FS Investment increases debt financing availability to $550 million

By Marisa Wong

Madison, Wis., April 26 - FS Investment Corp. II, through wholly owned, special purpose bankruptcy remote subsidiaries Lehigh River LLC and Cobbs Creek LLC, amended its debt financing arrangement with JPMorgan Chase Bank, NA, London Branch to increase the amount of debt financing available to $550 million from $300 million, according to an 8-K filing with the Securities and Exchange Commission.

As a result, the total market value of loans that FS Investment may sell from time to time to Lehigh River was increased to roughly $1.17 billion from around $640 million.

As of April 23, the amendment date, FS Investment has sold loans to Lehigh River for a purchase price of about $205 million, all of which consisted of the issuance of equity interests in Lehigh River.

The company expects that the total amount of loans held by Lehigh River, when the amended financing arrangement is fully ramped, will be about $1.17 billion.

The loans held by Lehigh River will secure the class A floating-rate notes to be issued from time to time by Lehigh River to Cobbs Creek.

Under a supplemental indenture dated April 23 with Citibank, NA as trustee, the total principal amount of class A notes that may be issued by Lehigh River was increased to $660 million from $360 million, and the maturity date was extended to May 20, 2024 from Feb. 20, 2024.

Also in connection with the amended debt financing arrangement, Cobbs Creek amended and restated its repurchase transaction with JPMorgan. JPMorgan has agreed to purchase from time to time class A notes held by Cobbs Creek for an aggregate purchase price of 83.33% of par.

Subject to various conditions, the maximum principal amount of class A notes that may be purchased under the amended facility was increased to $660 million from $360 million. Accordingly, the maximum amount payable at any time to Cobbs Creek was increased to $550 million from $300 million.

The final repurchase transaction under the restated facility must occur no later than May 20, 2017. Beginning on May 20, 2015, Cobbs Creek is permitted to reduce the aggregate principal amount of class A notes.

With the increase in the amount of available debt financing, the total market value of loans that FS Investment may sell from time to time to Cobbs Creek was increased to about $330 million from roughly $180 million.

The loans purchased by Cobbs Creek will secure its obligations under the agreement with JPMorgan.

As of April 23, FS Investment has sold loans to Cobbs Creek for a purchase price of $36 million, all of which consisted of the issuance of equity interests in Cobbs Creek.

Also, $232.8 million of class A notes had been purchased by Cobbs Creek from Lehigh River and subsequently sold to JPMorgan for proceeds of about $194 million.

During the 150-day period following the amendment date, Lehigh River intends to issue and sell to Cobbs Creek an additional $427.2 million principal amount of class A notes, and Cobbs Creek intends to enter into additional repurchase transactions.

FS Investment is a business development company based in Philadelphia.

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