FSK 10-K & 10-Q changes, risk factors and insider trading
FS KKR Capital Corp · NYSE · CIK 1422183 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Any failure by the Adviser to manage and support our investment process may hinder the achievement of our investment objectives.”
New heading “It may be difficult to bring suit or foreclosure in non-U.S. countries.”
New heading “Any unrealized losses we experience on our portfolio may be an indication of future realized losses, which could reduce our income available for distribution.”
New heading “We may not be able to obtain all required state licenses.”
New heading “We may be obligated to pay the Adviser incentive compensation even if we incur a net loss due to a decline in the value of our portfolio.”
New heading “Our shares may be purchased by the Adviser or its affiliates.”
New heading “The Adviser relies on key personnel, the loss of any of whom could impair its ability to successfully manage us.”
New heading “Asset-backed securities and structured products present additional risks.”
New heading “Price declines in the medium- and large-sized U.S. corporate debt market may adversely affect the fair value of our portfolio, reducing our NAV through increased net unrealized depreciation.”
New heading “We may enter into securities lending agreements.”
New heading “Any investments in securities or assets of publicly traded companies are subject to the risks inherent in investing in public securities.”
New heading “We may use a wide range of investment techniques that could expose us to a diverse range of risks.”
New heading “Technological innovations and industry disruptions may negatively impact us.”
New heading “Syndication of Co-Investments.”
New heading “Provisions in a credit facility may limit our investment discretion.”
New heading “Changes in interest rates may affect our cost of capital and net investment income.”
New heading “We have formed and may in the future form one or more CLOs, which may subject us to certain structured financing risks.”
Removed heading “Risks Related to Our Business and Structure”
Removed heading “Risks Related to the Adviser and its Affiliates”
Removed heading “Risks Related to Business Development Companies and RICs”
Removed heading “Risks Related to our Investments”
Removed heading “Risks Related to Debt Financing”
Removed heading “Risks Related to an Investment in Our Common Stock”
Removed heading “General Risk Factors”
Removed heading “International investments create additional risks.”
Removed heading “We are currently operating in a period of capital markets disruption and economic uncertainty.”
Largest changes
“For instance, on January 14, 2025, the Antitrust Division of the U.S. Department of Justice, or the DOJ, filed a civil antitrust complaint, or the DOJ Complaint, in the U.S. District Court for the Southern District of New York against KKR & Co. and various KKR-sponsored investment entities, or the KKR Defendants, alleging violations of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, or the HSR Act. …”see in full comparison
“The ongoing invasion of Ukraine by Russia and related sanctions have increased global political and economic uncertainty. Because Russia is a major exporter of oil and natural gas, the invasion and related economic sanctions have reduced the supply, and increased the price, of energy, which has a material effect on inflation and may continue to exacerbate ongoing supply chain issues. …”see in full comparison
From time to time, capital markets may experience periods of disruption and instability. Such disruptions may result in, amongst other things, write-offs, the re-pricing of credit risk, the failure of financial institutions or worsening general economic conditions, any of which could materially and adversely impact the broader financial and credit markets and reduce the availability of debt and equity capital for the market as a whole and financial services firms in particular. There can be no assurance these market conditions will not occur or worsen in the future, including economic and political events in or affecting the world’s major economies, such as the ongoingsee in full comparisonwarwarsbetweeninRussiaEastern Europe andUkraine and conflicts inthe Middle East.SanctionsSanctions,imposed by the U.S.tariffs andotherglobalcountriestradein connection with hostilities between Russia and Ukraine and the tensions between China and Taiwannegotiations have caused additional financial market volatility and affected the global economy. Concerns over future increases in inflation, economic recession, as well as interest rate volatility and fluctuations in oil and gas prices resulting from global production and demand levels, as well as geopolitical tension, have exacerbated market volatility. Market uncertainty and volatilityhavecould alsobeenbe magnified as a result ofthe 2024U.S.presidentialpresidential, congressional andcongressionalotherelectionselections, and resulting uncertainties regarding actual and potential shifts in U.S. foreign investment, trade, economic and other policies, including with respect to treaties and tariffs.
