities
|
| | | | 41,996 | | | |
Market Comparables
|
| | Market Yield (%) | | |
13.4% – 14.7%
|
| |
13.6%
|
|
Equity/Other
|
| | | | 91,469 | | | |
Market Comparables
|
| | EBITDA Multiples (x) | | |
4.0x – 15.8x
|
| |
8.0x
|
|
| | | | | | | | | | | | Production Multiples (Mboe/d) | | |
$31,250.0 – $38,750.0
|
| |
$35,910.5
|
|
| | | | | | | | | | | |
Proved Reserves Multiples (Mmboe)
|
| |
$7.0 – $13.8
|
| |
$12.5
|
|
| | | | | | | | | | | | PV-10 Multiples (x) | | |
0.8x – 1.3x
|
| |
0.9x
|
|
| | | | | | | | | | | | Revenue Multiples (x) | | |
0.1x – 0.1x
|
| |
0.1x
|
|
| | | | | | | | | | | | Implied Volatility (%) | | |
80.0% – 90.0%
|
| |
85.0%
|
|
Total
|
| | | $ | 245,333 | | | | | | | ||||||||
Centrally Cleared Credit Default Swaps—Buy Protection
|
| | | $ | (687) | | | |
Market Quotes
|
| | Indicative Dealer Quotes | | |
(2.0)% – 2.4%
|
| |
1.4%
|
|
Centrally Cleared Credit Default Swaps—Sell Protection
|
| | | $ | (10,688) | | | |
Market Quotes
|
| | Indicative Dealer Quotes | | |
(21.7)% – (17.2)%
|
| |
(21.1)%
|
|
|
Arrangement(1)
|
| |
Type of Arrangement
|
| |
Rate
|
| |
Amount
Outstanding(2) |
| |
Amount
Available |
| |
Maturity Date
|
| ||||||
Dauphin Funding Facility
|
| |
Revolving Credit Facility
|
| |
L+1.80%
|
| | | $ | 15,000 | | | | | $ | 135,000 | | | |
February 21, 2019(3)
|
|
Bucks Funding Facility
|
| |
Prime Brokerage Facility
|
| |
L+1.10%
|
| | | | 297,133 | | | | | | 2,867 | | | |
September 27, 2019(4)
|
|
Series 2023 Term Preferred—Floating(5)
|
| | Floating Rate Shares | | |
L+1.85%
|
| | | | 45,000 | | | | | | — | | | |
August 1, 2023
|
|
Series 2023 Term Preferred—Fixed(5)
|
| | Fixed Rate Shares | | |
4.818%
|
| | | | 55,000 | | | | | | — | | | |
August 1, 2023
|
|
Series 2026 Term Preferred Shares(5)
|
| | Fixed Rate Shares | | |
5.426%
|
| | | | 100,000 | | | | | | — | | | |
February 1, 2026
|
|
Total
|
| | | | | | | | | $ | 512,133 | | | | | $ | 137,867 | | | | ||
|
| | |
Interest
Expense(1) |
| |
Amortization of
Deferred Financing Costs and Discount |
| |
Total
|
| |||||||||
Dauphin Funding Facility
|
| | | $ | 4,216 | | | | | $ | 541 | | | | | $ | 4,757 | | |
Bucks Funding Facility
|
| | | | 12,161 | | | | | | 11 | | | | | | 12,172 | | |
Series 2023 Term Preferred Shares—Floating Rate
|
| | | | 755 | | | | | | 31 | | | | | | 786 | | |
Series 2023 Term Preferred Shares—Fixed Rate
|
| | | | 1,045 | | | | | | 33 | | | | | | 1,078 | | |
Series 2026 Term Preferred Shares
|
| | | | 905 | | | | | | 14 | | | | | | 919 | | |
Total
|
| | | $ | 19,082 | | | | | $ | 630 | | | | | $ | 19,712 | | |
|
| | |
Cash Paid for
Interest Expense(1) |
| |
Average
Borrowings |
| |
Effective Interest
Rate(2) |
| |
Weighted Average
Interest Rate(2) |
| ||||||||||||
Dauphin Funding Facility
|
| | | $ | 5,018 | | | | | $ | 98,280 | | | | | | 4.61% | | | | | | 4.29% | | |
Bucks Funding Facility
|
| | | | 12,261 | | | | | $ | 346,478 | | | | | | 3.91% | | | | | | 3.51% | | |
Series 2023 Term Preferred Shares—Floating Rate
|
| | | | 755 | | | | | $ | 45,000 | | | | | | 4.29% | | | | | | 4.22% | | |
Series 2023 Term Preferred Shares—Fixed Rate
|
| | | | — | | | | | $ | 55,000 | | | | | | 4.88% | | | | | | 4.82% | | |
Series 2026 Term Preferred Shares
|
| | | | — | | | | | $ | 100,000 | | | | | | 5.50% | | | | | | 5.43% | | |
Total
|
| | | $ | 18,034 | | | | | | |||||||||||||||
|
Name
|
| |
Age
|
| |
Trustee Since
|
| |
Title
|
| |
Principal
Occupations During the Past Five Years |
| |
Number of
Registered Investment Companies in Fund Complex* Overseen by Trustee |
| |
Other Directorships
Held by Trustee |
|
Interested Trustees | | | | | | | | | | | | | | | | | | | |
Michael C. Forman(1) | | |
57
|
| |
January 2013
|
| | Chairman, President and Chief Executive Officer | | | Chairman and Chief Executive Officer of FS Investments | | |
10
|
