FSSL | FS Specialty Lending Fund

FSSL | FS Specialty Lending Fund

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FS Specialty Lending Fund     FSSL

Closed

Net asset value

$3.64

as of 9/30/2023

Distribution amount

$0.0683

as of 10/18/2023

Past performance is not a guarantee of future results.  On September 29, 2023, FS Energy & Power Fund was renamed FS Specialty Lending Fund as a part of a plan to transition the Fund’s investment strategy from investing primarily in private U.S. energy and power companies to a diversified credit strategy investing in private and public credit in a broader set of industries, sectors and subsectors.


Performance

Shareholder returns1 as of 11/30/2023

YTD 1YR 3YR 5YR 10YR Since incept.
7/18/2011
Cumulative total return
Since incept.*
Cumulative total return
Since incept.
(with sales charge)2
Cumulative cash distributions per share
Since incept.3
FSSL -4.63% -2.67% 7.07% -6.72% 02/28/2024 -0.59% -7.02% -16.32% $5.93
name 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 fundId charge
FSSL 13.61% 10.68% -2.62% -16.60% 26.21% -4.21% -1.80% -2.00% -37.29% 14.37% 11.53% -4.63% FSSL 0

*Compounded monthly

Numbers may be rounded. Returns shown are historical only and are based on past performance. Past performance is not a guarantee of future results. Returns less than one year are cumulative; all others are annualized.

View important disclosures  

  • Shareholder returns (without sales charge) are the total returns an investor received for the highlighted period, taking into account all distributions paid during such period, compounded monthly. Except for shareholder returns (without sales charge) for the 1-, 3- and 5-year periods, the calculation assumes that the investor purchased shares at FSSL’s public offering price, excluding any selling commissions or dealer manager fees, at the beginning of the applicable period and reinvested all distributions pursuant to FSSL’s distribution reinvestment plan (DRP). Since FSSL closed its public offering in November 2016 and has since issued new shares only pursuant to its DRP, the calculation for the 1-, 3- and 5-year periods assume the investor purchased shares at the beginning of the applicable period at a price based on FSSL’s DRP on such date. Shareholder returns (without sales charge) do not include selling commissions and dealer manager fees, which could total up to 10% of the public offering price. Had such selling commissions and dealer manager fees been included, the performance shown would be lower. Following the termination of FSSL’s DRP effective September 15, 2023, the total return for each period presented subsequent to the effective date is calculated based on the change in net asset value during the applicable period, assuming the reinvestment of all distributions at the Company’s net asset value per share as of the period end date. Valuation as of the end of each period shown above is based on the net asset value per share as of quarter-end.

    FSSL is now closed to new investors. FSSL’s annualized total expenses as a percentage of average net assets attributable to common shares was 4.60% for the nine months ended September 30, 2023.
  • Shareholder return (with sales charge) is the total return an investor received since inception, taking into account all distributions paid during such period, compounded monthly. The calculation assumes that the investor purchased shares at FSSL’s public offering price (which includes the maximum selling commissions and dealer manager fees) at inception and reinvested all distributions pursuant to FSSL’s DRP. Following the termination of FSSL’s DRP effective September 15, 2023, the total return for each period presented subsequent to the effective date is calculated based on the change in net asset value during the applicable period, assuming the reinvestment of all distributions at the Company’s net asset value per share as of the period end date. Valuation as of the end of each period shown above is based on the net asset value per share as of the period end date. Upon liquidation or redemption, market conditions may cause the actual values to be more or less than the values shown. FSSL’s public offering price was subject to a sales charge of up to 10% and offering expenses of up to 1.5% of the gross proceeds received in the Fund’s offering.
  • Total cash distributions paid per share ($) are calculated as the total regular cash distributions paid since inception on a per share basis as of September 30, 2023. The payment of future distributions on FSSL’s common shares is subject to the sole discretion of FSSL’s board of trustees and applicable legal restrictions and, therefore, there can be no assurance as to the amount or timing of any such future distributions.

