FS KKR CapitalNYSE: FSK

PHILADELPHIA and NEW YORK , June 6, 2024 /PRNewswire/ -- FS KKR Capital Corp. (NYSE: FSK) today announced that it has completed its previously announced offering of $600 million in aggregate principal amount of its 6.875% unsecured notes due 2029 (the "Notes"). BofA Securities, Inc., BMO Capital Markets Corp., J.P.

PHILADELPHIA and NEW YORK , May 31, 2024 /PRNewswire/ -- FS KKR Capital Corp. (NYSE: FSK) announced that it has priced an underwritten public offering of $600 million in aggregate principal amount of its 6.875% unsecured notes due 2029 (the "Notes"). The Notes will mature on August 15, 2029 and may be redeemed in whole or in part at FSK's option at any time at par plus a "make-whole" premium, provided that the Notes may be redeemed at par one month prior to their maturity.

FS KKR Capital is a trustworthy business development company that offers a 15.1% annualized yield and has a strong credit rating. FSK benefits from rising interest rates because of its floating-rate debt, but there are some limitations to this advantage. The company's most recent earnings report demonstrates its resilience, with impressive net investment income and strong dividend payouts.

Look beyond analysts' estimates for FS KKR Capital (FSK) and assess projections for key metrics to better understand the company's performance for the quarter ending March 2024.

FS KKR Capital is a significant BDC that holds a collection of debt investments generating substantial income. Most of their investments are in floating rate loans, which are advantageous in a rising interest rate environment. While their dividend coverage is adequate, there are worries about an increase in non-accruals and a decline in interest coverage ratio.

Shares of FS KKR Capital Corp declined after their Q4 2023 earnings report, but the author remains bullish on the stock. The decline in net investment income and the risk of loans going on non-accrual status are concerns for the author's investment thesis.

FS KKR Capital, the fourth largest BDC, has recently sold off due to rising non-accruals and a drop in net investment income. Despite these challenges, the BDC's dividend is safe and covered by NII, and its balance sheet remains in good shape with ample liquidity. The BDC is currently undervalued, making it an attractive income play for investors in search of higher yields.

FS KKR has seen a valuation drawdown after reporting NII results that met expectations. An increase in the BDC's non-accrual percentage has raised fears of a dividend cut, but the current dividend is well-supported by cash flow. FS KKR's distribution coverage ratio in FY 2023 was 1.11X which reflects a low dividend risk.

FS KKR Capital Corp reports a concerning increase in its non-accrual ratio for Q4, leading to an 8% drop in stock price. The BDC's dividend safety deteriorates, with the pay-out ratio crossing above 100%, potentially leading to a cut in special dividend payments. The company's credit quality trend and dividend potential in 2024 raise uncertainty, leading to a higher discount to NAV.