UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21539
(Exact name of registrant as specified in charter)
120 East Liberty Drive
Wheaton, IL 60187
(Address of principal executive offices) (Zip code)
W. Scott Jardine, Esq.
First Trust Portfolios L.P.
120 East Liberty Drive
Wheaton, IL 60187
(Name and address of agent for service)
Registrant's telephone number, including area code: 630-765-8000
Date of fiscal year end: May 31
Date of reporting period: November 30, 2022
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
(a) The Report to Shareholders is attached herewith.
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Performance | |||||
Average Annual Total Returns | |||||
6
Months Ended 11/30/22 |
1
Year Ended 11/30/22 |
5
Years Ended 11/30/22 |
10
Years Ended 11/30/22 |
Inception (5/25/04) to 11/30/22 | |
Fund Performance(3) | |||||
NAV | 1.78% | -2.61% | 3.13% | 4.24% | 4.01% |
Market Value | -2.61% | -8.47% | 3.25% | 3.19% | 3.30% |
Index Performance | |||||
Morningstar®
LSTA® US Leveraged Loan Index(4) |
1.44% | -0.41% | 3.30% | 3.70% | 4.39% |
(1) | Most recent distribution paid or declared through November 30, 2022. Subject to change in the future. |
(2) | Distribution rates are calculated by annualizing the most recent distribution paid or declared through the report date and then dividing by Common Share Price or NAV, as applicable, as of November 30, 2022. Subject to change in the future. |
(3) | Total return is based on the combination of reinvested dividend, capital gain and return of capital distributions, if any, at prices obtained by the Dividend Reinvestment Plan and changes in NAV per share for NAV returns and changes in Common Share Price for market value returns. From inception to October 12, 2010, Four Corners Capital Management, LLC served as the Fund’s sub-advisor. Effective October 12, 2010, the Leveraged Finance Team of First Trust Advisors L.Pon to October 12, 2010, Four Corners Capital Management, LLC served as the Fund’s sub-advisor. Effective October 12, 201. assumed the day-to-day responsibility for management of the Fund’s portfolio. Total returns do not reflect sales load and are not annualized for periods of less than one year. Past performance is not indicative of future results. |
(4) | Formerly, S&P/LSTA Leveraged Loan Index. |
(5) | The ratings are by S&P Global Ratings except where otherwise indicated. A credit rating is an assessment provided by a nationally recognized statistical rating organization (NRSRO) of the creditworthiness of an issuer with respect to debt obligations except for those debt obligations that are only privately rated. Ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest). Investment grade is defined as those issuers that have a long-term credit rating of BBB- or higher. The credit ratings shown relate to the creditworthiness of the issuers of the underlying securities in the Fund, and not to the Fund or its shares. Credit ratings are subject to change. |
(6) | Percentages are based on long-term positions. Money market funds are excluded. |
Industry Classification | %
of Total Long-Term Investments(6) |
Software | 22.1% |
Insurance | 12.5 |
Media | 10.7 |
Health Care Technology | 10.5 |
Hotels, Restaurants & Leisure | 8.9 |
Health Care Providers & Services | 7.6 |
Commercial Services & Supplies | 3.0 |
Containers & Packaging | 2.9 |
Wireless Telecommunication Services | 2.1 |
Electric Utilities | 2.1 |
Diversified Telecommunication Services | 2.1 |
Pharmaceuticals | 1.9 |
Capital Markets | 1.9 |
Food Products | 1.9 |
Professional Services | 1.6 |
Health Care Equipment & Supplies | 1.5 |
Aerospace & Defense | 1.2 |
Specialty Retail | 1.1 |
Diversified Consumer Services | 1.0 |
Diversified Financial Services | 0.7 |
Trading Companies & Distributors | 0.7 |
Electronic Equipment, Instruments & Components | 0.6 |
Machinery | 0.3 |
Auto Components | 0.3 |
Communications Equipment | 0.2 |
Food & Staples Retailing | 0.2 |
Household Durables | 0.2 |
Building Products | 0.1 |
IT Services | 0.1 |
Oil, Gas & Consumable Fuels | 0.0* |
Entertainment | 0.0* |
Life Sciences Tools & Services | 0.0* |
Total | 100.0% |
* | Amount is less than 0.1%. |
Average Annual Total Returns | |||||
6
Months Ended 11/30/22 |
1
Year Ended 11/30/22 |
5
Years Ended 11/30/22 |
10
Years Ended 11/30/22 |
Inception (5/25/04) to 11/30/22 | |
Fund Performance(1) | |||||
NAV | 1.78% | -2.61% | 3.13% | 4.24% | 4.01% |
Market Value | -2.61% | -8.47% | 3.25% | 3.19% | 3.30% |
Index Performance | |||||
Morningstar® LSTA® US Leveraged Loan Index* | 1.44% | -0.41% | 3.30% | 3.70% | 4.39% |
(1) | Total return is based on the combination of reinvested divided, capital gain, and return of capital distribution, if any, at prices obtained by the Dividend Reinvestment Plan and changes in NAV per Common Share for NAV returns and changes in Common Share price for market value returns. Total returns do not reflect sales load and are not annualized for period of less than one year. |
* | Formerly, S&P/LSTA Leveraged Loan Index. |
Principal Value |
Description | Rate (a) | Stated Maturity (b) |
Value | ||||
SENIOR FLOATING-RATE LOAN INTERESTS (c) – 109.3% | ||||||||
Aerospace & Defense – 1.4% | ||||||||
$4,082,724 |
Transdigm, Inc., Tranche G Refinancing TL, 3 Mo. LIBOR + 2.25%, 0.00% Floor |
5.92% | 08/22/24 | $4,062,678 | ||||
Application Software – 20.5% | ||||||||
7,114,966 |
Applied Systems, Inc., 1st Lien Term Loan, 3 Mo. LIBOR + 3.00%, 0.50% Floor |
6.67% | 09/19/24 | 7,086,648 | ||||
1,462,693 |
Applied Systems, Inc., 2nd Lien Term Loan, 3 Mo. LIBOR + 5.50%, 0.75% Floor |
9.17% | 09/19/25 | 1,448,066 | ||||
1,527,408 |
ConnectWise, LLC, Term Loan B, 3 Mo. LIBOR + 3.50%, 0.50% Floor |
7.17% | 09/30/28 | 1,464,020 | ||||
5,118,134 |
Epicor Software Corp., First Lien Term Loan C, 1 Mo. LIBOR + 3.25%, 0.75% Floor |
7.32% | 07/30/27 | 4,936,850 | ||||
82,458 |
Flexera Software, LLC, 2020 Term Loan B, 1 Mo. LIBOR + 3.75%, 0.75% Floor |
7.83% | 01/26/28 | 79,297 | ||||
4,385,854 |
Gainwell Acquisition Corp. (fka Milano), Term Loan B, 3 Mo. LIBOR + 4.00%, 0.75% Floor |
7.67% | 10/01/27 | 4,271,822 | ||||
3,343,529 |
Greeneden U.S. Holdings II, LLC (Genesys Telecommunications Laboratories, Inc.), Initial Dollar Term Loan, 1
Mo. LIBOR + 4.00%, 0.75% Floor |
8.07% | 12/01/27 | 3,241,150 | ||||
611,678 |
Hyland Software, Inc., 2nd Lien Term Loan, 1 Mo. LIBOR + 6.25%, 0.75% Floor |
10.32% | 07/10/25 | 576,892 | ||||
2,005,649 |
Hyland Software, Inc., Term Loan B, 1 Mo. LIBOR + 3.50%, 0.75% Floor |
7.57% | 07/01/24 | 1,974,320 | ||||
4,496,967 |
Internet Brands, Inc. (Web MD/MH Sub I., LLC), 2020 June New Term Loan, 1 Mo. LIBOR + 3.75%, 1.00% Floor |
7.82% | 09/15/24 | 4,370,513 | ||||
1,265,863 |
Internet Brands, Inc. (Web MD/MH Sub I., LLC), 2nd Lien Term Loan, 3 Mo. SOFR + 6.25%, 0.00% Floor |
10.65% | 02/23/29 | 1,134,530 | ||||
8,465,748 |
Internet Brands, Inc. (Web MD/MH Sub I., LLC), Initial Term Loan, 1 Mo. LIBOR + 3.75%, 0.00% Floor |
7.82% | 09/13/24 | 8,229,385 | ||||
279,886 |
ION Trading Technologies Limited, Term Loan B, 3 Mo. LIBOR + 4.75%, 0.00% Floor |
8.42% | 04/01/28 | 267,291 | ||||
4,805,130 |
LogMeIn, Inc. (GoTo Group, Inc.), Term Loan B, 1 Mo. LIBOR + 4.75%, 0.00% Floor |
8.77% | 08/31/27 | 3,073,265 | ||||
2,177,572 |
McAfee Corp. (Condor Merger Sub, Inc.), Term Loan B, 1 Mo. SOFR + 3.75%, 0.50% Floor |
7.64% | 02/28/29 | 2,064,621 | ||||
361,174 |
N-Able, Inc., Term Loan B, 3 Mo. LIBOR + 3.00%, 0.50% Floor |
7.73% | 07/19/28 | 349,887 | ||||
2,092,956 |
Open Text Corporation (GXS), New Term Loan, 1 Mo. SOFR + 3.50%, 0.50% Floor |
7.39% | 12/31/29 | 2,031,046 | ||||
2,209,510 |
Open Text Corporation (GXS), Term Loan, 1 Mo. LIBOR + 1.75%, 0.00% Floor |
5.82% | 05/30/25 | 2,163,663 | ||||
912,941 |
RealPage, Inc., Second Lien Term Loan, 1 Mo. LIBOR + 6.50%, 0.75% Floor |
10.57% | 04/22/29 | 873,575 | ||||
5,731,488 |
RealPage, Inc., Term Loan B, 1 Mo. LIBOR + 3.00%, 0.50% Floor |
7.07% | 04/24/28 | 5,477,182 | ||||
3,073,447 |
SolarWinds Holdings, Inc., Initial Term Loan. 1 Mo. SOFR+ 4.00%, 0.00% Floor |
7.95% | 02/17/27 | 3,017,757 | ||||
488,794 |
Solera Holdings, Inc. (Polaris Newco), Term Loan B, 3 Mo. LIBOR + 4.00%, 0.50% Floor |
7.67% | 06/04/28 | 445,565 | ||||
232,552 |
Ultimate Kronos Group (UKG, Inc.), 2021 Term Loan, 3 Mo. LIBOR + 3.25%, 0.50% Floor |
7.00% | 05/03/26 | 224,315 | ||||
58,801,660 | ||||||||
Asset Management & Custody Banks – 2.3% | ||||||||
3,789,412 |
Edelman Financial Engines Center, LLC, Term Loan B, 1 Mo. LIBOR + 3.50%, 0.75% Floor |
7.57% | 04/07/28 | 3,611,120 |
Principal Value |
Description | Rate (a) | Stated Maturity (b) |
Value | ||||
SENIOR FLOATING-RATE LOAN INTERESTS (c) (Continued) | ||||||||
Asset Management & Custody Banks (Continued) | ||||||||
$3,248,900 |
Edelman Financial Engines Center, LLC, Term Loan Second Lien, 1 Mo. LIBOR + 6.75%, 0.00% Floor |
10.82% | 07/20/26 | $2,921,996 | ||||
6,533,116 | ||||||||
Auto Parts & Equipment – 0.3% | ||||||||
547,253 |
Clarios Global LP (Power Solutions), Term Loan B, 1 Mo. LIBOR + 3.25%, 0.00% Floor |
7.32% | 04/30/26 | 537,791 | ||||
519,374 |
Truck Hero, Inc., Term Loan B, 1 Mo. LIBOR + 3.75%, 0.75% Floor |
7.82% | 01/31/28 | 437,832 | ||||
975,623 | ||||||||
Broadcasting – 4.5% | ||||||||
329,625 |
E.W. Scripps Company, Tranche B-3 Term Loan, 1 Mo. LIBOR + 2.75%, 0.75% Floor |
6.82% | 01/07/28 | 319,855 | ||||
1,519,988 |
Gray Television, Inc., Term Loan B2, 1 Mo. LIBOR + 2.50%, 0.00% Floor |
6.27% | 02/07/24 | 1,516,188 | ||||
1,719,808 |
Gray Television, Inc., Term Loan C, 1 Mo. LIBOR + 2.50%, 0.00% Floor |
6.27% | 01/02/26 | 1,669,074 | ||||
3,101,009 |
iHeartCommunications, Inc., Second Amendment Incremental Term Loan B, 1 Mo. LIBOR + 3.25%, 0.50% Floor |
7.32% | 05/01/26 | 2,900,405 | ||||
1,199,070 |
iHeartCommunications, Inc., Term Loan B, 1 Mo. LIBOR + 3.00%, 0.00% Floor |
