Q1 2026 Results Show Significant Loss, NAV Decline, Dividend Cut; Company Secures $150M Preferred Stock Investment from KKR, Announces Buyback Programs Amid Credit Facility Reduction

summarizeSummary

FS KKR Capital Corp. reported a significant Q1 2026 net loss and NAV decline, leading to a further dividend cut and a reduction in its credit facility. The company is undertaking a multi-pronged capital strategy, including a $150 million preferred stock investment from KKR Alternative Assets L.P. with terms unfavorable to common shareholders, alongside share repurchase programs and an adviser fee waiver.

check_boxKey Events

• Significant Q1 2026 Net Loss and NAV Decline

  The company reported a net loss of $1.57 per share for Q1 2026, a substantial decrease from a net investment income of $0.43 per share in Q1 2025. Net Asset Value (NAV) per share fell to $18.83 from $20.89 at December 31, 2025.

• Further Dividend Cut Announced

  The Q2 2026 quarterly distribution was reduced to $0.42 per share, following a previous cut to $0.48 per share in Q1 2026, down from $0.70 per share in Q1 2025.

• Credit Facility Amended with Reduced Capacity and Higher Costs

  The Senior Secured Revolving Credit Facility commitments were reduced by $648.3 million to $4,051.7 million. Applicable margins (borrowing costs) increased, and the minimum Shareholders' Equity floor was reset lower to $3,750.0 million from $5,048.6 million.

• $150M Convertible Preferred Stock Investment from KKR Alternative Assets L.P.

  KKR Alternative Assets L.P. will purchase $150 million in newly issued convertible perpetual preferred stock. This stock ranks senior to common, has a $25 liquidation preference, pays 5% cash (or 7% PIK) dividends, and is convertible into common stock at an initial price of $18.83 per share (current NAV, but significantly above the current market price of $10.45).

auto_awesomeAnalysis

FS KKR Capital Corp. reported a substantial net loss of $1.57 per share for Q1 2026, a sharp reversal from a net investment income of $0.43 per share in Q1 2025. The company's Net Asset Value (NAV) per share also declined significantly to $18.83 from $20.89 at year-end 2025. This financial deterioration is further underscored by a reduction in the quarterly dividend to $0.42 per share for Q2 2026, following a cut to $0.48 in Q1 2026. Concurrently, the company amended its Senior Secured Revolving Credit Facility, reducing total commitments by $648.3 million to $4,051.7 million, increasing borrowing costs, and lowering the minimum Shareholders' Equity floor. To address liquidity and capital concerns, KKR Alternative Assets L.P. will purchase $150 million in newly issued convertible perpetual preferred stock. This preferred stock ranks senior to common stock, has a $25 liquidation preference, pays 5% cash (or 7% PIK) dividends, and is convertible into common stock at an initial price of $18.83 per share (which is the current NAV, but significantly above the current market price of $10.45). This structure is highly dilutive for existing common shareholders upon conversion. Additionally, KKR Alternative Assets L.P. announced a $150 million cash tender offer for common stock, and the company authorized a separate $300 million share repurchase program, both intended to buy common stock below NAV. The adviser, KKR Credit, also agreed to waive 100% of its portion of the subordinated income incentive fee for four quarters, starting Q2 2026, which is a positive for expense reduction. The company also disclosed a securities class action lawsuit alleging false and misleading statements regarding portfolio valuations and distribution strategy.