FS Energy and Power Fund (“FSEP” or the “Company”) has terminated the company’s quarterly tender offer and suspended the share repurchase program, citing difficult market conditions and events relating to crude oil production. The decision leaves shareholders who may wish to sell their shares with limited options for liquidity..
FSEP suspended regular cash distributions to shareholders after March 31, 2020. As a result of this tender offer termination, no shares will be purchased and all shares previously tendered will be returned to shareholders. The board also decided to suspend the share repurchase program for an indefinite period of time and will reassess the company’s ability to recommence the program in the future.
FSEP launched in July 2011 to invest primarily in privately-held U.S. companies in the energy and power industry and closed its public offering in November 2016. Upon information and belief, as a publicly registered, non-traded BDC, FSEP was marketed and recommended to numerous retail investors nationwide
BDCs have been around since the early 1980’s, when Congress first enacted legislation amending federal securities laws allowing for BDCs — which are simply types of closed-end funds — to make investments in developing companies and firms that would otherwise have difficulty accessing financing. Because they provide financing solutions for smaller, private companies, BDCs have been likened to private equity investment vehicles for retail investors in various marketing pitches by BDC sponsors and the financial advisors who recommend these financial products.
BDCs characteristically offer high yields to investors, both as a function of their collecting much higher than average interest income on loans to more thinly capitalized businesses, as well as their use of internal leverage. In light of a BDC’s leveraged structure and its typical investment portfolio, however, uninformed investors may come to learn too late that their investment carries considerable risk. Moreover, non-traded BDCs such as FSEP carry additional risks, including their lack of liquidity and high upfront fees and commissions.
For investors seeking immediate liquidity on their non-traded FSEP shares, there does exist a limited and fragmented secondary market. Unfortunately, however, recent pricing suggests that FSEP investors wishing to sell on a thinly traded secondary market may only do so at disadvantageous pricing of approximately $4.35 to $4.55 a share.
The attorneys at Law Office of Christopher J. Gray, P.C. have significant experience representing investors in connection with complex non-conventional investments, including non-traded BDCs and REITs. Investors may contact us via the contact form on this website, by telephone at (866) 966-9598, or by e-mail at email@example.com for a no-cost, confidential consultation. Attorneys at the firm are admitted in New York, New Jersey, Wisconsin and various federal courts around the country, and handle cases nationwide (in cooperation with attorneys located in those states if required by applicable rules).