KKR's Fund Downgraded to Junk by Moody's Amid Rising Bad Loans
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 6 days ago
0mins
Source: CNBC
- Credit Rating Downgrade: Moody's downgraded FS KKR Capital Corp's debt rating from Baa3 to Ba1, indicating a shift to junk status, which reflects worsening asset quality and declining profitability, leading to erosion of net asset value relative to peers.
- Rising Bad Loans: By the end of 2025, the fund's non-accrual loans rose to 5.5%, one of the highest rates among rated business development companies, indicating increasing asset quality challenges that could impact future investment returns.
- Investor Withdrawal Surge: Amid concerns over impending credit losses, retail investors are rushing to withdraw funds, creating liquidity pressures for the fund that may further increase borrowing costs and affect future returns.
- Poor Financial Performance: FS KKR reported a net loss of $114 million in Q4 2025, with only $11 million in net income for the entire year, highlighting a significant decline in profitability that could undermine its competitive position in the market.
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Analyst Views on FSK
Wall Street analysts forecast FSK stock price to rise
6 Analyst Rating
0 Buy
6 Hold
0 Sell
Hold
Current: 9.910
Low
15.50
Averages
17.25
High
18.50
Current: 9.910
Low
15.50
Averages
17.25
High
18.50
About FSK
FS KKR Capital Corp. is an externally managed, non-diversified, closed-end management investment company that has elected to be regulated as a business development company. The Company is focused on providing customized credit solutions to private middle market United States companies. Its investment objectives are to generate current income and, to a lesser extent, long-term capital appreciation. Its portfolio is comprised primarily of investments in senior secured loans and second lien secured loans of private middle market United States companies and, to a lesser extent, subordinated loans and certain asset-based financing loans of private United States companies. It may purchase interests in loans or make other debt investments, including investments in senior secured bonds, through secondary market transactions in the over-the-counter market or directly from its target companies as primary market or directly originated investments. The Company is managed by FS/KKR Advisor, LLC.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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