Cybersecurity refers to the combination of technologies, processes, and procedures established to protect information technology systems and data from unauthorized access, attack, or damage. We, our affiliates and our and their respective third-party service providers are subject to cybersecurity risks. Our business operations rely upon secure information technology systems for data processing, storage and reporting. We depend on the effectiveness of the information and cybersecurity policies, procedures and capabilities maintained by our affiliates and our and their respective third-party service providers to protect their computer and telecommunications systems and the data that reside on or are transmitted through them.see in full comparisonCybersecurityThereriskshashavebeensignificantlyanincreased in recent years and, while we have not experienced any material losses relating to cyber-attacks or other information security breaches, we could suffer such lossesincrease in thefuture.frequencyOur,and sophistication of the cyber and security threats faced, with attacks ranging from those common to businesses to those that are more advanced and persistent, which may target us or ouraffiliatesservice providers because we or our service providers hold a significant amount of confidential andoursensitive information about investors, portfolio companies or obligors (as applicable) andtheirpotentialrespectiveinvestments.third-partyAsserviceaproviders’result,computertheresystems,issoftwareaandheightenednetworksriskmay be vulnerable to unauthorized access, computer viruses or other malicious code and other events that could haveof a securityimpact,breachasorwelldisruptionaswithcyber-attacks that do not have a security impact but may nonetheless cause harm, such as causing denial-of-service attacks (i.e., effortsrespect tomakethisnetwork services unavailable to intended users) on websites, servers or other online systems. If one or more of such events occur, it potentially could jeopardize confidential and other information, including nonpublic personal information and sensitive business data, processed and stored in, and transmitted through, computer systems and networks, or otherwise cause interruptions or malfunctions in our operations or the operations of our affiliates and our and their respective third-party service providers. This could result in significant losses, reputational damage, litigation, regulatory fines or penalties, or otherwise adversely affect our business, financial condition or results of operations.information.
“Our, our affiliates and our and their respective third-party service providers’ computer systems, software and networks may be vulnerable to unauthorized access, computer viruses or other malicious code and other events that could have a security impact, as well as cyber-attacks that do not have a security impact but may nonetheless cause harm, such as causing denial-of-service attacks (i.e., efforts to make network services unavailable to intended users) on websites, servers or other online systems. …”see in full comparison
“The success of our activities is affected by general economic and market conditions, including, among others, interest rates, availability of credit, inflation rates, economic uncertainty, changes in laws, and trade barriers. These factors could affect the level and volatility of securities prices and the liquidity of our investments. Volatility or illiquidity could impair our profitability or result in losses. These factors also could adversely affect the availability or cost of our leverage, which would result in lower returns. In addition, the U.S. …”see in full comparison
Full comparison: every changed paragraph (176)
Risks Related to Our Business and Structure
•IfOur ability to achieve our investment advisoryobjectives agreementdepends on the Adviser’s ability to manage and support our investment process and if our Advisory Agreement were to be terminated, or if the Adviser loses any members of its senior management team, our ability to achieve our investment objectives could be significantly harmed.
•TheBecause inabilityour ofbusiness themodel Adviserdepends to generatea investmentsignificant opportunitiesextent throughupon relationships with private equity sponsors, investment banks and commercial banksbanks, the inability of the Adviser to maintain or develop these relationships, or the failure of these relationships to generate investment opportunities, could adversely affect our business.
•We operate in a highly competitive market for investment opportunities.opportunities, which could reduce returns and result in losses.
•If we, our affiliates and our and their respective third-party service providers are unable to maintain the availability of electronic data systems and safeguard the security of data, our ability to conduct business may be compromised, which could impair our liquidity, disrupt our business, damage our reputation or otherwise adversely affect our business.
•The Small Business Credit Availability Act, or SBCA Act, allows us to incur additional leverage.
•Failure to safeguard the security of our data could compromise our ability to conduct business.
Risks Related to the Adviser and its Affiliates
•The Adviser and its affiliatesaffiliates, including our officers and some of our directors, face conflicts of interest as a result of compensation arrangements between us and the AdviserAdviser, andwhich relatedcould toresult obligationsin actions that are not in the Adviserbest andinterest its affiliates have toof our affiliates and to other clients.stockholders.
•WeThe timeframe and resources that the Adviser and individuals employed by the Adviser devote to us may be diverted and we may face additional competition because employees of the Adviser are not prohibited from raising money for or managing another entity that makes the same types of investments that we target.
Risks Related to Business Development Companies and RICs
•We are uncertain of our sources for funding our future capital needs and if we cannot obtain debt or equity financing on acceptable terms, or at all, our ability to acquire investments and to expand our operations will be adversely affected.
•Our ability to acquire investments may be adversely affected if we cannot obtain financing.
•Our investments in prospective portfolio companies may be risky, and we could lose all or part of our investment.
•Our investments in private investment funds, including hedge funds, private equity funds, limited liability companies and other business entities, subject us indirectly to the underlying risks of such private investment funds and additional fees and expenses.