7.07% | 05/01/26 | 1,121,777 | ||||
5,298,604 |
Nexstar Broadcasting, Inc., Incremental Term Loan B-4, 1 Mo. LIBOR + 2.50%, 0.00% Floor |
6.57% | 09/19/26 | 5,251,128 | ||||
21,121 |
Univision Communications, Inc., 2017 Replacement Repriced First Lien Term Loan C-5, 1 Mo. LIBOR + 2.75%, 1.00%
Floor |
6.82% | 03/15/24 | 21,068 | ||||
11,616 |
Univision Communications, Inc., 2021 Replacement New First Lien Term Loan, 1 Mo. LIBOR + 3.25%, 0.75% Floor |
7.32% | 03/15/26 | 11,399 | ||||
12,810,894 | ||||||||
Building Products – 0.1% | ||||||||
264,822 |
Hunter Douglas, Inc. (Solis), Term Loan B, 3 Mo. SOFR + 3.50%, 0.50% Floor |
7.86% | 02/28/29 | 230,538 | ||||
Cable & Satellite – 2.8% | ||||||||
4,647,746 |
Cablevision (aka CSC Holdings, LLC), March 2017 Term Loan B-1, 1 Mo. LIBOR + 2.25%, 0.00% Floor |
6.12% | 07/17/25 | 4,443,246 | ||||
3,537,674 |
Charter Communications Operating, LLC, Term Loan B1, 1 Mo. LIBOR + 1.75%, 0.00% Floor |
5.83% | 04/30/25 | 3,478,524 | ||||
7,921,770 | ||||||||
Casinos & Gaming – 1.5% | ||||||||
4,433,940 |
Golden Nugget, Inc. (Fertitta Entertainment, LLC), Initial Term Loan B, 1 Mo. SOFR + 4.00%, 0.50% Floor |
8.09% | 01/27/29 | 4,222,308 | ||||
217,409 |
Scientific Games Holdings LP (Scientific Games Lottery), Initial Dollar Term Loan, 3 Mo. SOFR + 3.50%, 0.50%
Floor |
7.10% | 04/04/29 | 207,354 | ||||
4,429,662 | ||||||||
Coal & Consumable Fuels – 0.0% | ||||||||
36,248 |
Arch Coal, Inc., Term Loan B, 1 Mo. LIBOR + 2.75%, 1.00% Floor |
6.82% | 03/07/24 | 35,863 | ||||
Communications Equipment – 0.3% | ||||||||
855,069 |
Commscope, Inc., Term Loan B, 1 Mo. LIBOR + 3.25%, 0.00% Floor |
7.32% | 04/06/26 | 820,601 |
Principal Value |
Description | Rate (a) | Stated Maturity (b) |
Value | ||||
SENIOR FLOATING-RATE LOAN INTERESTS (c) (Continued) | ||||||||
Data Processing & Outsourced Services – 0.1% | ||||||||
$200,204 |
Paysafe Holdings (US) Corp., Facility B1 Loan, 1 Mo. LIBOR + 2.75%, 0.50% Floor |
6.82% | 06/24/28 | $185,189 | ||||
Education Services – 0.5% | ||||||||
1,471,918 |
Ascensus Holdings, Inc. (Mercury), First Lien Term Loan, 3 Mo. LIBOR + 3.50%, 0.50% Floor |
7.19% | 08/02/28 | 1,409,361 | ||||
Electric Utilities – 2.5% | ||||||||
7,175,555 |
PG&E Corp., Term Loan B, 1 Mo. LIBOR + 3.00%, 0.50% Floor |
7.13% | 06/23/25 | 7,057,445 | ||||
Electronic Equipment & Instruments – 0.7% | ||||||||
1,368,043 |
Chamberlain Group, Inc. (Chariot), Term Loan B, 1 Mo. LIBOR + 3.50%, 0.50% Floor |
7.57% | 11/03/28 | 1,278,696 | ||||
870,089 |
Verifone Systems, Inc., Term Loan B, 3 Mo. LIBOR + 4.00%, 0.00% Floor |
8.36% | 08/20/25 | 784,307 | ||||
2,063,003 | ||||||||
Environmental & Facilities Services – 2.6% | ||||||||
5,725,622 |
GFL Environmental, Inc., Term Loan B, 3 Mo. LIBOR + 3.00%, 0.50% Floor |
7.41% | 05/31/25 | 5,711,308 | ||||
2,089,291 |
Packers Holdings, LLC (PSSI), Term Loan B, 1 Mo. LIBOR + 3.25%, 0.75% Floor |
7.13% | 03/15/28 | 1,817,683 | ||||
7,528,991 | ||||||||
Food Distributors – 0.3% | ||||||||
778,611 |
US Foods, Inc., Incremental B-2019 Term Loan, 1 Mo. LIBOR + 2.00%, 0.00% Floor |
6.07% | 08/31/26 | 767,041 | ||||
Health Care Equipment – 0.0% | ||||||||
86,399 |
Embecta Corp., Initial Term Loan, 3 Mo. SOFR + 3.00%, 0.50% Floor |
6.55% | 03/31/29 | 82,997 | ||||
Health Care Facilities – 0.8% | ||||||||
495,273 |
Ardent Health Services Inc (AHP Health Partners, Inc.), Term Loan B, 1 Mo. LIBOR + 3.50%, 0.50% Floor |
7.57% | 08/24/28 | 481,445 | ||||
2,000,000 |
Select Medical Corporation, Term Loan B, 1 Mo. LIBOR + 2.50%, 0.00% Floor |
6.58% | 03/06/25 | 1,960,620 | ||||
2,442,065 | ||||||||
Health Care Services – 5.6% | ||||||||
2,988,859 |
ADMI Corp. (Aspen Dental), 2020 Incremental Term Loan B2, 1 Mo. LIBOR + 3.38%, 0.50% Floor |
7.45% | 12/23/27 | 2,746,014 | ||||
2,512,004 |
ADMI Corp. (Aspen Dental), 2021 Incremental Term Loan B3, 1 Mo. LIBOR + 3.75%, 0.50% Floor |
7.82% | 12/23/27 | 2,292,204 | ||||
771,968 |
Aveanna Healthcare, LLC, 2021 Term Loan B, 1 Mo. LIBOR + 3.75%, 0.50% Floor |
7.77% | 07/15/28 | 592,485 | ||||
315,285 |
Brightspring Health (Phoenix Guarantor, Inc.), Incremental Term Loan B-3, 1 Mo. LIBOR + 3.50%, 0.00% Floor |
7.57% | 03/05/26 | 299,668 | ||||
3,289,639 |
CHG Healthcare Services, Inc., Term Loan B, 1 Mo. LIBOR + 3.25%, 0.50% Floor |
7.32% | 09/30/28 | 3,220,919 | ||||
2,690,425 |
DaVita, Inc., Term Loan B, 1 Mo. LIBOR + 1.75%, 0.00% Floor |
5.82% | 08/12/26 | 2,599,623 | ||||
2,622,039 |
ExamWorks Group, Inc. (Electron Bidco), Term Loan B, 1 Mo. LIBOR + 3.00%, 0.50% Floor |
7.07% | 10/29/28 | 2,541,516 | ||||
1,990,294 |
Global Medical Response, Inc. (fka Air Medical), 2021 Refinancing Term Loan, 1 Mo. LIBOR + 4.25%, 1.00% Floor
|
8.09% | 10/02/25 | 1,573,328 | ||||
190,480 |
SCP Health (Onex TSG Intermediate Corp.), Term Loan B, 3 Mo. LIBOR + 4.75%, 0.75% Floor |
9.16% | 02/28/28 | 169,051 |
Principal Value |
Description | Rate (a) | Stated Maturity (b) |
Value | ||||
SENIOR FLOATING-RATE LOAN INTERESTS (c) (Continued) | ||||||||
Health Care Services (Continued) | ||||||||
$62,686 |
Sevita (National Mentor Holdings, Inc.), Term Loan B, 1 Mo. LIBOR + 3.75%, 0.75% Floor |
7.83% | 03/01/28 | $44,281 | ||||
77,454 |
Sevita (National Mentor Holdings, Inc.), Term Loan B, 3 Mo. LIBOR + 3.75%, 0.75% Floor |
7.43% | 03/01/28 | 54,713 | ||||
4,102 |
Sevita (National Mentor Holdings, Inc.), Term Loan C, 3 Mo. LIBOR + 3.75%, 0.75% Floor |
7.43% | 03/01/28 | 2,898 | ||||
16,136,700 | ||||||||
Health Care Supplies – 1.7% | ||||||||
5,300,957 |
Medline Borrower, LP (Mozart), Initial Dollar Term Loan, 1 Mo. LIBOR + 3.25%, 0.50% Floor |
7.32% | 10/21/28 | 5,028,540 | ||||
Health Care Technology – 12.0% | ||||||||
4,675,565 |
athenahealth, Inc. (Minerva Merger Sub, Inc.), Term Loan B, 1 Mo. SOFR + 3.50%, 0.50% Floor |
7.41% | 02/15/29 | 4,259,440 | ||||
3,892,779 |
Ciox Health (Healthport/CT Technologies Intermediate Holdings, Inc.), New Term Loan B, 1 Mo. LIBOR + 4.25%, 0.75%
Floor |
8.32% | 12/16/25 | 3,587,429 | ||||
1,808,384 |
Ensemble RCM, LLC (Ensemble Health), Term Loan B, 3 Mo. SOFR + 3.85%, 0.00% Floor |
7.94% | 08/01/26 | 1,752,631 | ||||
2,266,541 |
Mediware (Wellsky/Project Ruby Ultimate Parent Corp.), Term Loan B, 1 Mo. LIBOR + 3.25%, 0.75% Floor |
7.32% | 03/10/28 | 2,150,789 | ||||
1,209,782 |
Navicure, Inc. (Waystar Technologies, Inc.), Term Loan B, 1 Mo. LIBOR + 4.00%, 0.00% Floor |
8.07% | 10/23/26 | 1,185,587 | ||||
1,834,006 |
Press Ganey (Azalea TopCo, Inc.), Term Loan B, 1 Mo. LIBOR + 3.50%, 0.00% Floor |
7.57% | 07/25/26 | 1,694,163 | ||||
12,343,896 |
Verscend Technologies, Inc. (Cotiviti), New Term Loan B-1, 1 Mo. LIBOR + 4.00%, 0.00% Floor |
8.07% | 08/27/25 | 12,240,330 | ||||
7,647,683 |
Zelis Payments Buyer, Inc., New Term Loan B-1, 1 Mo. LIBOR + 3.50%, 0.00% Floor |
7.57% | 09/30/26 | 7,545,281 | ||||
34,415,650 | ||||||||
Hotels, Resorts & Cruise Lines – 2.4% | ||||||||
460,665 |
Alterra Mountain Company, Term Loan B-2, 1 Mo. LIBOR + 3.50%, 0.50% Floor |
7.57% | 08/17/28 | 453,755 | ||||
5,926,463 |
Four Seasons Holdings, Inc., Term Loan, 1 Mo. SOFR + 3.25%, 0.50% Floor |
7.44% | 11/30/29 | 5,915,381 | ||||
443,489 |
Wyndham Hotels & Resorts, Inc., Term Loan B, 1 Mo. LIBOR + 1.75%, 0.00% Floor |
5.82% | 05/30/25 | 441,192 | ||||
6,810,328 | ||||||||
Household Appliances – 0.2% | ||||||||
677,143 |
Traeger Grills (TGP Holdings III, LLC), Term Loan B, 1 Mo. LIBOR + 3.25%, 0.75% Floor |
7.32% | 06/24/28 | 541,972 | ||||
Industrial Machinery – 0.4% | ||||||||
255,328 |
Filtration Group Corporation, 2021 Incremental Term Loan B, 1 Mo. LIBOR + 3.50%, 0.50% Floor |
7.57% | 10/21/28 | 248,498 | ||||
213,229 |
Filtration Group Corporation, Initial Term Loan, 1 Mo. LIBOR + 3.00%, 0.00% Floor |
7.07% | 03/29/25 | 210,218 | ||||
618,674 |
TK Elevator Newco GMBH (Vertical U.S. Newco, Inc.), New Term Loan B1 (USD), 6 Mo. LIBOR + 3.50%, 0.50% Floor
|
6.87% | 07/31/27 | 592,380 | ||||
1,051,096 | ||||||||
Insurance Brokers – 14.7% | ||||||||
4,509,949 |
Alliant Holdings I, LLC, 2019 New Term Loan, 1 Mo. LIBOR + 3.25%, 0.00% Floor |
7.32% | 05/10/25 | 4,414,112 |
Principal Value |
Description | Rate (a) | Stated Maturity (b) |
Value | ||||
SENIOR FLOATING-RATE LOAN INTERESTS (c) (Continued) | ||||||||
Insurance Brokers (Continued) | ||||||||
$7,543,348 |
Alliant Holdings I, LLC, Initial Term Loan, 1 Mo. LIBOR + 3.25%, 0.00% Floor |
7.32% | 05/09/25 | $7,391,274 | ||||
2,547,300 |
Alliant Holdings I, LLC, TLB-4 New Term Loan, 1 Mo. LIBOR + 3.50%, 0.50% Floor |
7.44% | 11/06/27 | 2,469,302 | ||||
475,455 |
AssuredPartners, Inc., 2021 Term Loan B, 1 Mo. LIBOR + 3.50%, 0.50% Floor |
7.57% | 02/13/27 | 456,080 | ||||
108,172 |
AssuredPartners, Inc., 2022 Incremental Term Loan B4, 1 Mo. SOFR + 4.25%, 0.50% Floor |
8.58% | 02/13/27 | 106,077 | ||||
1,818,498 |
AssuredPartners, Inc., Incremental Term Loan 2022, 1 Mo. SOFR + 3.50%, 0.50% Floor |
7.59% | 02/13/27 | 1,744,631 | ||||
6,445,470 |
AssuredPartners, Inc., Term Loan B, 1 Mo. LIBOR + 3.50%, 0.00% Floor |
7.57% | 02/12/27 | 6,189,005 | ||||
2,786,633 |
BroadStreet Partners, Inc., Term Loan B, 1 Mo. LIBOR + 3.00%, 0.00% Floor |
6.75% | 01/27/27 | 2,681,800 | ||||
35,901 |
HUB International Limited, Initial Term Loan B, 2 Mo. LIBOR + 2.75%, 0.00% Floor |
6.98% | 04/25/25 | 35,193 | ||||
13,714,085 |
HUB International Limited, Initial Term Loan B, 3 Mo. LIBOR + 2.75%, 0.00% Floor |
7.33% | 04/25/25 | 13,443,781 | ||||
2,451 |
HUB International Limited, New Term Loan B-3, 2 Mo. LIBOR + 2.75%, 0.75% Floor |
7.23% | 04/25/25 | 2,408 | ||||
960,599 |
HUB International Limited, New Term Loan B-3, 3 Mo. LIBOR + 2.75%, 0.75% Floor |
7.53% | 04/25/25 | 944,068 | ||||
453,751 |
Ryan Specialty Group, LLC, Term Loan B, 1 Mo. SOFR + 3.00%, 0.75% Floor |
7.19% | 09/01/27 | 450,234 | ||||
1,729,760 |
USI, Inc. (fka Compass Investors, Inc.), 2022 New Term Loan, 1 Mo. SOFR + 3.75%, 0.50% Floor |