| | FS Multi-Alternative Income Fund (since 2018); FS Series Trust (since 2016); FS Energy Total Return Fund (since 2016); FS Credit Income Fund (since 2016); FS Credit Real Estate Income Trust, Inc. (since 2016); FS Investment Corporation IV (since 2015); FS Investment Corporation III (since 2013); FS Investment Corporation II (since 2011); FS Energy and Power Fund (since 2010); and FS KKR Capital Corp. (formerly FS Investment Corporation) (since 2007) | |
Independent Trustees | | | | | | | | ||||||||||||
Walter W. Buckley, III | | |
58
|
| |
June 2013
|
| | Trustee | | | Chief Executive Officer of Actua Corporation (since 1996); and President of Actua Corporation (1996 – 2001; 2002 – 2009) |
| |
6
|
| | Actua Corporation (since 1996) |
|
David L. Cohen | | |
63
|
| |
June 2013
|
| | Trustee | | | Senior Executive Vice President of Comcast Corporation (since 2015); and Executive Vice President of Comcast Corporation (2002 – 2015) | | |
6
|
| | NBCUniversal Media, LLC (since 2013) | |
Barbara J. Fouss | | |
49
|
| |
November 2013
|
| | Trustee | | | Director of Strategic Initiatives of Sun National Bank (2012 – 2013); Chief Credit Policy Officer of Sun National Bank (2011 – 2012); and Deputy Chief Credit Policy Officer of Sun National Bank (2008 – 2011) |
| |
6
|
| | FS Investment Corporation IV (since 2015) | |
Name
|
| |
Age
|
| |
Trustee Since
|
| |
Title
|
| |
Principal
Occupations During the Past Five Years |
| |
Number of
Registered Investment Companies in Fund Complex* Overseen by Trustee |
| |
Other Directorships
Held by Trustee |
|
Philip E. Hughes, Jr. | | |
69
|
| |
June 2013
|
| | Trustee | | | Vice-Chairman of Keystone Industries (since 2011); Principal of Philip E. Hughes, Jr., CPA, Esq. Accounting, Tax and Business Services (since 2011); President of Fox Park Corporation (since 2005) and Sovereign Developers, LP (since 1999); and Partner of LarsonAllen LLP (2000 – 2011) | | |
7
|
| |
FS Series Trust (since 2017)
|
|
Oliver C. Mitchell, Jr. | | |
64
|
| |
June 2013
|
| | Trustee | | | Attorney and Consultant—Litigation Avoidance, Corporate Governance and Internal Investigations (since 2014); Senior Vice President, General Counsel and Secretary of American Cybersystems, Inc. (2013 – 2014); and Vice President, General Counsel and Secretary of Carpenter Technology Corporation (2007 – 2009) |
| |
6
|
| | National Commercial Bank Jamaica Limited (since 2015) | |
Charles P. Pizzi | | |
68
|
| |
June 2013
|
| | Trustee | | | President and Chief Executive Officer of Tasty Baking Company (2002 – 2011) |
| |
6
|
| | Pennsylvania Real Estate Investment Trust (since 2013); PHH Corporation (since 2012); FS Energy and Power Fund (since 2012); and Brandywine Realty Trust (since 1996) | |
Name
|
| |
Age
|
| |
Position Held with Registrant
|
| |
Length of
Time Served |
| |
Principal Occupations
During the Past Five Years |
|
Michael C. Forman | | |
57
|
| | Chairman, President and Chief Executive Officer | | |
Since 2013
|
| | Chairman and Chief Executive Officer, FS Investments | |
Edward T. Gallivan, Jr. | | |
56
|
| | Chief Financial Officer | | |
Since 2018
|
| | Chief Financial Officer of Fund—A (since 2018), Fund—D (since 2018), Fund—T (since 2018), Fund—ADV (since 2018), Fund—T2 (since 2018), FS Energy and Power Fund (since 2012), FS Energy Total Return Fund, FS Credit Income Fund, FS Multi-Alternative Income Fund and FS Credit Real Estate Income Trust | |
Name
|
| |
Age
|
| |
Position Held with Registrant
|
| |
Length of
Time Served |
| |
Principal Occupations
During the Past Five Years |
|
Stephen S. Sypherd | | |
41
|
| | Vice President, Treasurer and Secretary | | |
Since 2013
|
| | General Counsel, FS Investments; and Associate of Skadden, Arps, Slate, Meagher & Flom LLP (2002 – 2010) | |
James F. Volk | | |
56
|
| |
Chief Compliance Officer
|
| |
Since 2015
