FS KKR Capital, the listed business development company co-managed by KKR, has secured a fresh $300 capital commitment from its sponsor as it grapples with mounting credit stress and a continued decline in valuation metrics, according to a report by Reuters.
The support package comes as the vehicle faces increasing pressure from deteriorating loan performance and investor concerns across the listed and non-traded private credit sector. Market sentiment has weakened in recent months amid broader scrutiny of underwriting standards and potential disruption to corporate borrowers exposed to rapid shifts in technology-driven industries.
Under the new arrangements, KKR will deploy $150m through the issuance of convertible perpetual preferred equity and separately launch a tender offer to acquire up to $150m of common shares. The offer price has been set at $11 per share, although the manager noted it believes the underlying portfolio value remains higher than current trading levels. Alongside this, FS KKR Capital has also approved a $300m share repurchase initiative.
Performance indicators continued to weaken in the latest reporting period. Net asset value per share declined to $18.83 from $20.89 at year-end, while the company swung to a wider loss of $1.57 per share compared with a $0.41 loss previously.
Credit quality deterioration was also evident, with non-accrual assets rising to 4.2% of fair value, up from 3.4% at the end of December. The increase reflects a combination of newly stressed positions, markdowns on existing holdings, and broader spread widening across leveraged credit markets. Analysts have flagged the trend as evidence of worsening portfolio dynamics relative to peers.
Fitch Ratings recently downgraded the vehicle into speculative-grade territory, underscoring concerns about asset quality and earnings stability. Market participants have also pointed to a 46% decline in value over the past year as investor confidence in the structure has weakened.
Pressure on the portfolio has been compounded by write-downs in several holdings, including exposure to software company Medallia, which is expected to be transferred back to creditors in a restructuring process that could eliminate billions in equity value for its private equity owners.
