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1. Company Snapshot

1.a. Company Description

FS KKR Capital Corp.is a business development company specializing in investments in debt securities.It provides customized credit solutions to private middle market U.S. companies.


It invest primarily in the senior secured debt and, to a lesser extent, the subordinated debt of private middle market U.S. companies.It seeks to purchase interests in loans through secondary market transactions or directly from the target companies as primary market investments.It also seeks to invest in first lien senior secured loans, second lien secured loans and, to a lesser extent, subordinated loans, or mezzanine loans.


In connection with the debt investments, the firm also receives equity interests such as warrants or options as additional consideration.It also seek to purchase minority interests in the form of common or preferred equity in our target companies, either in conjunction with one of the debt investments or through a co-investment with a financial sponsor.Additionally, on an opportunistic basis, the fund may also invest in corporate bonds and similar debt securities.


The fund does not seek to invest in start-up companies, turnaround situations, or companies with speculative business plans.It seeks to invest in small and middle-market companies based in United States.The fund seeks to invest in firms with annual revenue between $10 million to $2.5 billion.


It focus on providing customized one-stop credit solutions to private upper middle market companies with annual EBITDA of $50 million to $100 million at the time of investment.It seeks to exit from securities by selling them in a privately negotiated over- the- counter market.For any investments that are not able to be sold within the secondary market, the firm seeks to exit such investments through repayment, an initial public offering of equity securities, merger, sale or recapitalization.

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1.b. Last Insights on FSK

FS KKR Capital Corp.'s recent performance has been negatively impacted by weak earnings, poor dividend coverage, and limited new investment activity. The company's net investment income decreased to $0.57 per share, and its dividend coverage is questionable as distributions exceed net investment income. Additionally, FSK's portfolio quality is challenged by persistently high non-accrual rates compared to peers. The company's leverage also rose above peer averages, and its net debt to equity ratio stood at 116% as of September 30, 2025. Analysts have a consensus "Hold" rating on the stock.

1.c. Company Highlights

2. FSK's Q3 2025 Earnings: A Resilient Performance

FSK reported a net investment income of $0.57 per share, in line with the analyst estimates, and adjusted net investment income of $0.57 per share, slightly below the public guidance of approximately $0.58. The company's total investment income was $373 million, a decrease of $25 million compared to the second quarter, primarily driven by a decrease in interest income. The total expenses were $210 million, a decrease of $15 million compared to the second quarter, mainly due to lower interest expense. The net asset value increased to $21.99, up from $21.93 in the previous quarter.

Publication Date: Nov -15

📋 Highlights
  • Q3 Net Investment Income (NII):: Generated $0.57 per share, slightly below $0.58 guidance but consistent with adjusted NII of $0.57 per share.
  • New Investments:: Originated $1.1 billion in Q3, with 65% in first lien loans, 15% in asset-based finance, and 12% in joint venture capital calls.
  • Portfolio Performance:: Portfolio companies achieved 4% weighted average year-on-year EBITDA growth, with median interest coverage of 1.8x.
  • Capital Structure:: Issued $400 million in unsecured notes at 6.125%, swapped to floating rate at 4.4%, maintaining gross debt-to-equity at 120% (vs. 131% in Q2).
  • 2026 Distribution Strategy:: Targeting a 10% annualized yield on net asset value (NAV), with $3.7 billion in available liquidity to support distributions.

Investment Portfolio Performance

FSK's portfolio companies reported a weighted average year-on-year EBITDA growth rate of approximately 4% across companies in which they have invested since April 2018. Interest coverage levels remain healthy, with median third-quarter coverage at 1.8x. The fair value investment portfolio had a value of $13.4 billion, consisting of 224 portfolio companies, with the 10 largest portfolio companies representing approximately 20% of the fair value of the investment portfolio.

Capital Structure and Liquidity

FSK's gross and net debt to equity levels were 120% and 116%, respectively, compared to 131% and 120% at June 30, indicating a reduction in leverage. The company's available liquidity was $3.7 billion, and approximately 64% of its drawn balance sheet and 44% of its committed balance sheet was comprised of unsecured debt. In September, FSK issued $400 million of 6.125% unsecured notes due 2031, which were subsequently swapped to a floating rate via an interest rate swap agreement at a weighted average cost of 4.4%.

2026 Distribution Strategy

FSK announced its 2026 distribution strategy, expecting a total distribution to equate to an annualized yield on its net asset value of approximately 10%. The base distribution level was set with a degree of confidence in the forward curve and refinancing of liabilities. As Daniel Pietrzak mentioned, "We did not give ourselves a lot of benefit from upside levers, such as spreads widening or assets rotating into income-producing buckets."