|
| | Senior Vice President of Fund Compliance, FS Investments (since 2014); and Chief Compliance Officer, Chief Accounting Officer and Head of Traditional Fund Operations at SEI’s Investment Manager Services market unit (1996 – 2014) | |
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Interests in FS Global Credit Opportunities Fund are not registered under the Securities Act of 1933, as amended (the “Securities Act”), and are issued only to FS Global Credit Opportunities Fund–A, FS Global Credit Opportunities Fund–D, FS Global Credit Opportunities Fund–T, FS Global Credit Opportunities Fund–ADV and FS Global Credit Opportunities Fund–T2 in private placement transactions that do not involve any “public offering” within the meaning of Section 4(a)(2) of, and/or Regulation D under, the Securities Act. This annual report does not constitute an offer to sell, or the solicitation of an offer to buy, any interest in FS Global Credit Opportunities Fund. Past performance is not indicative of future results.
www.fsinvestments.com | AN18-GCO-M | |
© 2019 FS Investments | DFS FE19 |
Name of Investment Committee Member
|
| |
Dollar Range of Equity Securities in the Fund(1)
|
|
Andrew Beckman
|
| |
None
|
|
Nicholas Heilbut
|
| |
None
|
|
Robert Hoffman
|
| |
None
|
|
Period
|
| |
(a)
Total Number of Shares Purchased(1)(2) |
| |
(b)
Average Price Paid per Share |
| |
(c)
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
| |
(d)
Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs |
| ||||||||||||
January 1 to January 31, 2018
|
| | | | 5,026,360 | | | | | $ | 7.669 | | | | | | 5,026,360 | | | | |
|
(3)
|
| |
February 1 to February 28, 2018
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | |
March 1 to March 31, 2018
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | |
April 1 to April 30, 2018
|
| | | | 2,425,597 | | | | | $ | 7.722 | | | | | | 2,425,597 | | | | |
|
(3)
|
| |
May 1 to May 31, 2018
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | |
June 1 to June 30, 2018
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | |
July 1 to July 31, 2018
|
| | | | 1,728,121 | | | | | $ | 7.854 | | | | | | 1,728,121 | | | | |
|
(3)
|
| |
August 1 to August 31, 2018
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | |
September 1 to September 30, 2018
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | |
October 1 to October 31, 2018
|
| | | | 1,573,610 | | | | | $ | 7.958 | | | | | | 1,573,610 | | | | |
|
(3)
|
| |
November 1 to November 30, 2018
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | |
December 1 to December 31, 2018
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Total
|
| | | | 10,753,688 | | | | | $ | 7.753 | | | | | | 10,753,688 | | | | |
|
(3)
|
| |
|
|
(a)(1)
|
| | The Fund’s Code of Business Conduct and Ethics is included herein in response to Item 2(f). | |
|
(a)(2)
|
| | The certifications of the Fund’s Chief Executive Officer and Chief Financial Officer required by Rule 30a-2(a) under the 1940 Act are included herein. | |
|
(a)(3)
|
| | Not applicable. | |
|
(a)(4)
|
| | The Proxy Voting Policies and Procedures of FS Global Advisor are included herein in response to Item 7. | |
|
(b)
|
| | The certifications of the Fund’s Chief Executive Officer and Chief Financial Officer required by Rule 30a-2(b) under the 1940 Act are included herein. | |
| | | | FS Global Credit Opportunities Fund | | |||
| | | | By: | | |
/s/ Michael C. Forman
Michael C. Forman
President and Chief Executive Officer Date: March 11, 2019 |
|
| | | | By: | | |
/s/ Michael C. Forman
Michael C. Forman
President and Chief Executive Officer (Principal Executive Officer) Date: March 11, 2019 |
|
| | | | By: | | |
/s/ Edward T. Gallivan, Jr.
Edward T. Gallivan, Jr.
Chief Financial Officer (Principal Financial Officer) Date: March 11, 2019 |
|