Updated
Updated · Barron's · May 11
KKR Unveils $600 Million Support for FS KKR Fund as Portfolio Value Drops 10%
Updated
Updated · Barron's · May 11

KKR Unveils $600 Million Support for FS KKR Fund as Portfolio Value Drops 10%

3 articles · Updated · Barron's · May 11

Summary

  • $18.83 a share marked FS KKR Capital Corp.'s net asset value at March-end, down 10% from December after borrower stress and new repayment problems deepened losses.
  • 42 cents a share is the fund's new quarterly dividend, cut from 70 cents a year ago after loan markdowns more than erased income from interest and dividends.
  • $600 million in support is meant to shore up the stock: KKR will tender for $150 million of shares at $11, buy $150 million of convertible preferreds, and the fund will repurchase $300 million of stock.
  • A third of the $1.3 billion write-down came from Medallia, Cubic Corp. and Affordable Care, while lending has slowed sharply to $500 million from $2 billion a year earlier as the portfolio shrinks.
  • The $12 billion business development company has become a cautionary tale in private credit, with its shares trading at 58% of net asset value and a portfolio tilted beyond first-lien loans.

Insights

With KKR's retail fund faltering, is the entire private credit 'gold rush' about to end for everyday investors?
As AI becomes a 'wrecking ball' for software, are private credit funds facing a hidden, systemic crisis?