KKR’s BDC, Corporate Capital Trust, is preparing to go public under the ticker CCT on the NYSE. The non-traded BDC will be the second BDC to go public this year after Carlyle Group took its BDC (CGBD) public during the summer of 2017.
Fee change prior to listing
Prior to its listing, KKR will become the sole investment advisor and fees will be reduced to 1.5% of gross assets plus 20% of returns over its 7% hurdle. The incentive fee will be subject to a four-quarter lookback, a protection that Carlyle Group’s BDC shareholders do not have. This protects investors from paying high fees when the BDC experiences high capital losses.
The company is currently paying distributions at an annualized rate of $0.715 per share, and will pay two special dividends of $0.045 per share ($0.09 total) post-listing, based on expectations outlined in a presentation.
Becoming the third-largest public BDC by assets
Corporate Capital Trust grew fast as a non-traded BDC, but will need to go public if it wants to raise more money. With many BDCs trading near their 52 week highs, now may be an ideal time to take the BDC public. We suspect the IPO will be similar to FS Investment Corporation‘s IPO, given the company mentioned that it may buy back stock after listing. FSIC went public without selling new shares; it simply listed shares on the market without selling more stock as part of the offering. Even still, KKR’s Corporate Capital Trust will be the third-largest publicly-traded BDC by assets.
Corporate Capital Trust promised its shareholders that they would get a liquidity event (opportunity to cash in their stock) by December 2018. The expected listing would beat that timeline by a year or more, as the company expects to list in the fourth quarter of 2017.
Based on its current net asset value of $8.92 per share and distributions (excluding special dividends) of $0.715 per share, the company will yield about 8.0%, placing it among the median BDC yield.