Fs Kkr Capital ((FSK)) has held its Q2 earnings call. Read on for the main highlights of the call.
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FS KKR Capital’s recent earnings call presented a mixed bag of outcomes, reflecting both positive strides and notable challenges. The company showcased robust investment activity and a steadfast distribution strategy, yet faced hurdles with specific portfolio companies and a rise in nonaccruals, which adversely affected the net asset value. Despite these setbacks, FSK is proactively addressing these issues.
Strong New Investment Activity
FS KKR Capital’s investment team demonstrated resilience by originating $3.4 billion in investments during the first half of 2025, with $1.4 billion in the second quarter alone. This performance underscores strong new investment activity, even amidst a sluggish M&A environment.
Liquidity and Distribution Strategy
FSK maintained robust liquidity, closing the quarter with $3.1 billion available across cash, unsettled trades, and undrawn credit facilities. The company declared a third-quarter distribution of $0.70 per share, aligning with its 2025 distribution strategy of $2.80 per share for the year.
Portfolio Diversification and Growth
FSK’s portfolio companies reported a weighted average year-over-year EBITDA growth rate of approximately 8%. Nonaccruals related to 91% of the portfolio originated by KKR Credit were lower than the industry average, indicating effective portfolio diversification and growth.
Decline in Net Asset Value
The net asset value per share for FSK declined by 6.2%, from $23.37 to $21.93 during the quarter. This decrease was primarily attributed to company-specific issues affecting four portfolio companies.
Increased Nonaccruals
Nonaccruals rose to 5.3% of the portfolio on a cost basis and 3% on a fair value basis, up from 3.5% and 2.1% respectively in the previous quarter. This increase was due to challenges with four portfolio companies.
Challenges with Specific Portfolio Companies
FSK encountered difficulties with specific companies such as Production Resource Group, 48forty, Kellermeyer Bergensons Services, and Worldwise. These challenges significantly contributed to the negative movement in net asset value.
Forward-Looking Guidance
FS KKR Capital provided forward-looking guidance indicating a net investment income of $0.62 per share and an adjusted net investment income of $0.60 per share, slightly below their public guidance. The company maintained its 2025 distribution guidance of $2.80 per share and expects third-quarter GAAP net investment income to approximate $0.58 per share.
In conclusion, FS KKR Capital’s earnings call revealed a complex landscape of achievements and obstacles. While the company continues to drive strong investment activity and uphold its distribution strategy, it faces challenges with specific portfolio companies and rising nonaccruals. The company remains committed to addressing these issues and maintaining its financial guidance.