New York, December 11, 2017 – GSO Capital Partners LP (together with its credit-focused affiliates “GSO”), Blackstone’s (NYSE: BX) credit platform, today announced that it will launch a new, fully integrated, internal direct lending business – combining the firm’s superior origination and investment capabilities in this area with its industry-leading institutional and retail distribution channels.
Bennett Goodman, Co-Founder of GSO Capital Partners and Senior Managing Director of Blackstone, said: “Given the evolution of our firm, moving ahead independently to control our own destiny in this area was the right decision for our business. Bringing together our direct lending investment expertise with our strong institutional and growing retail distribution capabilities represents an extremely powerful combination. Our shareholders will also now receive a much larger share of the value we create through managing these types of portfolios.”
Concurrently, GSO will be concluding its investment sub-advisory relationship with FS Investments’ funds (the “FS Funds”) effective April 9, 2018. During the interim, GSO will continue to provide investment services to the FS Funds and help ensure a smooth transition. In consideration of such services and GSO’s partnership with FS Investments in the FS Funds' business over the last decade, GSO will receive payments totaling $640 million from FS Investments, substantially all of which are expected to be paid in 2018. Blackstone anticipates utilizing those cash proceeds for the benefit of its shareholders and will provide additional details on those actions early next year.
The $640 million in cash proceeds represent approximately three years of revenues from the FS Funds. In addition, GSO expects to begin its new direct lending business and generate additional revenue in 2018. GSO anticipates that its internal direct lending business will fully replace, and ultimately exceed, the current revenues and earnings to Blackstone shareholders from the FS Funds.
Goodman added: “We thank FS Investments for their partnership over the years and wish them the best going forward. We are proud of the investment performance and portfolio construction of the funds and are committed to working with FS to make sure there is a smooth transition.”
From the formation of the GSO and FS Investments partnership in 2008, the direct lending FS Funds have generated strong performance, exceeding substantially all of the relevant market benchmarks. For the FS Investment Corporation (FSIC) fund, the oldest fund in the complex, annualized net returns have been 12.4 percent since inception.
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