Fitch Ratings has affirmed the 'BB' Long-Term Issuer Default Rating (IDR) and debt ratings of Fifth Street Finance Corp (FSC). The Rating Outlook is Negative. Fitch has chosen to withdraw the ratings of FSC for commercial reasons. A full list of rating actions is at the end of this rating action commentary.

On March 9, 2016, Fitch downgraded FSC's Long-Term IDR and debt ratings to 'BB' from 'BB+' and maintained the Negative Rating Outlook. The rating actions were taken as part of Fitch's periodic review of Business Development Companies (BDCs), which comprises 10 publicly rated firms. For more information on this rating action, please see the rating action commentary titled 'Fitch Downgrades Fifth Street Finance to 'BB'; Maintains Negative Outlook'. There has been no material change in FSC's credit profile since the previous rating actions.

KEY RATING DRIVERS

IDR AND SENIOR DEBT

The rating affirmations reflect the absence of material changes in FSC's credit profile since Fitch's last rating actions. FSC's ratings remain supported by the senior secured nature of the majority of the collateral, limited exposure to oil and gas investments, low interest rate risk, appropriate funding and liquidity profiles, and the regulatory framework (Investment Company Act of 1940) under which BDCs operate.

The downgrade on March 9, 2016 reflected FSC's continued asset quality deterioration and higher leverage relative to peers, compounded by a weakening franchise as a result of accounting misstatements and inconsistencies in strategy, growth plans, fee structure, dividend policy, and share repurchase activity. Additionally, pending shareholder lawsuits were expected to continue to be a distraction for management and likely to negatively impact operating performance, as elevated legal expenses weigh on net investment income and dividend coverage in the near term.

Other rating constraints applicable to the BDC sector more broadly include the capital markets impact on leverage, given the need to fair value portfolio investments each quarter, the limited ability to retain capital due to dividend distribution requirements and Fitch's Negative sector and Rating Outlooks, which reflect competitive underwriting conditions, earnings pressure, underperforming energy investments, unsustainable asset quality metrics, increased activist pressure, and limited access to growth capital.

The maintenance of the Negative Rating Outlook reflects the potential for further asset quality deterioration and longer-term uncertainties with respect to management's fundamental risk appetite regarding leverage, portfolio risk, growth, and dividend management. Given the time it could take to address these issues, Fitch expected that resolution of the Negative Outlook could be toward the outer end of the 12-24 month Outlook horizon. As such, Fitch is unable to resolve the Negative Outlook prior to the rating withdrawal.

RATING SENSITIVITIES

IDR AND SENIOR DEBT

Rating sensitivities are no longer relevant given today's rating withdrawal.

Fitch has affirmed and withdrawn the ratings as follows:

Fifth Street Finance Corp.

• Long-Term IDR at 'BB';
• Senior secured debt at 'BB';
• Senior unsecured debt at 'BB'.

The Rating Outlook is Negative.

Date of Relevant Committee: June 6, 2016

Summary of Financial Statement Adjustments: Fitch has made no adjustments that are not disclosed within the company's public filings.

Additional information is available on www.fitchratings.com.