7.68% | 11/30/29 | 1,699,801 | ||||
42,027,766 | ||||||||
Integrated Telecommunication Services – 2.3% | ||||||||
3,378,830 |
Numericable (Altice France SA or SFR), Term Loan B-11, 3 Mo. LIBOR + 2.75%, 0.00% Floor |
7.16% | 07/31/25 | 3,235,230 | ||||
751,031 |
Zayo Group Holdings, Inc., Incremental Term Loan B-2, 1 Mo. SOFR + 4.25%, 0.50% Floor |
8.34% | 03/09/27 | 583,506 | ||||
3,740,009 |
Zayo Group Holdings, Inc., Initial Dollar Term Loan, 1 Mo. LIBOR + 3.00%, 0.00% Floor |
7.07% | 03/09/27 | 2,810,542 | ||||
6,629,278 | ||||||||
Managed Health Care – 0.7% | ||||||||
2,293,123 |
Multiplan, Inc. (MPH), Term Loan B, 3 Mo. LIBOR + 4.25%, 0.50% Floor |
8.98% | 08/31/28 | 1,963,487 | ||||
Metal & Glass Containers – 0.2% | ||||||||
497,673 |
Berry Global, Inc., Term Loan Z, 1 Mo. LIBOR + 1.75%, 0.00% Floor |
5.63% | 07/01/26 | 491,203 | ||||
Office Services & Supplies – 0.2% | ||||||||
608,895 |
Dun & Bradstreet Corp., Refinancing Term Loan, 1 Mo. LIBOR + 3.25%, 0.00% Floor |
7.29% | 02/08/26 | 600,066 | ||||
Packaged Foods & Meats – 2.2% | ||||||||
16,760 |
Hostess Brands, LLC (HB Holdings), Term Loan B, 1 Mo. LIBOR + 2.25%, 0.75% Floor |
6.32% | 08/03/25 | 16,643 | ||||
6,485,964 |
Hostess Brands, LLC (HB Holdings), Term Loan B, 3 Mo. LIBOR + 2.25%, 0.75% Floor |
6.66% | 08/03/25 | 6,440,692 | ||||
6,457,335 |
Principal Value |
Description | Rate (a) | Stated Maturity (b) |
Value | ||||
SENIOR FLOATING-RATE LOAN INTERESTS (c) (Continued) | ||||||||
Paper Packaging – 3.3% | ||||||||
$4,669,550 |
Graham Packaging Company, LP, Term Loan B, 1 Mo. LIBOR + 3.00%, 0.75% Floor |
7.07% | 08/04/27 | $4,558,648 | ||||
1,598,439 | Pactiv, LLC / Evergreen Packaging, LLC (fka Reynolds Group Holdings), Term Loan B-2, 1 Mo. LIBOR + 3.25%, 0.00% Floor | 7.32% | 02/05/26 | 1,573,600 | ||||
3,348,833 |
Pactiv, LLC / Evergreen Packaging, LLC (fka Reynolds Group Holdings), Tranche B-3 U.S. Term Loan, 1 Mo. LIBOR
+ 3.25%, 0.50% Floor |
7.32% | 09/20/28 | 3,295,988 | ||||
9,428,236 | ||||||||
Pharmaceuticals – 2.0% | ||||||||
972,491 |
Jazz Pharmaceuticals, Inc., Term Loan B, 1 Mo. LIBOR + 3.50%, 0.50% Floor |
7.57% | 05/05/28 | 963,981 | ||||
5,061 |
Mallinckrodt International Finance S.A., Amendment No. 2 Incremental Term Loan, 3 Mo. LIBOR + 5.25%, 0.75% Floor
|
8.73% | 09/30/27 | 3,964 | ||||
1,088,938 |
Nestle Skin Health (Sunshine Lux VII SARL/Galderma), 2021 Term Loan B-3, 3 Mo. LIBOR + 3.75%, 0.75% Floor |
7.42% | 10/02/26 | 1,032,793 | ||||
3,811,548 |
Parexel International Corp. (Phoenix Newco), First Lien Term Loan, 1 Mo. LIBOR + 3.25%, 0.50% Floor |
7.32% | 11/15/28 | 3,660,534 | ||||
5,661,272 | ||||||||
Research & Consulting Services – 1.9% | ||||||||
4,173,518 |
Clarivate Analytics PLC (Camelot), Term Loan B, 1 Mo. LIBOR + 3.00%, 1.00% Floor |
7.07% | 10/31/26 | 4,101,775 | ||||
975,807 |
Corelogic, Inc., 2021 Incremental Term Loan B, 1 Mo. LIBOR + 3.50%, 0.50% Floor |
7.63% | 06/02/28 | 802,602 | ||||
386,835 |
J.D. Power (Project Boost Purchaser, LLC), Non-Fungible 1st Lien Term Loan, 1 Mo. LIBOR + 3.50%, 0.50% Floor
|
7.57% | 05/26/26 | 372,329 | ||||
334,037 |
Veritext Corporation (VT TopCo, Inc.), Term Loan B-4, 1 Mo. LIBOR + 3.75%, 0.75% Floor |
7.82% | 08/10/25 | 324,433 | ||||
5,601,139 | ||||||||
Restaurants – 6.4% | ||||||||
4,112,297 |
1011778 B.C. Unlimited Liability Company (Restaurant Brands) (aka Burger King/Tim Horton’s), Term Loan
B, 1 Mo. LIBOR + 1.75%, 0.00% Floor |
5.82% | 11/14/26 | 4,030,051 | ||||
1,218,819 |
1011778 B.C. Unlimited Liability Company (Restaurant Brands) (aka Burger King/Tim Horton’s), Term Loan
B, 3 Mo. LIBOR + 1.75%, 0.00% Floor |
6.16% | 11/14/26 | 1,194,443 | ||||
7,553,655 |
IRB Holding Corp. (Arby’s/Inspire Brands), New Term Loan B 2022, 1 Mo. LIBOR + 2.75%, 1.00% Floor |
6.82% | 02/05/25 | 7,410,664 | ||||
1,965,000 |
IRB Holding Corp. (Arby’s/Inspire Brands), Term Loan B-3, 1 Mo. SOFR + 3.10%, 0.75% Floor |
6.89% | 12/15/27 | 1,888,365 | ||||
3,880,000 |
Portillo’s Holdings, LLC, Term Loan B, 1 Mo. LIBOR + 5.50%, 1.00% Floor |
9.57% | 08/30/24 | 3,847,680 | ||||
18,371,203 | ||||||||
Security & Alarm Services – 0.2% | ||||||||
549,406 |
Garda World Security Corporation, Second Lien Term Loan B-3, 3 Mo. LIBOR + 4.25%, 0.00% Floor |
8.93% | 10/30/26 | 526,469 | ||||
Specialized Consumer Services – 0.7% | ||||||||
926,400 |
Asurion, LLC, Inc. Amendment No. 6 Term Loan, 1 Mo. LIBOR + 3.25%, 0.00% Floor |
7.32% | 12/23/26 | 809,053 |
Principal Value |
Description | Rate (a) | Stated Maturity (b) |
Value | ||||
SENIOR FLOATING-RATE LOAN INTERESTS (c) (Continued) | ||||||||
Specialized Consumer Services (Continued) | ||||||||
$1,698,479 |
Asurion, LLC, New B-8 Term Loan, 1 Mo. LIBOR + 5.25%, 0.00% Floor |
9.32% | 01/31/28 | $1,306,130 | ||||
2,115,183 | ||||||||
Specialized Finance – 0.9% | ||||||||
850,305 |
Radiate Holdco, LLC (Astound), Term Loan B, 1 Mo. LIBOR + 3.25%, 0.75% Floor |
7.32% | 09/25/26 | 743,881 | ||||
731,007 |
WCG Purchaser Corp. (WIRB- Copernicus Group), Initial Term Loan B, 1 Mo. LIBOR + 4.00%, 0.00% Floor |
8.07% | 01/08/27 | 685,319 | ||||
1,211,918 |
WCG Purchaser Corp. (WIRB- Copernicus Group), Initial Term Loan B, 3 Mo. LIBOR + 4.00%, 0.00% Floor |
7.67% | 01/08/27 | 1,136,173 | ||||
2,565,373 | ||||||||
Specialty Stores – 1.3% | ||||||||
2,770,775 |
Petco Health and Wellness Company, Inc., 2021 Replacement Dollar Term Loan, 3 Mo. LIBOR + 3.25%, 0.75% Floor
|
6.92% | 03/03/28 | 2,681,889 | ||||
1,074,628 |
Petsmart, Inc., Initial Term Loan B, 1 Mo. LIBOR + 3.75%, 0.75% Floor |
7.82% | 02/12/28 | 1,031,256 | ||||
3,713,145 | ||||||||
Systems Software – 5.5% | ||||||||
2,689,180 |
BMC Software Finance, Inc. (Boxer Parent), Initial Term Loan, 1 Mo. LIBOR + 3.75%, 0.00% Floor |
7.82% | 10/02/25 | 2,575,912 | ||||
883,272 |
Idera, Inc., Term Loan B, 3 Mo. LIBOR + 3.75%, 0.75% Floor |
7.50% | 02/15/28 | 835,063 | ||||
1,781,852 |
Misys Financial Software Ltd. (Almonde, Inc.) (Finastra), Term Loan B, 3 Mo. LIBOR + 3.50%, 1.00% Floor |
6.87% | 06/13/24 | 1,608,531 | ||||
885,870 |
Proofpoint, Inc., Term Loan B, 3 Mo. LIBOR + 3.25%, 0.50% Floor |
7.98% | 08/31/28 | 851,268 | ||||
1,962,470 |
Sophos Group PLC (Surf), Term Loan B-5, 3 Mo. LIBOR + 3.50%, 0.00% Floor |
6.67% | 03/05/27 | 1,879,889 | ||||
6,804,180 |
SS&C Technologies Holdings, Inc., Facility B1 USD, 1 Mo. LIBOR + 1.75%, 0.00% Floor |
5.82% | 04/16/25 | 6,671,907 | ||||
1,282,564 |
SUSE (Marcel Lux IV SARL), 2021 Refinancing Term Loan, Daily SOFR + 3.25%, 0.00% Floor |
7.16% | 03/15/26 | 1,260,119 | ||||
15,682,689 | ||||||||
Trading Companies & Distributors – 0.8% | ||||||||
2,326,073 |
SRS Distribution, Inc., 2022 Refinancing Term Loan, 1 Mo. LIBOR + 3.50%, 0.50% Floor |
7.57% | 06/04/28 | 2,230,122 | ||||
113,313 |
SRS Distribution, Inc., Term Loan B, 1 Mo. SOFR + 3.60%, 0.50% Floor |
7.69% | 06/04/28 | 108,249 | ||||
2,338,371 | ||||||||
Wireless Telecommunication Services – 2.5% | ||||||||
7,272,834 |
SBA Senior Finance II, LLC, Term Loan B, 1 Mo. LIBOR + 1.75%, 0.00% Floor |
5.83% | 04/11/25 | 7,221,924 | ||||
Total Senior Floating-Rate Loan Interests |
313,536,922 | |||||||
(Cost $324,453,078) | ||||||||
Principal Value |
Description | Stated Coupon |
Stated Maturity |
Value | ||||
CORPORATE BONDS AND NOTES (c) – 8.8% | ||||||||
Application Software – 0.1% | ||||||||
560,000 |
GoTo Group, Inc. (d) |
5.50% | 09/01/27 | 328,678 |
Principal Value |
Description | Stated Coupon |
Stated Maturity |
Value | ||||
CORPORATE BONDS AND NOTES (c) (Continued) | ||||||||
Broadcasting – 2.7% | ||||||||
$1,000,000 |
Gray Television, Inc. (d) |
5.88% | 07/15/26 | $922,500 | ||||
2,000,000 |
Gray Television, Inc. (d) |
7.00% | 05/15/27 | 1,841,250 | ||||
52,000 |
iHeartCommunications, Inc. (d) |
5.25% | 08/15/27 | 46,386 | ||||
3,043,000 |
Nexstar Media, Inc. (d) |
5.63% | 07/15/27 | 2,873,307 | ||||
2,395,000 |
Sirius XM Radio, Inc. (d) |
3.13% | 09/01/26 | 2,165,176 | ||||
7,848,619 | ||||||||
Cable & Satellite – 2.9% | ||||||||
7,000,000 |
CCO Holdings, LLC / CCO Holdings Capital Corp. (d) |
5.13% | 05/01/27 | 6,633,305 | ||||
2,000,000 |
CSC Holdings, LLC (d) |
7.50% | 04/01/28 | 1,561,710 | ||||
8,195,015 | ||||||||
Casinos & Gaming – 0.4% | ||||||||
572,000 |
Fertitta Entertainment, LLC / Fertitta Entertainment Finance Co., Inc. (d) |
4.63% | 01/15/29 | 505,680 | ||||
572,000 |
VICI Properties, L.P. / VICI Note Co., Inc. (d) |
4.25% | 12/01/26 | 532,801 | ||||
1,038,481 | ||||||||
Health Care Facilities – 1.7% | ||||||||
2,500,000 |
Tenet Healthcare Corp. (d) |
6.25% | 02/01/27 | 2,398,600 | ||||
2,500,000 |
Tenet Healthcare Corp. (d) |
5.13% | 11/01/27 | 2,356,963 | ||||
4,755,563 | ||||||||
Health Care Services – 0.2% | ||||||||
376,000 |
DaVita, Inc. (d) |
4.63% | 06/01/30 | 304,930 | ||||
226,000 |
DaVita, Inc. (d) |
3.75% | 02/15/31 | 166,453 | ||||
324,000 |
Global Medical Response, Inc. (d) |
6.50% | 10/01/25 | 244,392 | ||||
715,775 | ||||||||
Insurance Brokers – 0.3% | ||||||||
359,000 |
AmWINS Group, Inc. (d) |
4.88% | 06/30/29 | 310,638 | ||||
500,000 |
AssuredPartners, Inc. (d) |
7.00% | 08/15/25 | 480,538 | ||||
791,176 | ||||||||
Integrated Telecommunication Services – 0.2% | ||||||||
769,000 |
Zayo Group Holdings, Inc. (d) |
4.00% | 03/01/27 | 552,057 | ||||
Systems Software – 0.3% | ||||||||
1,007,000 |
SS&C Technologies, Inc. (d) |
5.50% | 09/30/27 | 964,008 | ||||
Total Corporate Bonds and Notes |
25,189,372 | |||||||
(Cost $26,351,987) | ||||||||
FOREIGN CORPORATE BONDS AND NOTES (c) – 0.6% | ||||||||
Application Software – 0.0% | ||||||||
22,000 |
Open Text Corp. (d) |
3.88% | 02/15/28 | 18,585 | ||||
Environmental & Facilities Services – 0.6% | ||||||||
1,554,000 |
GFL Environmental, Inc. (d) |
3.75% | 08/01/25 | 1,456,829 | ||||
305,000 |
GFL Environmental, Inc. (d) |
4.00% | 08/01/28 | 262,109 | ||||
1,718,938 | ||||||||
Total Foreign Corporate Bonds and Notes |
1,737,523 | |||||||
(Cost $1,766,566) |
