Recovery Options for Investors in the Franklin Square BDCs (FSKR)

Stoltmann Law Offices, P.C, a Chicago-based securities law firm specializing in representing investors nationwide, continues to hear from investors who have suffered devastating losses in alternative investments.  One of the most common and popular alternative investments peddled by brokers over the last several years are “business development companies” or “BDCs”. The most common issuer of BDCs is a company called Franklin Square, and brokerage firms have pushed hundreds of millions of dollars in these speculative investments to unsuspecting investors for a decade.

FSKR, the publicly-traded BDC called FS KKR Capital Corp. (NYSE: FSKR), was created by the merger of four Franklin Square non-traded BDCs in December 2019:

  • FS Investment Corporation II (FSIC II)
  • FS Investment Corporation III (FSIC III)
  • FS Investment Corporation IV (FSIC IV)
  • Corporate Capital Trust II (CCT II).

In June 2020, the shares of FSKR were listed on the NYSE, and a 4-1 reverse stock split was instituted, priming-up the share price to about $14.  For those unlucky investors who originally invested in the non-traded BDCs, that did them little good, it just consolidated the number of shares they had valued at about $3.50 per share. Further evidence of the devalued share price are the back to back unsolicited tender offers by vulture fund McKenzie Capital Partners, which offered to buy shares of FSKR at $4.10 per share, and then, only a few days later, reduced that to a mere $1.50 per share.

As we have blogged about before, BDCs like those issued by Franklin Square are speculative, high risk, and high-commissioned products. They are unsuitable for most investors, especially those who are retired and have no interest in speculation. BDCs focus on providing financing and funding to small private companies – a sector that is extremely high risk to lend to, and who are being wrecked by the COVID-19 pandemic. There is great concern that once the PPP relief for small businesses runs out, these companies, which Franklin Square finances, will default on these notes and loans, and it will be the Franklin Square investors that take it on the chin. Investors have the right to purse the brokerage firm that was responsible for soliciting them to invest in these ill-fated BDCs through FINRA Arbitration.

If you invested money in any Franklin Square BDC and believe you have suffered investment losses as a result, please contact our Chicago-based securities law firm, Stoltmann Law Offices, P.C., for a free, no-obligation consultation with a securities attorney. Call 312-332-4200.  We are a contingency fee law firm, which means we do not get paid until you do!

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