Recent distributions history

Payable date Record date Distribution ($/Share) Distribution type1,2
January 26, 2024 January 24, 2024 $0.00343 Enhanced distribution
January 3, 2024 December 22, 2023 $0.06093 Enhanced distribution
October 20, 2023 October 18, 2023 $0.0683 Enhanced distribution
July 13, 2023 June 30, 2023 $0.03 Special distribution
April 12, 2023 March 31, 2023 $0.03 Special distribution
January 13, 2023 December 31, 2022 $0.03 Special distribution
October 14, 2022 September 30, 2022 $0.03 Special distribution
July 13, 2022 June 30, 2022 $0.03 Special distribution
April 14, 2022 March 31, 2022 $0.03 Special distribution
January 14, 2022 December 31, 2021 $0.03 Special distribution
October 13, 2021 September 30, 2021 $0.03 Special distribution
July 16, 2021 June 30, 2021 $0.03 Special distribution
April 14, 2021 March 10, 2021 $0.03 Special distribution
January 12, 2021 December 23, 2020 $0.03 Special distribution
October 12, 2020 September 29, 2020 $0.03 Special distribution
July 10, 2020 June 29, 2020 $0.03 Special distribution

View important disclosures

  • Special distributions: FSSL announced the suspension of regular monthly distributions following the payment of the March 31, 2020 distribution. Between Q2 2020 and Q2 2023, FSSL’s board of trustees and FSSL’s Advisor evaluated FSSL’s ability to pay special distributions on a quarterly basis based on market conditions and FSSL’s financial condition.
  • Enhanced distributions: In Q2 2023, FSSL announced that it expects to provide enhanced quarterly distributions to shareholders commencing in Q3 2023 until the achievement of a long-term liquidity event at an annualized distribution rate of approximately 7.5% based on FSSL’s estimated net asset value at the time of declaration and increasing in subsequent years, subject to a maximum annualized rate of 15% of FSSL’s then-current net asset value beyond 2026 until the achievement of a long-term liquidity event. FSSL expects a portion of the enhanced distributions will represent a return of investor capital. There can be no assurance that FSSL will be able to make these distributions.
  • The Q4 2023 distribution was split into two payments with approximately 90% of the total quarterly distribution paid on January 4, 2024. The remaining amount (representing approximately 10% of the total quarterly distribution) was paid January 26, 2024. As a reminder, the aggregate quarterly distribution is intended to represent an annualized distribution rate of approximately 7.5% based on the estimated net asset value as of December 31, 2023. The rationale for splitting the quarterly distribution into two payments is driven by both tax considerations and the timing of the year end valuation process.

The payment of any type of future distributions on FSSL’s common shares is subject to the discretion of FSSL’s board of trustees and applicable legal restrictions and, therefore, there can be no assurance as to the amount or timing of any such future distribution.


Key facts

Objective

Generate current income and, to a lesser extent, long-term capital appreciation

Adviser

FS/EIG Advisor, LLC

Share class inception date

7/18/2011

Closed to new investors

11/18/2016

Distributions1

Quarterly

Liquidity2

Quarterly tender offers

Tax reporting

Form 1099-DIV

CUSIP

30264D109

View important disclosures

  • The payment of future distributions on FSSL’s common shares is subject to the discretion of FSSL’s board of trustees and applicable legal restrictions and, therefore, there can be no assurance as to the amount or timing of any such future distributions.
  • FSSL intends to repurchase a limited number of common shares pursuant to its share repurchase program. FSSL may amend, suspend or terminate its share repurchase program at any time. See FSSL’s prospectus for more information. As of March 17, 2020, FS/EIG and FSSL’s board of trustees has suspended the share repurchase program and will assess the ability to recommence the quarterly tender in the future based on market conditions and the fund’s operations.

Risk factors and definitions

The following are some of the risks an investment in our common shares involves; however, you should carefully consider all of the information found in FSSL’s annual report on Form 10-K and other reports filed with the SEC.