Valuation

With a Price-to-Book Ratio of 0.71 and a Dividend Yield of 17.96%, FSK's valuation appears attractive. The company's ROE is 4.27%, indicating a relatively stable return on equity. Analysts estimate next year's revenue growth at -9.8%, which may impact the company's ability to maintain its current dividend yield. However, FSK's available liquidity and unsecured debt profile provide a stable foundation for its distribution strategy.

3. NewsRoom

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Why I'm Parking 45% Of My BDC Capital In These 2 Names

Dec -02

Source: seekingalpha.com

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Want $50,000 in Yearly Passive Income? Invest $50,000 in These Stocks

Dec -01

Source: 247wallst.com

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Creative Planning Sells 5,890 Shares of FS KKR Capital Corp. $FSK

Nov -26

Source: defenseworld.net

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Advisors Asset Management Inc. Acquires 32,409 Shares of FS KKR Capital Corp. $FSK

Nov -26

Source: defenseworld.net

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FS KKR Capital Corp. (NYSE:FSK) Receives Consensus Rating of “Reduce” from Brokerages

Nov -25

Source: defenseworld.net

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A Rare Buying Opportunity: Blue-Chip 11-12% Yields Too Cheap To Ignore

Nov -24

Source: seekingalpha.com

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Fund Increases Holdings: Is This Stock a Good Buy?

Nov -23

Source: fool.com

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Worried About Rate Cuts? 2 BDCs Best Positioned For The Storm

Nov -23

Source: seekingalpha.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (9.90%)

6. Segments

Investment and Related Activities

Expected Growth: 9.9%

FS KKR Capital Corp.'s 9.9% growth in Investment and Related Activities is driven by increasing demand for alternative investment solutions, expansion into new markets, and strategic acquisitions. Additionally, the company's diversified investment portfolio, strong credit quality, and effective risk management practices have contributed to its growth.

7. Detailed Products

Senior Loans

FS KKR Capital Corp. provides senior loans to companies, offering a stable source of capital for growth, acquisitions, and refinancing.

Unitranche Loans

FS KKR Capital Corp. offers unitranche loans, which combine senior and subordinated debt into a single loan, providing a simplified capital structure.

Second Lien Loans

FS KKR Capital Corp. provides second lien loans, which offer additional capital to companies with existing senior debt, providing flexibility and liquidity.

Mezzanine Debt

FS KKR Capital Corp. offers mezzanine debt, which combines debt and equity features, providing a flexible financing solution for companies.

Equity Co-Investments

FS KKR Capital Corp. makes equity co-investments alongside its debt investments, providing additional capital and strategic support to portfolio companies.

8. FS KKR Capital Corp.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for FS KKR Capital Corp. is medium due to the presence of alternative investment options for investors, such as other private equity firms and investment companies.

Bargaining Power Of Customers

The bargaining power of customers for FS KKR Capital Corp. is low due to the company's diversified investor base and limited dependence on individual investors.

Bargaining Power Of Suppliers

The bargaining power of suppliers for FS KKR Capital Corp. is medium due to the company's reliance on a diverse range of suppliers for its investment activities.

Threat Of New Entrants

The threat of new entrants for FS KKR Capital Corp. is high due to the relatively low barriers to entry in the private equity industry and the increasing popularity of alternative investment options.

Intensity Of Rivalry

The intensity of rivalry for FS KKR Capital Corp. is high due to the highly competitive nature of the private equity industry and the presence of several established players.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 54.45%
Debt Cost 5.73%
Equity Weight 45.55%
Equity Cost 10.31%
WACC 7.82%
Leverage 119.54%

11. Quality Control: FS KKR Capital Corp. passed 2 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Federated Hermes

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Growth: 6.6

Quality: 8.0

Yield: 7.0

Momentum: 9.0

Volatility: 10.0

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Yield: 10.0

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Value: 6.7

Growth: 5.8

Quality: 7.9

Yield: 10.0

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A-Score: 6.5/10

Value: 6.6

Growth: 4.7

Quality: 5.6

Yield: 6.0

Momentum: 7.5

Volatility: 8.3

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A-Score: 6.4/10

Value: 4.7

Growth: 6.7

Quality: 8.4

Yield: 6.0

Momentum: 6.0

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FS KKR Capital

A-Score: 6.4/10

Value: 6.0

Growth: 4.4

Quality: 7.2

Yield: 10.0

Momentum: 1.5

Volatility: 9.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

15.46$

Current Price

15.46$

Potential

-0.00%

Expected Cash-Flows