10-K/A: FS Specialty Lending Fund Files Amendment No. 1 to 2024 Annual Report

FS Specialty Lending Fund files an amendment to its 2024 annual report to include Part III information and updated certifications.

Summary

• FS Specialty Lending Fund filed Amendment No. 1 to its Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
• The amendment includes Part III information, which was previously incorporated by reference.
• The filing also updates Part IV, Item 15 to include new certifications from the CEO and CFO.
• The cover page of the report has also been updated.
• The amendment does not affect the company's financial statements or notes to the financial statements.
• As of March 31, 2025, there were 455,506,155 shares of the Registrant's common shares of beneficial interest outstanding.
• The price at which the registrant last issued shares pursuant to the distribution reinvestment plan prior to the plan's termination was $3.75 per share.
• The company's base management fee is calculated at an annual rate of 1.75% of the average weekly value of the company's gross assets.
• The incentive fee consists of a capital gains incentive fee and a subordinated income incentive fee.
• The incentive fee on capital gains is 20.0% of the company's incentive fee capital gains.
• The subordinated incentive fee on income is 20.0% of the company's pre-incentive fee net investment income for the immediately preceding quarter subject to a hurdle rate of 1.625% per quarter, or an annualized hurdle rate of 6.5%.

Sentiment

Score: 7

Explanation: The document is a routine regulatory filing. The sentiment is neutral as it primarily contains factual information and certifications. The potential for increased investment flexibility through the new exemptive order is a slightly positive element.

Future Outlook

The SEC may grant a new exemptive order that would supersede the November 13, 2024 order, potentially simplifying certain conditions and providing more flexibility for co-investments with affiliates.

Management Comments

• Michael C. Forman, Chief Executive Officer, certified that the report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.
• Edward T. Gallivan, Jr., Chief Financial Officer, certified that the report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.

Industry Context

As a BDC, FS Specialty Lending Fund operates under specific regulatory restrictions, particularly regarding co-investments with affiliated entities. The exemptive relief sought from the SEC is a common practice for BDCs to enhance investment flexibility.

Comparison to Industry Standards

• The base management fee of 1.75% is within the typical range for externally managed BDCs.
• The incentive fee structure, with both capital gains and income components, is also standard in the BDC industry.
• Comparable BDCs include Ares Capital Corporation (ARCC) and Main Street Capital Corporation (MAIN), which also have similar fee structures and investment strategies.

Related Party Transactions

• The company has procedures in place for the review, approval and monitoring of transactions involving the company and certain persons related to the company.
• The Audit Committee is required to review and approve all transactions with related persons (as defined in Item 404 of Regulation S-K promulgated under the Exchange Act).
• FS/EIG Advisor is entitled to an annual base management fee based on the average weekly value of the Company's gross assets and an incentive fee based on the Company's performance.
• The Company reimburses FS/EIG Advisor for expenses necessary to perform services related to the Company's administration and operations.

Stakeholder Impact

• Shareholders are impacted by the fees paid to the investment advisor, which affect the company's net investment income.
• The potential for increased investment flexibility through the new exemptive order could benefit shareholders by potentially improving investment returns.
• The company's performance and financial stability affect its ability to provide returns to shareholders.

Next Steps

• The SEC will decide whether to grant the new exemptive order regarding co-investments with affiliates.
• The company will continue to operate under the existing Investment Advisory and Administrative Services Agreement.

Key Dates

Keywords

FS Specialty Lending Fund, Annual Report, Form 10-K/A, Amendment, Financial Statements, Corporate Governance, Executive Compensation, Beneficial Ownership, Related Party Transactions, Audit Fees, Investment Advisory Agreement, Base Management Fee, Incentive Fee, Capital Gains, Subordinated Income, Trustees, Executive Officers, Certifications