8-K: FS KKR Capital Corp. Announces First Quarter 2025 Results and Declares $0.70 per Share Distribution

FS KKR Capital Corp. reports its Q1 2025 financial results, including a net investment income of $0.67 per share and the declaration of a $0.70 per share distribution for Q2 2025.

Summary

• FS KKR Capital Corp. (FSK) announced its financial results for the quarter ended March 31, 2025.
• The company declared a second quarter 2025 distribution of $0.70 per share, consisting of a $0.64 base distribution and a $0.06 supplemental distribution.
• Net investment income was $0.67 per share, compared to $0.61 per share for the previous quarter.
• Adjusted net investment income was $0.65 per share, slightly lower than the $0.66 per share in the prior quarter.
• Net asset value (NAV) decreased to $23.37 per share from $23.64 per share as of December 31, 2024.
• The company experienced a total net realized and unrealized loss of $0.24 per share, compared to a loss of $0.09 per share in the previous quarter.
• Total purchases amounted to $1,998 million, while sales and repayments totaled $1,407 million, including $290 million in sales to the joint venture Credit Opportunities Partners JV, LLC.
• The net debt to equity ratio increased to 114% as of March 31, 2025, compared to 104% as of December 31, 2024.
• The fair value of total investments was $14.1 billion, with 63.3% invested in senior secured securities.
• The weighted average annual yield on accruing debt investments was 11.0%, down from 11.3% in the previous quarter.
• Investments on non-accrual status represented 2.1% of the total investment portfolio at fair value.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While the company reported a decrease in NAV and an increase in net realized and unrealized losses, it also declared a stable distribution and saw an increase in net investment income. The management's comments are optimistic, but the mixed financial results temper the overall sentiment.

Positives

• Net investment income increased to $0.67 per share from $0.61 per share in the previous quarter.
• The company declared a distribution of $0.70 per share for the second quarter.
• Approximately $2.0 billion of new investments were originated during the quarter.
• The company maintains a significant amount of cash and availability under financing arrangements, with $472 million in cash and $2.6 billion available.

Negatives

• Net asset value per share decreased from $23.64 to $23.37.
• Total net realized and unrealized loss increased to $0.24 per share from $0.09 per share in the previous quarter.
• The net debt to equity ratio increased to 114% from 104%.
• The weighted average annual yield on accruing debt investments decreased from 11.3% to 11.0%.

Risks

• The company's forward-looking statements are subject to uncertainties, including economic changes, terrorism, natural disasters, pandemics, and regulatory changes.
• The price at which shares of common stock may trade on the New York Stock Exchange is a risk factor.
• Investments on non-accrual status represented 2.1% of the total investment portfolio at fair value.

Future Outlook

The company's future performance is subject to various economic and market conditions, and it undertakes no obligation to update forward-looking statements.

Management Comments

• Michael C. Forman, Chief Executive Officer & Chairman, stated that the company delivered a strong start to the year, generating $0.65 per share of Adjusted Net Investment Income and originating approximately $2.0 billion of new investments.
• Management believes their strategy of building spillover income supports the continued stability of their distributions amid current market volatility.

Industry Context

FS KKR Capital Corp., as a business development company (BDC), operates in the space of providing credit solutions to middle market U.S. companies, competing with other BDCs and private credit funds.

Comparison to Industry Standards

• Ares Capital Corporation (ARCC), another major BDC, reported a net debt to equity ratio of 1.13x as of March 31, 2024, which is similar to FSK's 1.14x as of March 31, 2025.
• Main Street Capital (MAIN), another BDC, focuses on lower middle market companies and often has a lower yield on its debt investments due to the perceived lower risk profile of its portfolio companies.
• Blackstone Secured Lending Fund (BXSL) reported a weighted average yield on debt investments of 12.1% for Q1 2024, which is higher than FSK's 11.0% for Q1 2025, potentially indicating a different risk profile or investment strategy.

Related Party Transactions

• The company sold $290 million of investments to its joint venture Credit Opportunities Partners JV, LLC.

Stakeholder Impact

• Shareholders will receive a distribution of $0.70 per share for the second quarter.
• The company's performance impacts its employees and the communities in which it operates.
• The company's investments support private middle market U.S. companies.

Next Steps

• FSK will host its first quarter 2025 results conference call on May 8, 2025.
• An investor presentation of financial information will be available on FSK's website.
• The second quarter distribution of $0.70 per share will be paid on or about July 2, 2025.

Key Dates

Keywords

FS KKR Capital Corp, BDC, Business Development Company, Net Investment Income, Distribution, Financial Results, Investments, Debt, Yield, Portfolio