Risks Related to our Investments
•Our investments in prospective portfolio companies may be risky, and we could lose all of our investment.
•Our investments in private investment funds subject us indirectly to the underlying risks of such private investment funds and additional fees and expenses.
•There may be circumstances where our debt investments could be subordinated to claims of other creditors or we could be subject to lender liability claims. If there is a default, the value of any collateral securing our debt investments may not be sufficient to repay in full both the other creditors and us.
•Second priority liens on collateral securing debt investments that we make to our portfolio companies may be subject to control by senior creditors with first priority liens. If there is a default, the value of the collateral may not be sufficient to repay in full both the first priority creditors and us.
•Changes to United States tariff and import/export regulations may have a negative effect on our portfolio companies.
•We may from time to time enter into total return swaps, credit default swaps or other derivative transactions which expose us to certain risks.risks, including credit risk, market risk, liquidity risk and other risks similar to those associated with the use of leverage.
Risks Related to Debt Financing
•The agreements governing our or our subsidiaries’ debt financing arrangements containcontain, and agreements governing future debt financing arrangements may contain, various covenants which, if not complied with, could have a material adverse effect on our ability to meet our investment obligations.obligations and to pay distributions to our stockholders.
Risks Related to an Investment in Our Common Stock
•There is a risk that investors in our common stock may not receive distributions.distributions or that distributions may not increase, or may decrease, over time.
•PortionsOur distribution proceeds may exceed our earnings. Therefore, portions of the distributions that we make may represent a return of capital to stockholders.stockholders, which will lower their tax basis in their shares of common stock.
•Our shares of common stock may trade at a discount to net asset valuevalue, and wesuch discount may issuebe shares at prices below our then-current net asset value.significant.
•We may pay distributions from offering proceeds, borrowings or the sale of assets.assets to the extent our cash flows from operations, net investment income or earnings are not sufficient to fund declared distributions.
•Holders of any preferred stock that we may issue will have the right to elect members of the boardBoard of directors.Directors and have class voting rights on certain matters.
General Risk Factors
•Events outside of our control, including public health crises,control could negatively affect our portfolio companies and our results of operations.
•Uncertainty about U.S. federal government initiativesinitiatives, including tariffs and global trade negotiations, could negatively impact our business, financial condition and results of operations.
Our ability to achieve our investment objectives depends on the Adviser’s ability to manage and support our investment process and if our agreementAdvisory with the AdviserAgreement were to be terminated, or if the Adviser loses any members of its senior management team, our ability to achieve our investment objectives could be significantly harmed.
In addition, each of our investmentAdvisory advisory agreementAgreement and administrationAdministration agreementAgreement with the Adviser has termination provisions that allow the parties to terminate the agreements without penalty. The investmentAdvisory advisory agreementAgreement and administrationAdministration agreementAgreement may each be terminated at any time, without penalty, by the Adviser, upon 60 days’ notice to us. If the investmentAdvisory advisory agreementAgreement is terminated, it may adversely affect the quality of our investment opportunities. In addition, in the event such agreement is terminated, it may be difficult for us to replace the Adviser and the termination of such agreement may adversely impact the terms of any existing or future financing arrangement, which could have a material adverse effect on our business and financial condition.
If theThe Adviser failsdepends to maintainon its existingbroader organization’s relationships with private equity sponsors, investment banks and commercial banksbanks, onand whichwe itrely reliesto a significant extent upon these relationships to provide us with potential investment opportunities,opportunities. If the Adviser or its broader organization fails to maintain their existing relationships or develop new relationships with other sponsors or sources of investment opportunities, we may not be able to grow our investment portfolio. In addition, individuals with whom the Adviser hasor its broader organization have relationships generally are not obligated to provide us with investment opportunities, and, therefore, there is no assurance that such relationships will generate investment opportunities for us.
The SBCASmall Business Credit Availability Act allows us to incur additional leverage.
On March 23, 2018, the SBCA Act became law. The SBCA Act, among other things, amends Section 61(a) of the 1940 Act to add a new Section 61(a)(2) which reduces the asset coverage requirements for senior securities applicable to BDCs from 200% to 150% provided that certain disclosure and approval requirements are met. Effective June 15, 2019, following approval by our stockholders,stockholders pursuant to Section 61(a) of the 1940 Act, our asset coverage requirement was reduced from 200% to 150%, such that the Company’s maximum debt to equity ratio increased from a prior maximum of 1.0x (equivalent of $1 of debt outstanding for each $1 of equity) to a maximum of 2.0x permitted by the Small Business Credit Availability Act (equivalent to $2 of debt outstanding for each $1 of equity). As a result, we are able to incur substantial additional indebtedness, and, therefore the risk of an investment in us may increase. See “Risks Related to Debt Financing—We currently incur indebtedness to make investments, which magnifies the potential for gain or loss on amounts invested in our common stock and may increase the risk of investing in our common stock.”
