FSK · FS KKR Capital Corp.

FS KKR Capital Corp. entered into a definitive Purchase Agreement on May 10, 2026 with KKR Alternative Assets L.P., an affiliate of KKR & Co. Inc., to issue 6,000,000 shares of cumulative convertible perpetual preferred stock for $150 million at $25 per share. This senior instrument ranks above common stock with a $25 liquidation preference, 5% cash dividend (or 7% PIK option), and conversion into common stock at $18.83 per share after 6 months, matching Q1-end NAV. Closing awaits the Purchaser's $150M common stock tender offer at $11/share and HSR clearance, expected on the 11th business day post-tender. Proceeds target general corporate uses including a new $300M common repurchase program authorized through June 2027 and debt repayment. Concurrently, a Registration Rights Agreement grants demand, piggyback, and shelf rights for conversion shares. Q1 2026 results showed net investment income of $0.42/share (down from $0.48 prior quarter) amid $499M purchases vs $710M repayments, NAV drop to $18.83/share from unrealized losses and non-accruals rising to 4.2% of portfolio, and net debt/equity at 131%. Strategic actions include KKR waiving 50% subordinated incentive fees for four quarters to bolster NII and the $0.42/share Q2 distribution. A May 8 credit facility amendment cut commitments to $4.05B, raised margins, and reset equity covenants, reflecting deleveraging focus. These moves signal management confidence in intrinsic value above current trading levels while addressing NAV pressure from portfolio challenges.