FS KKR Capital reported a first-quarter 2026 loss and announced a series of strategic actions valued at roughly $600 million aimed at supporting net asset value and shareholder returns.
These first quarter moves come after several quarters of pressure on portfolio values, and investors will be scrutinizing the first quarter results for signs that the reset is gaining traction.
The business development company posted a loss of $1.57 per share for the quarter ended March 31, 2026, compared with a loss of $0.41 per share in Q4 2025. Net investment income was $0.42 per share, down from $0.48 per share in the prior quarter.
Net asset value declined to $18.83 per share from $20.89 per share at year-end 2025. That drop of roughly 10% in a single period adds to earlier quarters of NAV erosion for FS KKR, putting the first quarter results near the sharper end of moves seen across large listed BDCs this cycle. Total net realized and unrealized losses widened to $2.00 per share from $0.89 per share.
The company's board declared a second-quarter distribution of $0.42 per share, payable on or about July 2, 2026, to stockholders of record as of June 17, 2026.
A KKR subsidiary has agreed to invest $150 million in cumulative convertible perpetual preferred stock, carrying a 5.00% cash dividend rate or, at FSK's option, 7.00% in payment-in-kind dividends. The initial conversion price is $18.83 per share, matching the March 31 NAV.
Market data earlier this year had shown FS KKR’s common stock trading at a steep discount to NAV, so the preferred investment and other actions are being read as a sponsor-backed response to those earlier results.
Separately, KKR plans to launch a $150 million fixed-price tender offer at $11.00 per share on or around May 12, 2026, to remain open for 20 business days. KKR said it views the intrinsic value of FSK's common stock as above the tender price.
The board also authorized a $300 million stock repurchase program to commence after the tender expires, running through June 1, 2027. KKR will additionally waive 100% of its portion of the subordinated income incentive fee — equal to 50% of the total fee — for four consecutive quarters beginning Q2 2026.
In a joint statement, chief executive officer and chairman Michael C. Forman and president and chief investment officer Daniel R. Pietrzak attributed the NAV decline to legacy investments, new non-accruals and spread widening in parts of the portfolio.
"We believe FSK's current stock price underappreciates the long-term value associated with FSK's investment portfolio and the KKR Credit platform. The four strategic actions announced this morning underscore our confidence in FSK and align that level of confidence with shareholders," they said.
Total investments stood at $12.3 billion at quarter-end, with 63.7% in senior secured securities. Investments on non-accrual status rose to 4.2% of the portfolio at fair value, up from 3.4% at year-end, while the net debt-to-equity ratio climbed to 131% from 122%.
For insurance and other institutional investors in private credit, these first quarter trends in non-accruals and leverage at FS KKR will be key markers for how the wider asset class is handling a higher-rate environment.
The weighted average annual yield on accruing debt investments was 9.9%, down from 10.1%. Quarterly purchases totaled $499 million against $710 million in sales and repayments.
On May 8, FSK amended its senior secured revolving credit facility, reducing total commitments to approximately $4.05 billion from $4.7 billion and resetting the minimum shareholders' equity floor to $3.75 billion. The applicable margin for extending lenders was raised to a range of 0.775% to 1.9%.
Earlier commentary from credit analysts this year has highlighted such facility changes across several BDCs as part of a broader repricing of risk, adding another layer of context to FS KKR’s first quarter results.
