FS KKR Narrows Loss as Portfolio Contracts
Second-quarter investment income fell 27% from a year earlier to $290 million.
FS KKR Capital (FSK), the business development company, narrowed its second-quarter net loss to $0.13 a share as credit quality improved and leverage moved into management’s target range.
The result marked an improvement from the first quarter, when the company lost $1.57 a share, even as a smaller portfolio and lower asset value showed the continuing pressure on its investments. Total net realized and unrealized losses improved to $0.56 a share from $2.00.
Net investment income rose sequentially to $0.44 a share from $0.42, and adjusted net investment income increased to $0.43 from $0.41. Total investment income declined from $398 million a year earlier, led by lower interest and fee income.
The portfolio contracted 6.9% from the first quarter to $11.42 billion. Purchases of $590 million were outweighed by $1.33 billion of sales and repayments, leaving fair value 12.2% below its level at the end of 2024. Net asset value fell to $18.30 a share from $18.83 at March 31.
Interest income from non-controlled and unaffiliated investments dropped to $166 million from $224 million a year earlier, and fee income fell to $4 million from $9 million. Paid-in-kind interest from those investments declined to $8 million from $15 million.
Credit measures improved as non-accrual investments declined to 3.8% of portfolio fair value from 4.2% at the end of March. Debt-to-equity fell to 127% from 138%, with debt principal declining to $6.49 billion from $7.29 billion.
FS KKR began buying shares under its $300 million repurchase program, spending $4 million through June 30 and another $36 million through Aug. 5. The company also received $150 million from a KKR subsidiary’s purchase of convertible preferred stock, with proceeds designated for uses including common-share repurchases or debt repayment.
The company declared a third-quarter common distribution of $0.44 a share, up from the second quarter’s $0.42 payout and supported in part by a 50% subordinated income-incentive-fee waiver. The higher distribution accompanied a balance sheet with lower leverage and new capital available for repurchases.