Shares | Description | Value | ||
COMMON STOCKS (c) – 0.3% | ||||
Pharmaceuticals – 0.3% | ||||
150,392 |
Akorn, Inc. (e) (f) |
$977,548 | ||
(Cost $1,724,086) | ||||
RIGHTS (c) – 0.1% | ||||
Electric Utilities – 0.1% | ||||
106,607 |
Vistra Energy Corp., no expiration date (f) (g) |
131,500 | ||
Life Sciences Tools & Services – 0.0% | ||||
1 |
New Millennium Holdco, Inc., Corporate Claim Trust, no expiration date (f) (g) (h) (i) |
0 | ||
1 |
New Millennium Holdco, Inc., Lender Claim Trust, no expiration date (f) (g) (h) (i) |
0 | ||
0 | ||||
Total Rights |
131,500 | |||
(Cost $174,207) | ||||
WARRANTS (c) – 0.0% | ||||
Movies & Entertainment – 0.0% | ||||
315,514 |
Cineworld Group PLC, expiring 11/23/25 (f) (g) (j) |
19,013 | ||
(Cost $0) | ||||
Total Investments – 119.1% |
341,591,878 | |||
(Cost $354,469,924) | ||||
Outstanding Loans – (18.8)% |
(54,000,000) | |||
Net Other Assets and Liabilities – (0.3)% |
(882,337) | |||
Net Assets – 100.0% |
$286,709,541 |
(a) | Senior Floating-Rate Loan Interests (“Senior Loans”) in which the Fund invests pay interest at rates which are periodically predetermined by reference to a base lending rate plus a premium. These base lending rates are generally (i) the lending rate offered by one or more major European banks, such as the LIBOR, (ii) the SOFR obtained from the U.S. Department of the Treasury’s Office of Financial Research, (iii) the prime rate offered by one or more United States banks or (iv) the certificate of deposit rate. Certain Senior Loans are subject to a LIBOR or SOFR floor that establishes a minimum LIBOR or SOFR rate. When a range of rates is disclosed, the Fund holds more than one contract within the same tranche with identical LIBOR or SOFR period, spread and floor, but different LIBOR or SOFR reset dates. |
(b) | Senior Loans generally are subject to mandatory and/or optional prepayment. As a result, the actual remaining maturity of Senior Loans may be substantially less than the stated maturities shown. |
(c) | All of these securities are available to serve as collateral for the outstanding loans. |
(d) | This security, sold within the terms of a private placement memorandum, is exempt from registration upon resale under Rule 144A of the Securities Act of 1933, as amended (the “1933 Act”), and may be resold in transactions exempt from registration, normally to qualified institutional buyers. Pursuant to procedures adopted by the Fund’s Board of Trustees, this security has been determined to be liquid by First Trust Advisors L.P. (the “Advisor”). Although market instability can result in periods of increased overall market illiquidity, liquidity for each security is determined based on security specific factors and assumptions, which require subjective judgment. At November 30, 2022, securities noted as such amounted to $26,926,895 or 9.4% of net assets. |
(e) | Security received in a transaction exempt from registration under the 1933 Act. The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers (see Note 2D - Restricted Securities in the Notes to Financial Statements). |
(f) | Non-income producing security. |
(g) | Pursuant to procedures adopted by the Fund’s Board of Trustees, this security has been determined to be illiquid by the Advisor. |
(h) | This security is fair valued by the Advisor’s Pricing Committee in accordance with procedures approved by the Fund’s Board of Trustees, and in accordance with the provisions of the Investment Company Act of 1940 and rules thereunder, as amended. At November 30, 2022, securities noted as such are valued at $0 or 0.0% of net assets. |
(i) | This security’s value was determined using significant unobservable inputs (see Note 2A – Portfolio Valuation in the Notes to Financial Statements). |
(j) | This issuer has filed for protection in bankruptcy court. |
LIBOR | London Interbank Offered Rate |
SOFR | Secured Overnight Financing Rate |
Total Value at 11/30/2022 |
Level
1 Quoted Prices |
Level
2 Significant Observable Inputs |
Level
3 Significant Unobservable Inputs | |
Senior Floating-Rate Loan Interests* |
$ 313,536,922 | $ — | $ 313,536,922 | $ — |
Corporate Bonds and Notes* |
25,189,372 | — | 25,189,372 | — |
Foreign Corporate Bonds and Notes* |
1,737,523 | — | 1,737,523 | — |
Common Stocks* |
977,548 | — | 977,548 | — |
Rights: | ||||
Electric Utilities |
131,500 | — | 131,500 | — |
Life Sciences Tools & Services |
—** | — | — | —** |
Warrants* |
19,013 | — | 19,013 | — |
Total Investments |
$ 341,591,878 | $— | $ 341,591,878 | $—** |
* | See Portfolio of Investments for industry breakout. |
** | Investment is valued at $0. |
ASSETS: | |
Investments, at value (Cost $354,469,924) |
$ 341,591,878 |
Cash |
8,617,477 |
Receivables: | |
Investment securities sold |
20,522,381 |
Interest |
1,419,553 |
Prepaid expenses |
4,321 |
Total Assets |
372,155,610 |
LIABILITIES: | |
Outstanding loans |
54,000,000 |
Payables: | |
Investment securities purchased |
30,871,664 |
Investment advisory fees |
215,248 |
Interest and fees on loans |
124,940 |
Audit and tax fees |
42,539 |
Administrative fees |
28,360 |
Custodian fees |
12,340 |
Legal fees |
11,485 |
Trustees’ fees and expenses |
2,951 |
Shareholder reporting fees |
2,724 |
Transfer agent fees |
2,470 |
Financial reporting fees |
761 |
Unrealized depreciation on unfunded loan commitments |
126,559 |
Other liabilities |
4,028 |
Total Liabilities |
85,446,069 |
NET ASSETS |
$286,709,541 |
NET ASSETS consist of: | |
Paid-in capital |
$ 355,520,483 |
Par value |
259,834 |
Accumulated distributable earnings (loss) |
(69,070,776) |
NET ASSETS |
$286,709,541 |
NET ASSET VALUE, per Common Share (par value $0.01 per Common Share) |
$11.03 |
Number of |
INVESTMENT INCOME: | ||
Interest |
$ 12,570,272 | |
Dividends |
32,040 | |
Other |
36,248 | |
Total investment income |
12,638,560 | |
EXPENSES: | ||
Investment advisory fees |
1,390,610 | |
Interest and fees on loans |
1,289,778 | |
Administrative fees |
126,787 | |
Shareholder reporting fees |
41,834 | |
Audit and tax fees |
37,206 | |
Legal fees |
26,707 | |
Custodian fees |
21,020 | |
Listing expense |
18,193 | |
Trustees’ fees and expenses |
9,105 | |
Transfer agent fees |
7,212 | |
Financial reporting fees |
4,616 | |
Other |
17,979 | |
Total expenses |
2,991,047 | |
NET INVESTMENT INCOME (LOSS) |
9,647,513 | |
NET REALIZED AND UNREALIZED GAIN (LOSS): | ||
Net realized gain (loss) on investments |
(16,937,923) | |
Net change in unrealized appreciation (depreciation) on: | ||
Investments |
11,368,149 | |
Unfunded loan commitments |
(54,034) | |
Net change in unrealized appreciation (depreciation) |
11,314,115 | |
NET REALIZED AND UNREALIZED GAIN (LOSS) |
(5,623,808) | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |
$ 4,023,705 |
Six
Months Ended 11/30/2022 (Unaudited) |
Year Ended 5/31/2022 | ||
OPERATIONS: | |||
Net investment income (loss) |
$ 9,647,513 | $ 14,768,290 | |
Net realized gain (loss) |
(16,937,923) | (1,184,588) | |
Net change in unrealized appreciation (depreciation) |
11,314,115 | (24,665,993) | |
Net increase (decrease) in net assets resulting from operations |
4,023,705 | (11,082,291) | |
DISTRIBUTIONS TO SHAREHOLDERS FROM: | |||
Investment operations |
(11,029,948) | (14,904,773) | |
Return of capital |
— | (10,282,054) | |
Total distributions to shareholders |
(11,029,948) | (25,186,827) | |
CAPITAL TRANSACTIONS: | |||
Proceeds from Common Shares reinvested |
— | 366,260 | |
Repurchase of Common Shares |
— | — | |
Net increase (decrease) in net assets resulting from capital transactions |
— | 366,260 | |
Total increase (decrease) in net assets |
(7,006,243) | (35,902,858) | |
NET ASSETS: | |||
Beginning of period |
293,715,784 | 329,618,642 | |
End of period |
$ 286,709,541 | $ 293,715,784 | |
CAPITAL TRANSACTIONS were as follows: | |||
Common Shares at beginning of period |
25,983,388 | 25,953,421 | |
Common Shares issued as reinvestment under the Dividend Reinvestment Plan |
— | 29,967 | |
Common Shares at end of period |
25,983,388 | 25,983,388 |
Cash flows from operating activities: | ||
Net increase (decrease) in net assets resulting from operations |
$4,023,705 | |
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by operating activities: | ||
Purchases of investments |
(179,730,082) | |
Sales, maturities and paydown of investments |
251,833,263 | |
Net amortization/accretion of premiums/discounts on investments |
(845,360) | |
Net realized gain/loss on investments |
16,937,923 | |
Net change in unrealized appreciation/depreciation on investments and unfunded loan commitments |
(11,314,115) | |
Changes in assets and liabilities: | ||
Increase in interest receivable |
(97,888) | |
Decrease in prepaid expenses |
16,916 | |
Decrease in interest and fees payable on loans |
(1,662) | |
Decrease in investment advisory fees payable |
(49,077) | |
Decrease in audit and tax fees payable |
(30,513) | |
Increase in legal fees payable |
8,735 | |
Decrease in shareholder reporting fees payable |
(17,658) | |
Decrease in administrative fees payable |
(1,488) | |
Increase in custodian fees payable |
4,534 | |
Decrease in transfer agent fees payable |
(8,307) | |
Decrease in trustees’ fees and expenses payable |
(152) | |
Decrease in financial reporting fees payable |
(10) | |
Increase in other liabilities payable |
292 | |
Cash provided by operating activities |
$80,729,056 | |
Cash flows from financing activities: | ||
Distributions to Common Shareholders from investment operations |
(11,029,948) | |
Repayment of borrowings |
(104,000,000) | |
Proceeds from borrowings |
42,000,000 | |
Cash used in financing activities |
(73,029,948) | |
Increase in cash |
7,699,108 | |
Cash at beginning of period |
918,369 | |
Cash at end of period |
$8,617,477 | |
Supplemental disclosure of cash flow information: | ||
Cash paid during the period for interest and fees |
$1,291,440 |
Six
Months Ended 11/30/2022 (Unaudited) |
