Fifth Street Finance Corp. (NASDAQ:FSC) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01. Entry into a Material Definitive Agreement.
At a special meeting of stockholders (the Special Meeting) held
on March 20, 2017, the stockholders of Fifth Street Finance Corp.
(the Company) approved a fourth amended and restated investment
advisory agreement (the Fourth Amended and Restated Investment
Advisory Agreement) by and between the Company and Fifth Street
Management LLC, a subsidiary of Fifth Street Asset Management
Inc. (Fifth Street Management), as investment adviser. The
Company and Fifth Street Management subsequently signed the
Fourth Amended and Restated Investment Advisory Agreement. The
Fourth Amended and Restated Investment Advisory Agreement, which
is effective beginning with the Companys fiscal quarter that
commenced on January 1, 2017, changes the structure of the
subordinated incentive fee on income as described below. The
other commercial terms of the Companys existing investment
advisory relationship with Fifth Street Management, including
payment of a base management fee on total gross assets (excluding
cash and cash equivalents) of 1.75%, remain unchanged.
Under the Fourth Amended and Restated Investment Advisory
Agreement, effective beginning with the Companys fiscal quarter
that commenced on January 1, 2017, calculation of the
subordinated incentive fee on income for each quarter is as
follows:
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No subordinated incentive fee on income is payable to Fifth Street Management in any fiscal quarter in which the Companys pre-incentive fee net investment income does not exceed the preferred return rate of 1.75% (the Preferred Return) on net assets; |
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100% of the Companys pre-incentive fee net investment income, if any, that exceeds the Preferred Return but is less than or equal to 2.1875% in any fiscal quarter is payable to Fifth Street Management. This portion of the Companys subordinated incentive fee on income is referred to as the catch up and is intended to provide Fifth Street Management with an incentive fee of 20% on all of the Companys pre-incentive fee net investment income when the Companys pre-incentive fee net investment income reaches 2.1875% on net assets in any fiscal quarter; and |
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For any quarter in which the Companys pre-incentive fee net investment income exceeds 2.1875% on net assets, the subordinated incentive fee on income is equal to 20% of the amount of the Companys pre-incentive fee net investment income, as the Preferred Return and catch-up will have been achieved. |
In the event the cumulative subordinated incentive fee on income
accrued for the Lookback Period (after giving effect to any
reduction(s) to this paragraph for any prior fiscal quarters of
the Lookback Period but not the quarter of calculation) exceeds
20.0% of the cumulative net increase in net assets resulting from
operations during the Lookback Period, then the subordinated
incentive fee on income for the quarter shall be reduced by an
amount equal to (1) 25% of the subordinated incentive fee on
income calculated for such quarter (prior to giving effect to any
reduction to this paragraph) less (2) any base management fees
waived by Fifth Street Management for such fiscal quarter. For
this purpose, the cumulative net increase in net assets resulting
from operations is an amount, if positive, equal to the sum of
pre-incentive fee net investment income, base management fees,
realized gains and losses and unrealized capital appreciation and
depreciation of the Company for the Lookback Period. Lookback
Period means (1) through December 31, 2019, the period which
commences on January 1, 2017 and ends on the last day of the
fiscal quarter for which the subordinated incentive fee on income
is being calculated, and (2) after December 31, 2019, the fiscal
quarter for which the subordinated incentive fee on income is
being calculated and the eleven preceding fiscal quarters.
The foregoing description of the Fourth Amended and Restated
Investment Advisory Agreement does not purport to be complete and
is qualified in its entirety by reference to the Investment
Advisory Agreement, attached hereto as Exhibit 10.1 and
incorporated by reference herein. In addition, on March 21, 2017,
the Company issued a press release announcing the stockholder
approval of the Fourth Amended and Restated Investment Advisory
Agreement. A copy of the press release is attached hereto as
Exhibit 99.1.
Item 5.07. Submission of Matters to a Vote of Security
Holder.
On March 20, 2017, the Company held the Special Meeting. Set
forth below is the proposal voted upon by the Companys
stockholders at the Special Meeting, as set forth in the Companys
Definitive Proxy Statement filed on February 21, 2017, together
with the voting results for such proposal. As of February 10,
2017, the record date for the Special Meeting, 140,960,651 shares
of the Companys common stock were outstanding and entitled to
vote.
Proposal. The Companys stockholders approved the
Fourth Amended and Restated Investment Advisory Agreement, to
which Fifth Street Management will continue to serve as the
Companys investment adviser, as set forth below:
| Votes For | Votes Against | Abstain |
| 65,855,129 | 7,124,505 | 1,321,706 |
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
| 10.1 |
Fourth Amended and Restated Investment Advisory Agreement by and between Fifth Street Management LLC and Fifth Street Finance Corp., effective as of January 1, 2017 |
| 99.1 | Press release dated March 21, 2017 |
About Fifth Street Finance Corp. (NASDAQ:FSC)
Fifth Street Finance Corp. is a specialty finance company. The Company is a closed-end, non-diversified management investment company. The Company acts as a business development company (BDC). The Company’s investment objective is to maximize its portfolio’s total return by generating current income from its debt investments, and capital appreciation from its equity investments. The Company lends to and invests in small and mid-sized companies, primarily in connection with investments by private equity sponsors. The Company seeks to invest in companies in connection with private equity sponsors. The Company invests in sectors, such as healthcare services; Internet software and services; multi-sector holdings; advertising; airlines, and construction and engineering. Fifth Street Management LLC is the Company’s investment advisor. Fifth Street Finance Corp. (NASDAQ:FSC) Recent Trading Information
Fifth Street Finance Corp. (NASDAQ:FSC) closed its last trading session 00.00 at 4.67 with 1,153,874 shares trading hands.
