Future Standard BDC’s NAV Dips While Seeking Closed-End Conversion
FS Specialty Lending Fund – a non-traded business development company formerly known as FS Energy and Power Fund – still aims to list on a national securities exchange by the end of the year. Its net asset value declined $0.40 to $19.82 per share as of June 30, 2025. This was an approximate 1.98% decrease from its spring NAV following May’s reverse share split.
The fund – sponsored by Future Standard, formerly known as FS Investments – is currently seeking shareholder approval to convert the BDC into a registered closed-end fund under the Investment Company Act of 1940. This conversion will be structured as a merger, or reorganization, of the current fund into a newly formed entity: New FS Specialty Lending Fund.
Post-reorganization, the successor fund plans to adopt the FS Specialty Lending Fund name and seek listing under the ticker symbol “FSSL,” subject to market conditions and final board approval.
As previously reported by AltsWire, the BDC approved a 6-for-1 reverse share split, which took effect on May 15, 2025. The split was based on the fund’s net asset value of $3.37 per share as of March 31, resulting in a post-split NAV of $20.22 per share. The split was implemented to meet New York Stock Exchange rules which mandate a minimum listing price of $4.00 per share. The split also aligned the fund’s share price with the typical range of closed-end funds.
Upon listing, the BDC said its base management fee will be reduced from 1.75% to 1.5% 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. Upon listing, 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%.
The fund anticipates that its quarterly repurchase offer will remain suspended until the listing, at which point all shares will become freely tradeable on the NYSE.
The fund continued to make progress transitioning its portfolio to diversified credit investments while reducing legacy energy holdings during Q2 2025. Diversified credit investments represented approximately 92.4% of the portfolio’s fair value as of June 30, compared to 88% as of March 31. Regarding recent investment activity, purchases totaled approximately $262 million during Q2 2025, of which 68% were in private credit investments, and 85% were in senior secured debt.
The BDC’s board declared an enhanced quarterly cash distribution of $0.6195 per share for the second quarter, which represented an annualized distribution rate of 12.5% based on the June 30 NAV. The distribution was paid on July 22, 2025.
If a listing occurs in Q4 2025, the fund expects to pay a full quarterly enhanced distribution for the third quarter of 2025. In Q4 2025, it would target a monthly or quarterly distribution representing an annualized distribution rate of approximately 9% to 9.5% of the fund’s NAV.
By January 2026, it expects the listing to have occurred and FSSL to declare and pay distributions on a monthly basis.
The fund generated a NAV-based total return of 1.24% during Q2 2025, compared to 2.32% for the senior secured loan index and 3.57% for the high yield bond index. In Q1 2025, the NAV-based total return was 2.29%, and the high yield bond index was 0.94%.
Energy investments represented just 8% of the portfolio’s fair value as of June 30, down from 12% of the portfolio’s fair value as of Q1 2025 and 95% during Q2 2023, at the time the transition plan was announced.
As of June 30, two investments were on non-accrual, representing just 0.2% of the portfolio’s fair value and approximately 0.9% based on amortized cost, compared to 0.4% and approximately 1.4%, respectively, as of March 31.
When FS Specialty Lending Fund changed its name in May 2023, it also changed its investment focus. Per reporting by AltsWire, the BDC began investing primarily in a portfolio of secured and unsecured floating and fixed rate loans, bonds, and other types of credit instruments. Its aim was to invest 80% of the fund’s total assets this way instead of its prior 80% focus on securities of energy and/or energy and power-related companies.
If the BDC succeeds in listing on the NYSE, it would join other formerly non-traded entities that have gone public in the last few years. SmartStop Self Storage REIT (NYSE:SMA) debuted on the NYSE in April of this year. American Healthcare REIT (NYSE:AHR) and Sila Realty Trust (NYSE:SILA) – two formerly non-traded real estate investment trusts – listed on the NYSE in 2024.
The former recently reported a stock price closing of just over $40 per share, a significant benchmark for its legacy investors who initially bought AHR shares at $10 each. This was the equivalent of $40 per share after the company’s 1-for-4 reverse stock split in November 2021. This proportionally increased the share price but not the total value of an investor’s holdings, meaning that $40 per share was the target price for them to break even.
National Healthcare Properties Inc., formerly known as Healthcare Trust and externally managed by AR Global, has also declared its intention to pursue a listing. Earlier this month, it announced financial results for Q2 2025, reporting an 11.8% increase in same store revenue. The company said it is well-positioned for listing on a national securities exchange in the future.
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