FS Specialty Lending Fund announces liquidity plan
summary
On April 22, 2025, the Board of Trustees of FS Specialty Lending Fund (the Fund) approved a plan to prepare for the listing of its common shares on the New York Stock Exchange (NYSE). In advance of the listing, FSSL will be converted from a business development company (BDC) to a closed-end fund registered under the Investment Company Act of 1940 through a reorganization into a newly formed closed-end fund. The closed-end fund (FSSL) will be named “FS Specialty Lending Fund”, and we currently expect its common shares to begin trading on the NYSE under the ticker “FSSL” before the end of Q4 2025.
The investment management team and board will remain the same and there will be no change in the Fund’s investment objectives or strategy as a result of the conversion or listing.*
Although we are working toward a listing within the targeted time frame, the timing may be subject to change based on a variety of factors.
Note: Subject to market conditions, shareholder approval and board approval.
*The investment strategy will remain the same except for certain requirements specific to BDCs under the 1940 Act, which won’t apply once the Fund is converted to a closed-end fund. As part of the conversion to a closed-end fund, Future Standard will acquire EIG Asset Management’s interest in the Adviser, make the Adviser an indirect, wholly-owned subsidiary of Future Standard.
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proposals
Shareholder approval of all three proposals is a prerequisite for the proposed listing.
Proposal 1: Approve the amendment to the Declaration of Trust (DOT) to eliminate Article XII.
- Article XII prohibits the fund from engaging in a “Roll-Up Transaction”.
- These provisions were originally adopted during the Fund’s public offering but will no longer apply once the fund is listed as a closed-end fund.
- This proposal seeks to remove those provisions from the DOT to facilitate the Fund’s conversion to a closed-end fund through the reorganization.
Proposal 2: Approve the amendment of the DOT to clarify the shareholder voting standard in connection with a merger or reorganization of the Fund that has been approved by the Board of Trustees.
- This proposal seeks to clarify the board and shareholder approval requirements for converting the Fund to a registered closed-end fund through the reorganization.
Proposal 3: Approve the Agreement and Plan of Reorganization.
- This proposal provides for the reorganization of the Fund through the merger of the Fund into a newly formed closed-end fund. As part of the reorganization, all outstanding common shares of the Fund will be exchanged for newly issued shares of the closed-end fund.
how to vote
Shareholders can vote in one of three ways:
- Mail back your completed voting card
- Online at proxyvote.com by entering the control number on your voting card
- Call 1-844-202-3147
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client-friendly resources
Liquidity plan overview
ticker
FSSL
Conversion to a registered closed-end fund
- The Fund will be converted from a business development company into a closed-end fund registered under the 1940 Act through a reorganization into a newly formed closed-end fund. The reorganization is subject to shareholder approval.
- FSSL, the closed-end fund, will maintain the same board, investment objectives and strategy as the Fund.*
- The closed-end fund will be named “FS Specialty Lending Fund” and intends to pursue a listing of its shares on the NYSE.
*The investment strategy will remain the same except for certain requirements specific to BDCs under the 1940 Act, which won’t apply once the Fund is converted to a closed-end fund. As part of the conversion to a closed-end fund, Future Standard will acquire EIG Asset Management’s interest in the Adviser, making the Adviser an indirect, wholly-owned subsidiary of Future Standard.
Reverse share split
- The Fund conducted a 6-for-1 reverse split of its common shares. Now shareholders own one share for every six shares held before the split.
- Shareholders received a shareholder confirmation statement shortly after the processing of the reverse share split along with a letter, as applicable.
- The reverse share split was designed to achieve the following objectives:
- Comply with NYSE listing requirements which mandate a minimum stock price of $4.00 per share at the time of listing. As of March 31, 2025, FSSL’s net asset value (NAV) was $3.37 per share. Following the reverse share split, FSSL’s NAV is $20.22 per share.1
- Align FSSL’s share price with the typical trading range of comparable closed-end funds, which have historically traded in the range of approximately $10 to $20 per share.
- Meet the minimum share price requirements for certain intermediaries, broker dealers and custodians.
- Prior to the reverse share split, the Fund consolidated the existing fund types into the main fund, FS Specialty Lending Fund, with a new CUSIP: 30264D 203.
Quarterly repurchase offer
We expect the quarterly tender offer to remain suspended until the listing, at which point all shares will become freely tradable on the NYSE.
Fee changes
Upon a listing, the base management fee will be reduced from 1.75% to 1.50% of gross assets. The Adviser has agreed to waive 0.15% of the fee, resulting in an effective base management fee of 1.35% on gross assets for as long as FSSL remains a registered closed-end fund.2 The advisor currently may earn incentive fees consisting of two components: (i) a capital gains incentive fee and (ii) a subordinated income incentive fee.
- Following the conversion and reorganization into a closed-end fund, the Adviser will no longer be entitled to a capital gains incentive fee.
- Upon listing and continuing for as long as FSSL remains a registered closed-end fund, the Adviser has agreed to waive a portion of the income incentive fee, reducing it from 20% to 10% subject to an annualized hurdle rate of 6.0%.3
Distributions
We expect the Fund to pay enhanced quarterly distributions for Q1 and Q2 2025, paid in April and July, respectively, based on an annualized distribution rate of 12.5% based on the Fund’s then-current NAV. The Fund’s quarterly enhanced distributions were designed to offer attractive returns to shareholders during the transition period to a diversified credit strategy, with the understanding that they were intended to conclude once the Fund achieves a long-term liquidity event, and a portion of the distributions may represent a return of capital.
- If a listing occurs prior to the end of the third quarter of 2025, we expect FSSL to pay a full quarterly enhanced distribution for the third quarter, payable in October. In the fourth quarter, we expect FSSL to target a monthly or quarterly distribution, representing an annualized distribution rate of 9.0% to 9.5% of FSSL’s NAV.4
- If a listing occurs in the fourth quarter of 2025, FSSL will pay a full quarterly enhanced distribution for the third quarter of 2025. In the fourth quarter, we expect FSSL to target a monthly or quarterly distribution, representing an annualized distribution rate of 9.0-9.5% of the Fund’s NAV.3 We believe this rate is competitive with those of closed-end fund peers and offers a meaningful income premium over risk-free rates.
- Beginning in January 2026, we expect FSSL to declare and pay distributions on a monthly basis, subject to a listing occurring in 2025 and board approval.
Following the listing, all cash dividends or distributions declared by the Board will be reinvested on behalf of shareholders who do not elect to receive their distributions in cash. Shareholders who do not elect to “opt out” of FSSL’s distribution reinvestment plan (DRP) will have their shares automatically reinvested in additional shares.
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contact
Advisors and shareholders
877-628-8575