  • Because there is no public trading market for our common shares and we are not obligated to effectuate a liquidity event by a specified date, it will be difficult for you to sell your common shares. If you are able to sell your common shares before we complete a liquidity event, it is likely that you will receive less than what you paid for them. Our share repurchase program contains numerous restrictions. In addition, we have currently suspended our share repurchase program. If we conduct quarterly tender offers for our common shares in the future, only a limited number of our common shares will be eligible for repurchase. We may suspend or terminate the share repurchase program at any time.
  • Our distributions may be funded from unlimited amounts of offering proceeds or borrowings, which may constitute a return of capital and reduce the amount of capital available to us for investment. Any capital returned to shareholders through distributions will be distributed after payment of fees and expenses.
  • We invest in securities that are rated below investment grade by rating agencies or that would be rated below investment grade if they were rated. Below investment grade securities, which are often referred to as “junk,” have predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal. They may also be difficult to value and illiquid.
  • Our previous investment policy was to invest, under normal circumstances, at least 80% of our total assets in securities of energy and power companies. The revenues, income (or losses) and valuations of energy and power companies can fluctuate suddenly and dramatically due to a number of environmental, regulatory, political and general market risks, which have historically impacted our financial performance, including our net asset value per share, and may continue to in the future.
  • Our transition to a new investment policy will increase portfolio turnover, which will increase commission and transaction costs.
  • We are subject to financial market risks, including changes in interest rates, which may have a substantial negative impact on our investments.
  • An investment strategy focused primarily on privately held companies presents certain challenges, including the lack of available information about these companies.
  • Investing in middle market companies involves a number of significant risks, any one of which could have a material adverse effect on our operating results.
  • A lack of liquidity in certain of our investments may adversely affect our business. We may be unable to sell our investments at favorable prices or at all.
  • We are subject to financial market risks, including changes in interest rates, which may have a substantial negative impact on our investments.
  • We may borrow funds to make investments, which increases the volatility of our investments and may increase the risks of investing in our securities.
  • Our business model is dependent on bank relationships and recent strain on the banking system may adversely impact us.
  • FSSL is a long-term investment for persons of adequate financial means who have no need for liquidity in their investment. To invest in FSSL, an investor must have either (i) a net worth of at least $70,000 and an annual gross income of at least $70,000, or (ii) a net worth of at least $250,000. Some states, such as Kansas, impose higher suitability standards.
  • Portions of our distributions to shareholders were funded from the reimbursement of certain expenses, including through the offset of certain investment advisory fees, that are subject to repayment to our affiliate, FS Investments, and our future distributions may be funded from such offsets and reimbursements. Significant portions of these distributions may not be based on our investment performance, and such offsets and reimbursements by FS Investments may not continue in the future. If FS Investments had not agreed to reimburse certain of our expenses, including through the offset of certain advisory fees, significant portions of these distributions would have come from offering proceeds or borrowings. The repayment of amounts owed to FS Investments will reduce the future distributions to which you would otherwise be entitled.
  • The global outbreak of COVID-19 (commonly known as the coronavirus) has caused volatility, severe market dislocations and liquidity constraints in many markets, including securities we hold, and has adversely affected our investments and operations. Such impacts may continue to adversely affect us, the performance of our investments and an investment in us.
  • We expect that the recent market conditions may have a lasting and, in some instances, permanent impact on some of our portfolio companies as they struggle to meet covenant obligations and face insolvency in future periods. Poor performance or insolvency of our portfolio companies could have a material adverse impact on our financial condition and results of operations.

Cautionary Note Regarding Forward-Looking Statements

Statements included herein may constitute “forward-looking” statements as that term is defined in Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995, including statements with regard to future events or the future performance or operations of the Fund, the transition in investment policy, anticipated distribution rates, portfolio rotation, borrowings and liquidity events. Words such as “intends,” “will,” “expects,” and “may” or similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors could cause actual results to differ materially from those projected in these forward-looking statements. Factors that could cause actual results to differ materially include changes in the economy, geo-political risks, risks associated with possible disruption to the Fund’s operations or the economy generally due to hostilities, terrorism, natural disasters or pandemics such as COVID-19, future changes in laws or regulations and conditions in the Fund’s operating area, unexpected costs, disruptions in the oil and gas industry, the failure from time to time of oil-producing countries to reach agreements around crude oil production, the ability of the Fund to (i) transition to a diversified credit strategy within anticipated timeframes or at all, (ii) pay the targeted distributions, (iii) obtain the applied-for exemptive relief, (iv) obtain leverage on terms satisfactory to the Fund and (v) achieve a liquidity event, and such other factors that are disclosed in the Fund’s filings with the SEC. The inclusion of forward-looking statements should not be regarded as a representation that any plans, estimates or expectations will be achieved. Any forward-looking statements speak only as of the date of this communication. Except as required by federal securities laws, the Fund undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Readers are cautioned not to place undue reliance on any of these forward-looking statements.

CORPORATE GOVERNANCE

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