Year Ended May 31, | |||||||||||
2022 | 2021 | 2020 | 2019 | 2018 | ||||||||
Net asset value, beginning of period |
$ 11.30 | $ 12.70 | $ 12.46 | $ 13.70 | $ 14.05 | $ 14.28 | ||||||
Income from investment operations: | ||||||||||||
Net investment income (loss) |
0.37 | 0.56 | 0.55 | 0.67 | 0.74 | 0.70 | ||||||
Net realized and unrealized gain (loss) |
(0.22) | (0.99) | 0.90 | (0.97) | (0.36) | (0.17) | ||||||
Total from investment operations |
0.15 | (0.43) | 1.45 | (0.30) | 0.38 | 0.53 | ||||||
Distributions paid to shareholders from: | ||||||||||||
Net investment income |
(0.42) | (0.57) | (0.56) | (0.69) | (0.73) | (0.70) | ||||||
Return of capital |
— | (0.40) | (0.69) | (0.25) | — | (0.06) | ||||||
Total distributions paid to Common Shareholders |
(0.42) | (0.97) | (1.25) | (0.94) | (0.73) | (0.76) | ||||||
Common Share repurchases |
— | — | 0.04 | — | — | — | ||||||
Net asset value, end of period |
$ | $11.30 | $12.70 | $12.46 | $13.70 | $14.05 | ||||||
Market value, end of period |
$ | $10.90 | $12.60 | $11.12 | $11.98 | $12.99 | ||||||
Total return based on net asset value (a) |
1.78% | (3.64)% | 13.51% | (1.38)% | 3.44% | 4.24% | ||||||
Total return based on market value (a) |
(2.61)% | (6.31)% | 26.18% | 0.65% | (2.17)% | 1.05% | ||||||
Ratios to average net assets/supplemental data: | ||||||||||||
Net assets, end of period (in 000’s) |
$ 286,710 | $ 293,716 | $ 329,619 | $ 332,267 | $ 365,804 | $ 375,015 | ||||||
Ratio of total expenses to average net assets |
2.08% (b) | 1.67% | 1.70% | 2.35% | 2.53% | 2.17% | ||||||
Ratio of total expenses to average net assets excluding interest expense |
1.18% (b) | 1.24% | 1.30% | 1.26% | 1.24% | 1.26% | ||||||
Ratio of net investment income (loss) to average net assets |
6.71% (b) | 4.64% | 4.37% | 4.98% | 5.34% | 4.94% | ||||||
Portfolio turnover rate |
39% | 45% | 78% | 64% | 58% | 101% | ||||||
Indebtedness: | ||||||||||||
Total loans outstanding (in 000’s) |
$ 54,000 | $ 116,000 | $ 136,000 | $ 119,000 | $ 163,000 | $ 155,000 | ||||||
Asset coverage per $1,000 of indebtedness (c) |
$ 6,309 | $ 3,532 | $ 3,424 | $ 3,792 | $ 3,244 | $ 3,419 |
(a) | Total return is based on the combination of reinvested dividend, capital gain and return of capital distributions, if any, at prices obtained by the Dividend Reinvestment Plan, and changes in net asset value per share for net asset value returns and changes in Common Share Price for market value returns. Total returns do not reflect sales load and are not annualized for periods of less than one year. Past performance is not indicative of future results. |
(b) | Annualized. |
(c) | Calculated by subtracting the Fund’s total liabilities (not including the loans outstanding) from the Fund’s total assets, and dividing by the outstanding loans balance in 000’s. |
(1) | The terms “security” and “securities” used throughout the Notes to Financial Statements include Senior Loans. |
1) | the most recent price provided by a pricing service; |
2) | the fundamental business data relating to the borrower; |
3) | an evaluation of the forces which influence the market in which these securities are purchased and sold; |
4) | the type, size and cost of the security; |
5) | the financial statements of the borrower, or the financial condition of the country of issue; |
6) | the credit quality and cash flow of the borrower, or country of issue, based on the Pricing Committee’s, sub-advisor’s or portfolio manager’s analysis, as applicable, or external analysis; |
7) | the information as to any transactions in or offers for the security; |
8) | the price and extent of public trading in similar securities (or equity securities) of the borrower, or comparable companies; |
9) | the coupon payments; |
10) | the quality, value and salability of collateral, if any, securing the security; |
11) | the business prospects of the borrower, including any ability to obtain money or resources from a parent or affiliate and an assessment of the borrower’s management; |
12) | the prospects for the borrower’s industry, and multiples (of earnings and/or cash flows) being paid for similar businesses in that industry; |
13) | the borrower’s competitive position within the industry; |
14) | the borrower’s ability to access additional liquidity through public and/or private markets; and |
15) | other relevant factors. |
1) | benchmark yields; |
2) | reported trades; |
3) | broker/dealer quotes; |
4) | issuer spreads; |
5) | benchmark securities; |
6) | bids and offers; and |
7) | reference data including market research publications. |
1) | the last sale price on the exchange on which they are principally traded or, for Nasdaq and AIM securities, the official closing price; |
2) | the type of security; |
3) | the size of the holding; |
4) | the initial cost of the security; |
5) | transactions in comparable securities; |
6) | price quotes from dealers and/or third-party pricing services; |
7) | relationships among various securities; |
8) | information obtained by contacting the issuer, analysts, or the appropriate stock exchange; |
9) | an analysis of the issuer’s financial statements; |
10) | the existence of merger proposals or tender offers that might affect the value of the security; and |
11) | other relevant factors. |
• | Level 1 – Level 1 inputs are quoted prices in active markets for identical investments. An active market is a market in which transactions for the investment occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
• | Level 2 – Level 2 inputs are observable inputs, either directly or indirectly, and include the following: |
o | Quoted prices for similar investments in active markets. |
o | Quoted prices for identical or similar investments in markets that are non-active. A non-active market is a market where there are few transactions for the investment, the prices are not current, or price quotations vary substantially either over time or among market makers, or in which little information is released publicly. |
o | Inputs other than quoted prices that are observable for the investment (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates). |
o | Inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
• | Level 3 – Level 3 inputs are unobservable inputs. Unobservable inputs may reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the investment. |
Borrower | Principal Value |
Commitment Amount |
Value | Unrealized Appreciation (Depreciation) | ||||
athenahealth, Inc. (Minerva Merger Sub, Inc.), Term Loan | $ 794,455 | $ 791,140 | $ 723,748 | $ (67,392) | ||||
Aveanna Healthcare LLC, Term Loan | 181,205 | 180,135 | 139,075 | (41,060) | ||||
Traeger Grills (TGP Holdings III LLC), Term Loan | 89,286 | 88,929 | 71,463 | (17,466) | ||||
Veritext Corporation (VT TopCo, Inc.), Term Loan | 22,309 | 22,309 | 21,668 | (641) | ||||
$1,082,513 | $955,954 | $(126,559) |
Security | Acquisition Date |
Shares | Current Price | Carrying Cost |
Value | %
of Net Assets |
Akorn, Inc. | 10/15/2020 | 150,392 | $6.50 | $1,724,086 | $977,548 | 0.34% |
Distributions paid from: | |
Ordinary income |
$14,904,773 |
Return of capital |
10,282,054 |
Undistributed ordinary income |
$— |
Undistributed capital gains |
— |
Total undistributed earnings |
— |
Accumulated capital and other losses |
(37,881,083) |
Net unrealized appreciation (depreciation) |
(24,183,450) |
Total accumulated earnings (losses) |
(62,064,533) |
Other |
— |
Paid-in capital |
355,780,317 |
Total net assets |
$293,715,784 |
Tax Cost | Gross Unrealized Appreciation |
Gross Unrealized (Depreciation) |
Net
Unrealized Appreciation (Depreciation) | |||
$354,469,924 | $600,911 | $(13,478,957) | $(12,878,046) |
(1) | If Common Shares are trading at or above net asset value (“NAV”) at the time of valuation, the Fund will issue new shares at a price equal to the greater of (i) NAV per Common Share on that date or (ii) 95% of the market price on that date. |
(2) | If Common Shares are trading below NAV at the time of valuation, the Plan Agent will receive the dividend or distribution in cash and will purchase Common Shares in the open market, on the NYSE or elsewhere, for the participants’ accounts. It is possible that the market price for the Common Shares may increase before the Plan Agent has completed its purchases. Therefore, the average purchase price per share paid by the Plan Agent may exceed the market price at the time of valuation, resulting in the purchase of fewer shares than if the dividend or distribution had been paid in Common Shares issued by the Fund. The Plan Agent will use all dividends and distributions received in cash to purchase Common Shares in the open market within 30 days of the valuation date except where temporary curtailment or suspension of purchases is necessary to comply with federal securities laws. Interest will not be paid on any uninvested cash payments. |
(b) | Not applicable. |
Item 2. Code of Ethics.
Not applicable.
Item 3. Audit Committee Financial Expert.
Not applicable.
Item 4. Principal Accountant Fees and Services.
Not applicable.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Investments.
(a) | Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form. |
(b) | Not applicable. |
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
(a) | Not applicable. |
(b) | There have been no changes, as of the date of filing, in any of the Portfolio Managers identified in response to paragraph (a)(1) of this item in the registrant’s most recent annual report on Form N-CSR. |
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant’s board of directors, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item.
Item 11. Controls and Procedures.
(a) | The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)). |
(b) | There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
(a) | Not applicable. |
(b) | Not applicable. |
Item 13. Exhibits.
