FS/KKR Advisor, LLC (FS/KKR), a partnership between FS Investments and KKR Credit Advisors (US), today announced that FS KKR Capital Corp. (NYSE: FSK) and FS KKR Capital Corp. II (NYSE: FSKR), two publicly traded business development companies advised by FS/KKR, have entered into a definitive merger agreement. The merger of FSK and FSKR would create one of the largest BDCs in the U.S., with $14.9 billion in assets under management, $7.2 billion in net asset value and over $3 billion of committed capital available to new investment opportunities, each on a pro forma basis as of September 30, 2020.

Under the terms of the agreement, shareholders of FSKR will receive a number of FSK shares with a NAV per share equal to the NAV of the FSKR shares they hold, as determined shortly before closing, subject to payment of cash in lieu of fractional shares at the election of FSK. FSK will be the surviving entity and will continue to be managed by FS/KKR and trade on the New York Stock Exchange under the ticker symbol "FSK".

Michael Forman, Chairman and Chief Executive Officer of both FSK and FSKR, commented, "The merger of FSK and FSKR represents a significant step toward our long-term strategic goal of creating a premier middle-market lending franchise and industry leading BDC. The combined company will have a well-diversified investment portfolio and enhanced access to the investment grade debt markets. The combination will also result in reduced overall expenses and a stronger dividend profile."

The board of directors of FS KKR Capital Corp. and FS KKR Capital Corp. II have unanimously approved the merger. The transaction is expected to close during the second or third quarter of 2021, subject to approval by FSK and FSKR shareholders and other customary closing conditions. Prior to the closing of the merger, FS/KKR currently expects FSK and FSKR each to continue to declare quarterly distributions in the normal course of business, subject to board approval.

The combined company's investment strategy will continue to focus predominantly on senior secured debt investments. Based on publicly available information as of September 30, 2020, on a pro forma basis, approximately 72% of the combined company's investment portfolio will be comprised of senior secured debt investments.

The transaction is expected to provide a range of benefits for both FSK and FSKR shareholders, including:

• Increased Size and Scale: The combined company had, on a pro forma basis, $14.9 billion in assets as of September 30, 2020. The combined company's investment portfolio consisted of 216 investments across 23 industries, as of September 30, 2020.
• Enhanced Balance Sheet Size: The combined company's larger balance sheet may lead to improved access to the capital markets over time.
• Cost Synergies: The merger is projected to generate approximately $5 million in near term annual synergies by eliminating duplicative internal and external functions.
• Enhanced Liquidity and Institutional Investor Visibility: The combined company is expected to benefit from increased trading liquidity with respect to its common stock. The combined company also may improve its ability to attract a broader and more diverse investor base.

In connection with the merger, the board of FSK has also approved an amended advisory agreement for the combined company. Upon the closing, the combined company will permanently reduce its income incentive fee to 17.5% from the existing level of 20.0%. The hurdle rate will remain at 7.0%. In conjunction with the permanent fee reduction, the look back provision in the existing FSK advisory agreement will be removed. At the closing of the merger, FS/KKR has agreed to waive $90 million of incentive fees spread evenly over the first six quarters following the closing. This waiver equates to $15 million per quarter.

RBC Capital Markets, LLC served as financial advisor to the independent board members of FSK, and J.P. Morgan served as financial advisor to the independent board members of FSKR. Dechert LLP served as legal advisor to FS/KKR Advisor.

About FS/KKR Advisor, LLC

FS/KKR Advisor, LLC (FS/KKR) is a partnership between FS Investments and KKR Credit that serves as the investment adviser to BDCs with approximately $15 billion in assets under management as of September 30, 2020. The BDCs managed by FS/KKR are FS KKR Capital Corp. (NYSE: FSK) and FS KKR Capital Corp. II (NYSE: FSKR).

FS Investments is a leading asset manager dedicated to helping individuals, financial professionals and institutions design better portfolios. The firm provides access to alternative sources of income and growth, and focuses on setting industry standards for investor protection, education and transparency. FS Investments is headquartered in Philadelphia, PA with offices in New York, NY, Orlando, FL and Leawood, KS. Visit www.fsinvestments.com to learn more.

KKR Credit is a subsidiary of KKR & Co. Inc., a leading global investment firm that manages multiple alternative asset classes, including private equity, credit and real assets, with strategic manager partnerships that manage hedge funds. KKR aims to generate attractive investment returns for its fund investors by following a patient and disciplined investment approach, employing world-class people, and driving growth and value creation with KKR portfolio companies. KKR invests its own capital alongside the capital it manages for fund investors and provides financing solutions and investment opportunities through its capital markets business. References to KKR's investments may include the activities of its sponsored funds. For additional information about KKR & Co. Inc. (NYSE: KKR), please visit KKR's website at www.kkr.com and on Twitter @KKR_Co.