DEF 14A: FS KKR Capital Corp. Seeks Stockholder Approval for Share Issuance Below NAV

FS KKR Capital Corp. is asking stockholders to approve a proposal that would allow the company to sell shares below net asset value (NAV) in future offerings to provide flexibility for capital raising.

Summary

• FS KKR Capital Corp. is holding its 2025 Annual Meeting of Stockholders on June 18, 2025.
• Stockholders will vote on the election of three Class C Directors (Barbara Adams, Michael C. Forman, and Jerel A. Hopkins) for a three-year term expiring in 2028.
• A key proposal is to approve the company's ability to sell shares below net asset value (NAV) per share in future offerings.
• The board of directors unanimously recommends voting FOR each of the proposals.
• As of April 23, 2025, there were 280,066,432.663 shares outstanding.
• The company is seeking authorization to sell shares below NAV to maintain consistent access to capital, repay debt, build its investment portfolio, and for other corporate purposes.
• The proposal limits the number of shares salable below NAV to 25% of the company's outstanding shares immediately prior to each sale.
• The authorization, if approved, would be effective for 12 months following stockholder approval.
• The company's shares have traded both above and below NAV historically.
• The board believes that the flexibility to issue shares below NAV is in the best interests of the company and its stockholders.
• The company relies on its advisor, FS/KKR Advisor, LLC, for day-to-day management and investment strategies.
• The company has appointed Deloitte & Touche LLP as its independent registered public accounting firm for the year ending December 31, 2025.
• Stockholders must submit proposals for the 2026 annual meeting by December 29, 2025.

Sentiment

Score: 7

Explanation: The document is largely factual and procedural, outlining the proposals for the annual meeting. The board's recommendation to vote in favor of the proposals suggests a positive outlook from management's perspective, but the potential dilution from issuing shares below NAV introduces a note of caution.

Positives

• The board believes that having the flexibility to issue shares at a price below NAV per Share in certain instances is in the best interests of the Company and its stockholders and would provide added financial flexibility to comply with BDC, RIC and credit facility requirements the Company and its subsidiaries may face from time to time, including the requirement to maintain the required asset coverage ratio under the 1940 Act, and would provide access to capital markets to pursue attractive investment opportunities and/or repay any outstanding indebtedness or for other corporate purposes.
• The flexibility to issue Shares at a price below the then-current NAV per Share could also minimize the likelihood that the Company would be required to sell assets to raise capital at prices it believed to be less than such assets intrinsic values.

Negatives

• Any sale of Shares by the Company at a price below NAV per Share would result in an immediate dilution to existing stockholders on a per Share basis.
• Stockholders of the Company should also consider that they will have no subscription, preferential or preemptive rights to shares authorized for issuance, and thus any future issuance of shares at a price below NAV per share would dilute a stockholders holdings of shares as a percentage of shares outstanding to the extent the stockholder does not purchase sufficient shares in the offering or otherwise to maintain the stockholders percentage interest.

Risks

• The company's shares may trade below NAV, which is a risk separate from the risk that the company's NAV will decrease.
• Issuing shares below NAV can dilute existing stockholders' equity and voting power.
• The company relies on its advisor, FS/KKR Advisor, LLC, which may have conflicts of interest in allocating time and investment opportunities.
• The company is subject to regulatory restrictions as a BDC, including limitations on co-investing with affiliates.

Future Outlook

The company seeks to maintain consistent access to capital through public and private equity markets to raise capital for operations, repay debt, build its investment portfolio, and for other general corporate purposes.

Management Comments

• Michael C. Forman, Chairman and Chief Executive Officer: 'Your vote and participation in the governance of the Company is very important.'
• The Companys board of directors unanimously recommends that you vote FOR each of the proposals to be considered and voted on at the Annual Meeting.

Industry Context

As a BDC, FS KKR Capital Corp. operates under specific regulatory requirements, including maintaining asset coverage and distributing earnings to stockholders, which necessitates consistent access to capital markets.

Comparison to Industry Standards

• The document mentions that the Board compares the total amount paid to the Advisor for such services as a percentage of the Company's net assets to the same ratio as reported by other comparable BDCs.
• The document mentions that the Board may also engage compensation consultants from time-to-time, following consideration of certain factors related to such consultants independence, and decisions on director compensation are based on, among other things, a review of data of comparable BDCs.

Related Party Transactions

• The document describes the Investment Advisory Agreement and Administration Agreement with FS/KKR Advisor, LLC, including fees and expense reimbursements.
• The Advisor agreed, effective July 1, 2021, to waive up to $15 per quarter of the subordinated incentive fee on income to which it is entitled to under the investment advisory agreement. The fee waiver expired on December 31, 2022.

Stakeholder Impact

• Approval of the share issuance proposal could impact shareholders through potential dilution of NAV per share.
• The company's ability to access capital markets affects its ability to invest and generate returns for shareholders.
• The election of directors will shape the company's governance and strategic direction.

Next Steps

• Stockholders are requested to execute and return promptly the accompanying proxy card.
• Stockholders will vote on the election of three Class C Directors and the proposal to allow the Company in future offerings to sell its shares below net asset value per share.

Key Dates

Keywords

FS KKR Capital Corp, Annual Meeting, Stockholders, Share Issuance, Net Asset Value, NAV, Directors, Proxy Statement, Capital Raising, BDC