Credit two-step

11 December 2017 By Tom Buerkle Follow @tombuerkle

Henry Kravis’s buyout shop is cutting in on Blackstone to create an $18 billion middle-market lender with FS Investments. It’ll be the largest concern of its ilk – but a small fish in the bigger leveraged-loans pond. Success rides on rivals not dipping too far below the surface.

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FS Investment and KKR on Dec. 11 said they are combining several entities to create a private lender to middle-market companies. The venture would bring together Corporate Capital Trust, a business-development company advised by KKR, with four BDCs that FS has co-sponsored since 2008 with Blackstone’s GSO Capital Partners unit.

As part of the deal, FS will pay GSO $640 million, representing approximately three years of revenue from the four BDC funds. The Blackstone unit will use the proceeds to launch a wholly owned direct-lending business.

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