(a)(1) | Not applicable. |
(a)(2) | Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. |
(a)(3) | Not applicable. |
(a)(4) | Not applicable. |
(b) | Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) | First Trust Senior Floating Rate Income Fund II |
By (Signature and Title)* | /s/ James M. Dykas | |
James M. Dykas, President and Chief Executive Officer (principal executive officer) |
Date: | February 2, 2023 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By (Signature and Title)* | /s/ James M. Dykas | |
James M. Dykas, President and Chief Executive Officer (principal executive officer) |
Date: | February 2, 2023 |
By (Signature and Title)* | /s/ Donald P. Swade | |
Donald P. Swade, Treasurer, Chief Financial Officer and Chief Accounting Officer (principal financial officer) |
Date: | February 2, 2023 |
* Print the name and title of each signing officer under his or her signature.
Certification Pursuant to Rule 30a-2(a) under
the 1940 Act and Section 302
of the Sarbanes-Oxley Act
I, James M. Dykas, certify that:
1. | I have reviewed this report on Form N-CSR of First Trust Senior Floating Rate Income Fund II; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | February 2, 2023 | /s/ James M. Dykas | |||
James M. Dykas, President and Chief Executive Officer (principal executive officer) |
Certification Pursuant to Rule 30a-2(a) under
the 1940 Act and Section 302
of the Sarbanes-Oxley Act
I, Donald P. Swade, certify that:
1. | I have reviewed this report on Form N-CSR of First Trust Senior Floating Rate Income Fund II; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | February 2, 2023 | /s/ Donald P. Swade | |||
Donald P. Swade, Treasurer, Chief Financial Officer and Chief Accounting Officer (principal financial officer) |
Certification Pursuant to Rule 30a-2(b) under the
1940 Act and Section 906
of the Sarbanes-Oxley Act
I, James M. Dykas, President and Chief Executive Officer of First Trust Senior Floating Rate Income Fund II (the “Registrant”), certify that:
1. | The Form N-CSR of the Registrant (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. |
Date: | February 2, 2023 | /s/ James M. Dykas | |||
James M. Dykas, President and Chief Executive Officer (principal executive officer) |
I, Donald P. Swade, Treasurer, Chief Financial Officer and Chief Accounting Officer of First Trust Senior Floating Rate Income Fund II (the “Registrant”), certify that:
1. | The Form N-CSR of the Registrant (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. |
Date: | February 2, 2023 | /s/ Donald P. Swade | |||
Donald P. Swade, Treasurer, Chief Financial Officer and Chief Accounting Officer (principal financial officer) |
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N-2 |
Nov. 30, 2022
$ / shares
shares
|
---|---|
Cover [Abstract] | |
Entity Central Index Key | 0001282850 |
Amendment Flag | false |
Entity Inv Company Type | N-2 |
Document Type | N-CSRS |
Entity Registrant Name | First Trust Senior Floating Rate Income Fund II |
General Description of Registrant [Abstract] | |
Risk Factors [Table Text Block] | Principal
Risks
The
Fund is a closed-end management investment company designed primarily as a long-term investment and not as a trading vehicle. The Fund
is not intended to be a complete investment program and, due to the uncertainty inherent in all investments, there can be no assurance
that the Fund will achieve its investment objectives. The following discussion summarizes the principal risks associated with investing
in the Fund, which includes the risk that you could lose some or all of your investment in the Fund. The Fund is subject to the informational
requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940 and, in accordance therewith, files reports,
proxy statements and other information that is available for review. The order of the below risk factors does not indicate the significance
of any particular risk factor.
Credit
Agency Risk. Credit ratings are determined by credit rating agencies and are only the opinions of such
entities. Ratings assigned by a rating agency are not absolute standards of credit quality and do not evaluate market risk or the liquidity
of securities. Any shortcomings or inefficiencies in credit rating agencies’ processes for determining credit ratings may adversely
affect the credit ratings of securities held by the Fund or such credit rating agency’s ability to evaluate creditworthiness and,
as a result, may adversely affect those securities’ perceived or actual credit risk.
Credit
and Below-Investment Grade Securities Risk. Credit risk is the risk that the issuer or other obligated
party of a debt security in the Fund’s portfolio will fail to pay, or it is perceived that it will fail to pay, dividends or interest
and/or repay principal, when due. Below-investment grade instruments, including instruments that are not rated but judged to be of comparable
quality, are commonly referred to as high-yield securities or “junk” bonds and are considered speculative with respect to
the issuer’s capacity to pay dividends or interest and repay principal and are more susceptible to default or decline in market
value than investment grade securities due to adverse economic and business developments. High-yield securities are often unsecured and
subordinated to other creditors of the issuer. The market values for high-yield securities tend to be very volatile, and these securities
are generally less liquid than investment grade securities. For these reasons, an investment in the Fund is subject to the following specific
risks: (i) increased price sensitivity to changing interest rates and to a deteriorating economic environment; (ii) greater risk of loss
due to default or declining credit quality; (iii) adverse company specific events more likely to render the issuer unable to make dividend,
interest and/or principal payments; (iv) negative perception of the high-yield market which may depress the price and liquidity of high-yield
securities; (v) volatility; and (vi) liquidity.
Cyber
Security Risk. The Fund is susceptible to potential operational risks through breaches in cyber security.
A breach in cyber security refers to both intentional and unintentional events that may cause the Fund to lose proprietary information,
suffer data corruption or lose operational capacity. Such events could cause the Fund to incur regulatory penalties, reputational damage,
additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized
access to the Fund’s digital information systems through “hacking” or malicious software coding, but may also result
from outside attacks such as denial-of-service attacks through efforts to make network services unavailable to intended users. In addition,
cyber security breaches of the Fund’s third-party service providers, such as its administrator, transfer agent or custodian, or
issuers in which the Fund invests, can also subject the Fund to many of the same risks associated with direct cyber security breaches.
The Fund has established risk management systems designed to reduce the risks associated with cyber security. However, there is no guarantee
that such efforts will succeed, especially because the Fund does not directly control the cyber security systems of issuers or third party
service providers. Substantial costs may be incurred by the Fund in order to resolve or prevent cyber incidents in the future.
Health
Care Companies Risk. Through the Fund’s investments in senior loans, the Fund may be significantly
exposed to companies in the health care sector. Health care companies are involved in medical services or health care, including biotechnology
research and production, drugs and pharmaceuticals and health care facilities and services. These companies are subject to extensive competition,
generic drug sales or the loss of patent protection, product liability litigation and increased government regulation. Research and
development
costs of bringing new drugs to market are substantial, and there is no guarantee that the product will ever come to market. Health care
facility operators may be affected by the demand for services, efforts by government or insurers to limit rates, restriction of government
financial assistance and competition from other providers.
Illiquid
Securities Risk. The Fund invests a substantial portion of its assets in lower-quality debt issued by
companies that are highly leveraged. Lower-quality debt tends to be less liquid than higher-quality debt. Moreover, smaller debt issues
tend to be less liquid than larger debt issues. Although the resale or secondary market for senior loans is growing, it is currently limited.
There is no organized exchange or board of trade on which senior loans are traded. Instead, the secondary market for senior loans is an
unregulated inter-dealer or inter-bank resale market. In addition, senior loans in which the Fund invests may require the consent of the
borrower and/or agent prior to the settlement of the sale or assignment. These consent requirements can delay or impede the Fund’s
ability to settle the sale of senior loans. Depending on market conditions, the Fund may have difficulty disposing its senior loans, which
may adversely impact its ability to obtain cash to repay debt, to pay dividends, to pay expenses or to take advantage of new investment
opportunities.
Information
Technology Companies Risk. Information technology companies produce and provide hardware, software and
information technology systems and services. Information technology companies are generally subject to the following risks: rapidly changing
technologies and existing product obsolescence; short product life cycles; fierce competition; aggressive pricing and reduced profit margins;
the loss of patent, copyright and trademark protections; cyclical market patterns; evolving industry standards; and frequent new product
introductions and new market entrants. Information technology companies may be smaller and less experienced companies, with limited product
lines, markets or financial resources and fewer experienced management or marketing personnel. Information technology company stocks,
particularly those involved with the internet, have experienced extreme price and volume fluctuations that are often unrelated to their
operating performance. In addition, information technology companies are particularly vulnerable to federal, state and local government
regulation, and competition and consolidation, both domestically and internationally, including competition from foreign competitors with
lower production costs. Information technology companies also face competition for services of qualified personnel and heavily rely on
patents and intellectual property rights and the ability to enforce such rights to maintain a competitive advantage.
Interest
Rate Risk. The yield on the Fund’s common shares will tend to rise or fall as market interest
rates rise and fall, as senior loans pay interest at rates which float in response to changes in market rates. Changes in prevailing interest
rates can be expected to cause some fluctuation in the Fund’s net asset value. Similarly, a sudden and significant increase in market
interest rates may cause a decline in the Fund’s net asset value.
Many
financial instruments use or may use a floating rate based upon the London Interbank Offered Rate (“LIBOR”). The United Kingdom’s
Financial Conduct Authority (the “FCA”), which regulates LIBOR, intends to cease making LIBOR available as a reference rate
over a phase-out period that began in early 2022. However, subsequent announcements by the FCA, the LIBOR administrators, and other regulators
indicate that it is possible that the most widely used LIBOR rates may continue until mid-2023. While some instruments tied to LIBOR may
include a replacement rate, not all instruments have such fallback provisions and the effectiveness of such replacement rates remains
uncertain. The unavailability or replacement of LIBOR may affect the value, liquidity or return on certain Fund investments and may result
in costs incurred in connection with closing out positions and entering into new trades. In the United States, it is anticipated that
in many instances the Secured Overnight Financing Rate (“SOFR”) will replace LIBOR as the reference rate for many of the floating
rate instruments held by the Fund. There is no assurance that the composition or characteristics of SOFR, or any alternative reference
rate, will be similar to or produce the same value or economic equivalence as LIBOR or that instruments using an alternative rate will
have the same volume or liquidity. As a result, the transition process might lead to increased volatility and reduced liquidity in markets
that currently rely on LIBOR to determine interest rates; a reduction in the value of some LIBOR-based investments; increased difficulty
in borrowing or refinancing and diminished effectiveness of any applicable hedging strategies against instruments whose terms currently
include LIBOR; and/ or costs incurred in connection with temporary borrowings and closing out positions and entering into new agreements.
Any potential effects of the transition away from LIBOR on the Fund or on certain instruments in which the Fund invests can be difficult
to ascertain, and they may vary depending on a variety of factors. Any such effects on the transition away from LIBOR, as well as other
unforeseen effects, could result in losses to the Fund.
Leverage
Risk. The use of leverage by the Fund can magnify the effect of any losses. If the income and gains
from the securities and investments purchased with leverage proceeds do not cover the cost of leverage, the return to the common shares
will be less than if leverage had not been used. Leverage involves risks and special considerations for common shareholders including:
(i) the likelihood of greater volatility of net asset value and market price of the common shares than a comparable portfolio without
leverage; (ii) the risk that fluctuations in interest rates on borrowings will reduce the return to the common shareholders or will result
in fluctuations in the dividends paid on the common shares; (iii) in a declining market, the use of leverage is likely to cause a greater
decline in the net asset value of the common shares than if the Fund were not leveraged, which may result in a greater decline in the
market price of the common
shares; and (iv) when the Fund uses certain types of leverage, the investment advisory fee payable to the Advisor will be higher than
if the Fund did not use leverage.
Management
Risk and Reliance on Key Personnel. The implementation of the Fund’s investment strategy depends
upon the continued contributions of certain key employees of the Advisor, some of whom have unique talents and experience and would be
difficult to replace. The loss or interruption of the services of a key member of the portfolio management team could have a negative
impact on the Fund.
Market
Discount from Net Asset Value. Shares of closed-end investment companies such as the Fund frequently
trade at a discount from their net asset value. The Fund cannot predict whether its common shares will trade at, below or above net asset
value.
Market
Risk. Securities held by a fund, as well as shares of a fund itself, are subject to market fluctuations
caused by factors such as general economic conditions, political events, regulatory or market developments, changes in interest rates
and perceived trends in securities prices. Shares of a fund could decline in value or underperform other investments as a result of the
risk of loss associated with these market fluctuations. In addition, local, regional or global events such as war, acts of terrorism,
spread of infectious diseases or other public health issues, recessions, or other events could have a significant negative impact on a
fund and its investments. For example, the coronavirus (COVID-19) global pandemic and the aggressive responses taken by many governments,
including closing borders, restricting international and domestic travel, and the imposition of prolonged quarantines or similar restrictions,
had negative impacts, and in many cases severe impacts, on markets worldwide. While the development of vaccines has slowed the spread
of the virus and allowed for the resumption of reasonably normal business activity in the United States, many countries continue to impose
lockdown measures in an attempt to slow the spread. Also, in February 2022, Russia invaded Ukraine which has caused and could continue
to cause significant market disruptions and volatility across markets globally, including the United States. The hostilities and sanctions
resulting from those hostilities could have a significant impact on certain Fund investments as well as Fund performance. As the global
pandemic and conflict in Ukraine have illustrated, such events may affect certain geographic regions, countries, sectors and industries
more significantly than others. These events also may adversely affect the prices and liquidity of the Fund’s portfolio securities
or other instruments and could result in disruptions in the trading markets. Any of such circumstances could have a materially negative
impact on the value of the Fund’s shares and result in increased market volatility. During any such events, the Fund’s shares
may trade at increased premiums or discounts to their net asset value and the bid/ask spread on the Fund’s shares may widen.
Operational
Risk. The Fund is subject to risks arising from various operational factors, including, but not limited
to, human error, processing and communication errors, errors of the Fund’s service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. The Fund relies on third parties for a range of services, including
custody. Any delay or failure relating to engaging or maintaining such service providers may affect the Fund’s ability to meet its
investment objectives. Although the Fund and the Advisor seek to reduce these operational risks through controls and procedures, there
is no way to completely protect against such risks.
Potential
Conflicts of Interest Risk. First Trust and the portfolio managers have interests which may conflict
with the interests of the Fund. In particular, First Trust currently manages and may in the future manage and/or advise other investment
funds or accounts with the same or substantially similar investment objectives and strategies as the Fund. In addition, while the Fund
is using leverage, the amount of the fees paid to First Trust for investment advisory and management services are higher than if the Fund
did not use leverage because the fees paid are calculated based on managed assets. Therefore, First Trust has a financial incentive to
leverage the Fund.
Prepayment
Risk. Loans are subject to prepayment risk. Prepayment risk is the risk that the borrower on a loan
will repay principal (in part or in whole) prior to the scheduled maturity date. The degree to which borrowers prepay loans, whether as
a contractual requirement or at their election, may be affected by general business conditions, interest rates, the financial condition
of the borrower and competitive conditions among loan investors, among others. As such, prepayments cannot be predicted with accuracy.
Upon a prepayment, either in part or in full, the actual outstanding debt on which the Fund derives interest income will be reduced. The
Fund may not be able to reinvest the proceeds received on terms as favorable as the prepaid loan.
Reinvestment
Risk. Reinvestment risk is the risk that income from the Fund’s portfolio will decline if the
Fund invests the proceeds from matured, traded or called instruments at market interest rates that are below the Fund’s portfolio’s
current earnings rate. A decline in income could affect the common shares’ market price, level of distributions or the overall return
of the Fund.
Risks
Associated with Investments in Distressed Issuers. The Fund may invest in instruments of distressed
issuers, including firms that have defaulted on their debt obligations and/or filed for bankruptcy protection. Investing in such investments
involves a far greater level of risk than investing in issuers whose debt obligations are being met and whose debt trades at or close
to its “par” value. These investments are highly speculative with respect to the issuer’s ability to continue to make
interest payments and/or to pay its principal obligations
in full; can be very difficult to properly value, making them susceptible to a high degree of price volatility and rendering them less
liquid than performing debt obligations; and, for issuers involved in a bankruptcy proceeding, can be subject to a high degree of uncertainty
with regard to both the timing and the amount of the ultimate settlement.
Second
Lien Loan Risk. A second lien loan may have a claim on the same collateral pool as the first lien or
it may be secured by a separate set of assets. Second lien loans are typically secured by a second priority security interest or lien
on specified collateral securing the borrower’s obligation under the interest. Because second lien loans are second to first lien
loans, they present a greater degree of investment risk. Specifically, these loans are subject to the additional risk that the cash flow
of the borrower and property securing the loan may be insufficient to meet scheduled payments after giving effect to those loans with
a higher priority. In addition, loans that have a lower than first lien priority on collateral of the borrower generally have greater
price volatility than those loans with a higher priority and may be less liquid.
Senior
Loan Risk. The Fund invests in senior loans and therefore is subject to the risks associated therewith.
Investments in senior loans are subject to the same risks as investments in other types of debt securities, including credit risk, interest
rate risk, liquidity risk and valuation risk (which may be heightened because of the limited public information available regarding senior
loans and because loan borrowers may be leveraged and tend to be more adversely affected by changes in market or economic conditions).
Further, no active trading market may exist for certain senior loans, which may impair the ability of the Fund to realize full value in
the event of the need to sell a senior loan and which may make it difficult to value senior loans. Senior loans may not be considered
“securities” and the Fund may not be entitled to rely on the anti-fraud protections of the federal securities laws.
In
the event a borrower fails to pay scheduled interest or principal payments on a senior loan held by the Fund, the Fund will experience
a reduction in its income and a decline in the value of the senior loan, which will likely reduce dividends and lead to a decline in the
net asset value of the Fund’s common shares. If the Fund acquires a senior loan from another lender, for example, by acquiring a
participation, the Fund may also be subject to credit risks with respect to that lender. Although senior loans may be secured by specific
collateral, the value of the collateral may not equal the Fund’s investment when the senior loan is acquired or may decline below
the principal amount of the senior loan subsequent to the Fund’s investment. Also, to the extent that collateral consists of stock
of the borrower or its subsidiaries or affiliates, the Fund bears the risk that the stock may decline in value, be relatively illiquid,
and/or may lose all or substantially all of its value, causing the senior loan to be under collateralized. Therefore, the liquidation
of the collateral underlying a senior loan may not satisfy the issuer’s obligation to the Fund in the event of non-payment of scheduled
interest or principal, and the collateral may not be readily liquidated. The senior loan market has seen a significant increase in loans
with weaker lender protections including, but not limited to, limited financial maintenance covenants or, in some cases, no financial
maintenance covenants (i.e., “covenant-lite loans”) that would typically be included in a traditional loan agreement and general
weakening of other restrictive covenants applicable to the borrower such as limitations on incurrence of additional debt, restrictions
on payments of junior debt or restrictions on dividends and distributions. Weaker lender protections such as the absence of financial
maintenance covenants in a loan agreement and the inclusion of “borrower-favorable” terms may impact recovery values and/or
trading levels of senior loans in the future. The absence of financial maintenance covenants in a loan agreement generally means that
the lender may not be able to declare a default if financial performance deteriorates. This may hinder the Fund’s ability to reprice
credit risk associated with a particular borrower and reduce the Fund’s ability to restructure a problematic loan and mitigate potential
loss. As a result, the Fund’s exposure to losses on investments in senior loans may be increased, especially during a downturn in
the credit cycle or changes in market or economic conditions.
Valuation
Risk. The valuation of senior loans may carry more risk than that of common stock. Because the secondary
market for senior loans is limited, it may be difficult to value the loans held by the Fund. Market quotations may not be readily available
for some senior loans and valuation may require more research than for liquid securities. In addition, elements of judgment may play a
greater role in the valuation of senior loans than for securities with a secondary market, because there is less reliable objective data
available. These difficulties may lead to inaccurate asset pricing.
|
Latest Share Price | $ 10.18 |
Latest NAV | $ 11.03 |
Capital Stock, Long-Term Debt, and Other Securities [Abstract] | |
Outstanding Security, Title [Text Block] | Common Shares |
Outstanding Security, Held [Shares] | shares | 25,983,388 |
Credit Agency Risk [Member] | |
General Description of Registrant [Abstract] | |
Risk [Text Block] | Credit
Agency Risk. Credit ratings are determined by credit rating agencies and are only the opinions of such
entities. Ratings assigned by a rating agency are not absolute standards of credit quality and do not evaluate market risk or the liquidity
of securities. Any shortcomings or inefficiencies in credit rating agencies’ processes for determining credit ratings may adversely
affect the credit ratings of securities held by the Fund or such credit rating agency’s ability to evaluate creditworthiness and,
as a result, may adversely affect those securities’ perceived or actual credit risk.
|
Credit And Below Investment Grade Securities Risk [Member] | |
General Description of Registrant [Abstract] | |
Risk [Text Block] | Credit
and Below-Investment Grade Securities Risk. Credit risk is the risk that the issuer or other obligated
party of a debt security in the Fund’s portfolio will fail to pay, or it is perceived that it will fail to pay, dividends or interest
and/or repay principal, when due. Below-investment grade instruments, including instruments that are not rated but judged to be of comparable
quality, are commonly referred to as high-yield securities or “junk” bonds and are considered speculative with respect to
the issuer’s capacity to pay dividends or interest and repay principal and are more susceptible to default or decline in market
value than investment grade securities due to adverse economic and business developments. High-yield securities are often unsecured and
subordinated to other creditors of the issuer. The market values for high-yield securities tend to be very volatile, and these securities
are generally less liquid than investment grade securities. For these reasons, an investment in the Fund is subject to the following specific
risks: (i) increased price sensitivity to changing interest rates and to a deteriorating economic environment; (ii) greater risk of loss
due to default or declining credit quality; (iii) adverse company specific events more likely to render the issuer unable to make dividend,
interest and/or principal payments; (iv) negative perception of the high-yield market which may depress the price and liquidity of high-yield
securities; (v) volatility; and (vi) liquidity.
|
Cyber Security Risk [Member] | |
General Description of Registrant [Abstract] | |
Risk [Text Block] | Cyber
Security Risk. The Fund is susceptible to potential operational risks through breaches in cyber security.
A breach in cyber security refers to both intentional and unintentional events that may cause the Fund to lose proprietary information,
suffer data corruption or lose operational capacity. Such events could cause the Fund to incur regulatory penalties, reputational damage,
additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized
access to the Fund’s digital information systems through “hacking” or malicious software coding, but may also result
from outside attacks such as denial-of-service attacks through efforts to make network services unavailable to intended users. In addition,
cyber security breaches of the Fund’s third-party service providers, such as its administrator, transfer agent or custodian, or
issuers in which the Fund invests, can also subject the Fund to many of the same risks associated with direct cyber security breaches.
The Fund has established risk management systems designed to reduce the risks associated with cyber security. However, there is no guarantee
that such efforts will succeed, especially because the Fund does not directly control the cyber security systems of issuers or third party
service providers. Substantial costs may be incurred by the Fund in order to resolve or prevent cyber incidents in the future.
|
Health Care Companies Risk [Member] | |
General Description of Registrant [Abstract] | |
Risk [Text Block] | Health
Care Companies Risk. Through the Fund’s investments in senior loans, the Fund may be significantly
exposed to companies in the health care sector. Health care companies are involved in medical services or health care, including biotechnology
research and production, drugs and pharmaceuticals and health care facilities and services. These companies are subject to extensive competition,
generic drug sales or the loss of patent protection, product liability litigation and increased government regulation. Research and
development
costs of bringing new drugs to market are substantial, and there is no guarantee that the product will ever come to market. Health care
facility operators may be affected by the demand for services, efforts by government or insurers to limit rates, restriction of government
financial assistance and competition from other providers.
|
Illiquid Securities Risk [Member] | |
General Description of Registrant [Abstract] | |
Risk [Text Block] | Illiquid
Securities Risk. The Fund invests a substantial portion of its assets in lower-quality debt issued by
companies that are highly leveraged. Lower-quality debt tends to be less liquid than higher-quality debt. Moreover, smaller debt issues
tend to be less liquid than larger debt issues. Although the resale or secondary market for senior loans is growing, it is currently limited.
There is no organized exchange or board of trade on which senior loans are traded. Instead, the secondary market for senior loans is an
unregulated inter-dealer or inter-bank resale market. In addition, senior loans in which the Fund invests may require the consent of the
borrower and/or agent prior to the settlement of the sale or assignment. These consent requirements can delay or impede the Fund’s
ability to settle the sale of senior loans. Depending on market conditions, the Fund may have difficulty disposing its senior loans, which
may adversely impact its ability to obtain cash to repay debt, to pay dividends, to pay expenses or to take advantage of new investment
opportunities.
|
Information Technology Companies Risk [Member] | |
General Description of Registrant [Abstract] | |
Risk [Text Block] | Information
Technology Companies Risk. Information technology companies produce and provide hardware, software and
information technology systems and services. Information technology companies are generally subject to the following risks: rapidly changing
technologies and existing product obsolescence; short product life cycles; fierce competition; aggressive pricing and reduced profit margins;
the loss of patent, copyright and trademark protections; cyclical market patterns; evolving industry standards; and frequent new product
introductions and new market entrants. Information technology companies may be smaller and less experienced companies, with limited product
lines, markets or financial resources and fewer experienced management or marketing personnel. Information technology company stocks,
particularly those involved with the internet, have experienced extreme price and volume fluctuations that are often unrelated to their
operating performance. In addition, information technology companies are particularly vulnerable to federal, state and local government
regulation, and competition and consolidation, both domestically and internationally, including competition from foreign competitors with
lower production costs. Information technology companies also face competition for services of qualified personnel and heavily rely on
patents and intellectual property rights and the ability to enforce such rights to maintain a competitive advantage.
|
Interest Rate Risk [Member] | |
General Description of Registrant [Abstract] | |
Risk [Text Block] | Interest
Rate Risk. The yield on the Fund’s common shares will tend to rise or fall as market interest
rates rise and fall, as senior loans pay interest at rates which float in response to changes in market rates. Changes in prevailing interest
rates can be expected to cause some fluctuation in the Fund’s net asset value. Similarly, a sudden and significant increase in market
interest rates may cause a decline in the Fund’s net asset value.
Many
financial instruments use or may use a floating rate based upon the London Interbank Offered Rate (“LIBOR”). The United Kingdom’s
Financial Conduct Authority (the “FCA”), which regulates LIBOR, intends to cease making LIBOR available as a reference rate
over a phase-out period that began in early 2022. However, subsequent announcements by the FCA, the LIBOR administrators, and other regulators
indicate that it is possible that the most widely used LIBOR rates may continue until mid-2023. While some instruments tied to LIBOR may
include a replacement rate, not all instruments have such fallback provisions and the effectiveness of such replacement rates remains
uncertain. The unavailability or replacement of LIBOR may affect the value, liquidity or return on certain Fund investments and may result
in costs incurred in connection with closing out positions and entering into new trades. In the United States, it is anticipated that
in many instances the Secured Overnight Financing Rate (“SOFR”) will replace LIBOR as the reference rate for many of the floating
rate instruments held by the Fund. There is no assurance that the composition or characteristics of SOFR, or any alternative reference
rate, will be similar to or produce the same value or economic equivalence as LIBOR or that instruments using an alternative rate will
have the same volume or liquidity. As a result, the transition process might lead to increased volatility and reduced liquidity in markets
that currently rely on LIBOR to determine interest rates; a reduction in the value of some LIBOR-based investments; increased difficulty
in borrowing or refinancing and diminished effectiveness of any applicable hedging strategies against instruments whose terms currently
include LIBOR; and/ or costs incurred in connection with temporary borrowings and closing out positions and entering into new agreements.
Any potential effects of the transition away from LIBOR on the Fund or on certain instruments in which the Fund invests can be difficult
to ascertain, and they may vary depending on a variety of factors. Any such effects on the transition away from LIBOR, as well as other
unforeseen effects, could result in losses to the Fund.
|
Leverage Risk [Member] | |
General Description of Registrant [Abstract] | |
Risk [Text Block] | Leverage
Risk. The use of leverage by the Fund can magnify the effect of any losses. If the income and gains
from the securities and investments purchased with leverage proceeds do not cover the cost of leverage, the return to the common shares
will be less than if leverage had not been used. Leverage involves risks and special considerations for common shareholders including:
(i) the likelihood of greater volatility of net asset value and market price of the common shares than a comparable portfolio without
leverage; (ii) the risk that fluctuations in interest rates on borrowings will reduce the return to the common shareholders or will result
in fluctuations in the dividends paid on the common shares; (iii) in a declining market, the use of leverage is likely to cause a greater
decline in the net asset value of the common shares than if the Fund were not leveraged, which may result in a greater decline in the
market price of the common
shares; and (iv) when the Fund uses certain types of leverage, the investment advisory fee payable to the Advisor will be higher than
if the Fund did not use leverage.
|
Management Risk And Reliance On Key Personnel [Member] | |
General Description of Registrant [Abstract] | |
Risk [Text Block] | Management
Risk and Reliance on Key Personnel. The implementation of the Fund’s investment strategy depends
upon the continued contributions of certain key employees of the Advisor, some of whom have unique talents and experience and would be
difficult to replace. The loss or interruption of the services of a key member of the portfolio management team could have a negative
impact on the Fund.
|
Market Discount From Net Asset Value [Member] | |
General Description of Registrant [Abstract] | |
Risk [Text Block] | Market
Discount from Net Asset Value. Shares of closed-end investment companies such as the Fund frequently
trade at a discount from their net asset value. The Fund cannot predict whether its common shares will trade at, below or above net asset
value.
|
Market Risk [Member] | |
General Description of Registrant [Abstract] | |
Risk [Text Block] | Market
Risk. Securities held by a fund, as well as shares of a fund itself, are subject to market fluctuations
caused by factors such as general economic conditions, political events, regulatory or market developments, changes in interest rates
and perceived trends in securities prices. Shares of a fund could decline in value or underperform other investments as a result of the
risk of loss associated with these market fluctuations. In addition, local, regional or global events such as war, acts of terrorism,
spread of infectious diseases or other public health issues, recessions, or other events could have a significant negative impact on a
fund and its investments. For example, the coronavirus (COVID-19) global pandemic and the aggressive responses taken by many governments,
including closing borders, restricting international and domestic travel, and the imposition of prolonged quarantines or similar restrictions,
had negative impacts, and in many cases severe impacts, on markets worldwide. While the development of vaccines has slowed the spread
of the virus and allowed for the resumption of reasonably normal business activity in the United States, many countries continue to impose
lockdown measures in an attempt to slow the spread. Also, in February 2022, Russia invaded Ukraine which has caused and could continue
to cause significant market disruptions and volatility across markets globally, including the United States. The hostilities and sanctions
resulting from those hostilities could have a significant impact on certain Fund investments as well as Fund performance. As the global
pandemic and conflict in Ukraine have illustrated, such events may affect certain geographic regions, countries, sectors and industries
more significantly than others. These events also may adversely affect the prices and liquidity of the Fund’s portfolio securities
or other instruments and could result in disruptions in the trading markets. Any of such circumstances could have a materially negative
impact on the value of the Fund’s shares and result in increased market volatility. During any such events, the Fund’s shares
may trade at increased premiums or discounts to their net asset value and the bid/ask spread on the Fund’s shares may widen.
|
Operational Risk [Member] | |
General Description of Registrant [Abstract] | |
Risk [Text Block] | Operational
Risk. The Fund is subject to risks arising from various operational factors, including, but not limited
to, human error, processing and communication errors, errors of the Fund’s service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. The Fund relies on third parties for a range of services, including
custody. Any delay or failure relating to engaging or maintaining such service providers may affect the Fund’s ability to meet its
investment objectives. Although the Fund and the Advisor seek to reduce these operational risks through controls and procedures, there
is no way to completely protect against such risks.
|
Potential Conflicts Of Interest Risk [Member] | |
General Description of Registrant [Abstract] | |
Risk [Text Block] | Potential
Conflicts of Interest Risk. First Trust and the portfolio managers have interests which may conflict
with the interests of the Fund. In particular, First Trust currently manages and may in the future manage and/or advise other investment
funds or accounts with the same or substantially similar investment objectives and strategies as the Fund. In addition, while the Fund
is using leverage, the amount of the fees paid to First Trust for investment advisory and management services are higher than if the Fund
did not use leverage because the fees paid are calculated based on managed assets. Therefore, First Trust has a financial incentive to
leverage the Fund.
|
Prepayment Risk [Member] | |
General Description of Registrant [Abstract] | |
Risk [Text Block] | Prepayment
Risk. Loans are subject to prepayment risk. Prepayment risk is the risk that the borrower on a loan
will repay principal (in part or in whole) prior to the scheduled maturity date. The degree to which borrowers prepay loans, whether as
a contractual requirement or at their election, may be affected by general business conditions, interest rates, the financial condition
of the borrower and competitive conditions among loan investors, among others. As such, prepayments cannot be predicted with accuracy.
Upon a prepayment, either in part or in full, the actual outstanding debt on which the Fund derives interest income will be reduced. The
Fund may not be able to reinvest the proceeds received on terms as favorable as the prepaid loan.
|
Reinvestment Risk [Member] | |
General Description of Registrant [Abstract] | |
Risk [Text Block] | Reinvestment
Risk. Reinvestment risk is the risk that income from the Fund’s portfolio will decline if the
Fund invests the proceeds from matured, traded or called instruments at market interest rates that are below the Fund’s portfolio’s
current earnings rate. A decline in income could affect the common shares’ market price, level of distributions or the overall return
of the Fund.
|
Risks Associated With Investments In Distressed Issuers [Member] | |
General Description of Registrant [Abstract] | |
Risk [Text Block] | Risks
Associated with Investments in Distressed Issuers. The Fund may invest in instruments of distressed
issuers, including firms that have defaulted on their debt obligations and/or filed for bankruptcy protection. Investing in such investments
involves a far greater level of risk than investing in issuers whose debt obligations are being met and whose debt trades at or close
to its “par” value. These investments are highly speculative with respect to the issuer’s ability to continue to make
interest payments and/or to pay its principal obligations
in full; can be very difficult to properly value, making them susceptible to a high degree of price volatility and rendering them less
liquid than performing debt obligations; and, for issuers involved in a bankruptcy proceeding, can be subject to a high degree of uncertainty
with regard to both the timing and the amount of the ultimate settlement.
|
Second Lien Loan Risk [Member] | |
General Description of Registrant [Abstract] | |
Risk [Text Block] | Second
Lien Loan Risk. A second lien loan may have a claim on the same collateral pool as the first lien or
it may be secured by a separate set of assets. Second lien loans are typically secured by a second priority security interest or lien
on specified collateral securing the borrower’s obligation under the interest. Because second lien loans are second to first lien
loans, they present a greater degree of investment risk. Specifically, these loans are subject to the additional risk that the cash flow
of the borrower and property securing the loan may be insufficient to meet scheduled payments after giving effect to those loans with
a higher priority. In addition, loans that have a lower than first lien priority on collateral of the borrower generally have greater
price volatility than those loans with a higher priority and may be less liquid.
|
Senior Loan Risk [Member] | |
General Description of Registrant [Abstract] | |
Risk [Text Block] | Senior
Loan Risk. The Fund invests in senior loans and therefore is subject to the risks associated therewith.
Investments in senior loans are subject to the same risks as investments in other types of debt securities, including credit risk, interest
rate risk, liquidity risk and valuation risk (which may be heightened because of the limited public information available regarding senior
loans and because loan borrowers may be leveraged and tend to be more adversely affected by changes in market or economic conditions).
Further, no active trading market may exist for certain senior loans, which may impair the ability of the Fund to realize full value in
the event of the need to sell a senior loan and which may make it difficult to value senior loans. Senior loans may not be considered
“securities” and the Fund may not be entitled to rely on the anti-fraud protections of the federal securities laws.
In
the event a borrower fails to pay scheduled interest or principal payments on a senior loan held by the Fund, the Fund will experience
a reduction in its income and a decline in the value of the senior loan, which will likely reduce dividends and lead to a decline in the
net asset value of the Fund’s common shares. If the Fund acquires a senior loan from another lender, for example, by acquiring a
participation, the Fund may also be subject to credit risks with respect to that lender. Although senior loans may be secured by specific
collateral, the value of the collateral may not equal the Fund’s investment when the senior loan is acquired or may decline below
the principal amount of the senior loan subsequent to the Fund’s investment. Also, to the extent that collateral consists of stock
of the borrower or its subsidiaries or affiliates, the Fund bears the risk that the stock may decline in value, be relatively illiquid,
and/or may lose all or substantially all of its value, causing the senior loan to be under collateralized. Therefore, the liquidation
of the collateral underlying a senior loan may not satisfy the issuer’s obligation to the Fund in the event of non-payment of scheduled
interest or principal, and the collateral may not be readily liquidated. The senior loan market has seen a significant increase in loans
with weaker lender protections including, but not limited to, limited financial maintenance covenants or, in some cases, no financial
maintenance covenants (i.e., “covenant-lite loans”) that would typically be included in a traditional loan agreement and general
weakening of other restrictive covenants applicable to the borrower such as limitations on incurrence of additional debt, restrictions
on payments of junior debt or restrictions on dividends and distributions. Weaker lender protections such as the absence of financial
maintenance covenants in a loan agreement and the inclusion of “borrower-favorable” terms may impact recovery values and/or
trading levels of senior loans in the future. The absence of financial maintenance covenants in a loan agreement generally means that
the lender may not be able to declare a default if financial performance deteriorates. This may hinder the Fund’s ability to reprice
credit risk associated with a particular borrower and reduce the Fund’s ability to restructure a problematic loan and mitigate potential
loss. As a result, the Fund’s exposure to losses on investments in senior loans may be increased, especially during a downturn in
the credit cycle or changes in market or economic conditions.
|
Valuation Risk [Member] | |
General Description of Registrant [Abstract] | |
Risk [Text Block] | Valuation
Risk. The valuation of senior loans may carry more risk than that of common stock. Because the secondary
market for senior loans is limited, it may be difficult to value the loans held by the Fund. Market quotations may not be readily available
for some senior loans and valuation may require more research than for liquid securities. In addition, elements of judgment may play a
greater role in the valuation of senior loans than for securities with a secondary market, because there is less reliable objective data
available. These difficulties may lead to inaccurate asset pricing.
|
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