Any failure by the Adviser to manage and support our investment process may hinder the achievement of our investment objectives.
The Adviser is an investment adviser jointly operated by KKR Credit and by an affiliate of Future Standard. The 1940 Act and the Code impose numerous constraints on the operations of BDCs that do not apply to other investment vehicles. KKR Credit’s and Future Standard’s individual track records and achievements are not necessarily indicative of the future results they will achieve as a joint investment adviser to the Company. Accordingly, we can offer no assurance that we will replicate the historical performance of other investment companies with which KKR Credit and Future Standard have been affiliated, and we caution that our investment returns could be lower than the returns achieved by such other companies, including any other BDCs.
We may use derivative instruments including, in particular, swaps and other similar transactions, in seeking to achieve itsour investment objective or for other reasons, such as cash management, financing activities or to hedge its positions. Accordingly, these derivatives may be used in limited instances as a form of leverage or to seek to enhance returns, including speculation on changes in credit spreads, interest rates or other characteristics of the market, individual securities or groups of securities. If we invest in a derivative for speculative purposes, we will be fully exposed to the risks of loss of that derivative, which may sometimes be greater than the derivative’s cost. The use of derivatives may involve substantial leverage. The use of derivatives may subject us to various risks, including counterparty risk, currency risk, leverage risk, liquidity risk, correlation risk, index risk and regulatory risk.
The Derivatives Rule provides an exception from the DRMP, VaR limit and certain other requirements for a business development company that limits its “derivatives exposure” to no more than 10% of its net assets (as calculated in accordance with the Derivatives Rule) (a “limited derivatives user”), provided that the business development company establishes appropriate policies and procedures reasonably designed to manage derivatives risks, including the risk of exceeding the 10% “derivatives exposure” threshold. The Company currently classifies itself as a “limited derivatives user” under the Derivatives Rule and has adopted written policies and procedures reasonably designed to manage the Company’s derivatives risks, as required by the Derivatives Rule for “limited derivatives users.”
Cybersecurity refers to the combination of technologies, processes, and procedures established to protect information technology systems and data from unauthorized access, attack, or damage. We, our affiliates and our and their respective third-party service providers are subject to cybersecurity risks. Our business operations rely upon secure information technology systems for data processing, storage and reporting. We depend on the effectiveness of the information and cybersecurity policies, procedures and capabilities maintained by our affiliates and our and their respective third-party service providers to protect their computer and telecommunications systems and the data that reside on or are transmitted through them. CybersecurityThere riskshas havebeen significantlyan increased in recent years and, while we have not experienced any material losses relating to cyber-attacks or other information security breaches, we could suffer such lossesincrease in the future.frequency Our,and sophistication of the cyber and security threats faced, with attacks ranging from those common to businesses to those that are more advanced and persistent, which may target us or our affiliatesservice providers because we or our service providers hold a significant amount of confidential and oursensitive information about investors, portfolio companies or obligors (as applicable) and theirpotential respectiveinvestments. third-partyAs servicea providers’result, computerthere systems,is softwarea andheightened networksrisk may be vulnerable to unauthorized access, computer viruses or other malicious code and other events that could haveof a security impact,breach asor welldisruption aswith cyber-attacks that do not have a security impact but may nonetheless cause harm, such as causing denial-of-service attacks (i.e., effortsrespect to makethis network services unavailable to intended users) on websites, servers or other online systems. If one or more of such events occur, it potentially could jeopardize confidential and other information, including nonpublic personal information and sensitive business data, processed and stored in, and transmitted through, computer systems and networks, or otherwise cause interruptions or malfunctions in our operations or the operations of our affiliates and our and their respective third-party service providers. This could result in significant losses, reputational damage, litigation, regulatory fines or penalties, or otherwise adversely affect our business, financial condition or results of operations.information.
Our, our affiliates and our and their respective third-party service providers’ computer systems, software and networks may be vulnerable to unauthorized access, computer viruses or other malicious code and other events that could have a security impact, as well as cyber-attacks that do not have a security impact but may nonetheless cause harm, such as causing denial-of-service attacks (i.e., efforts to make network services unavailable to intended users) on websites, servers or other online systems. If one or more of such events occur, it potentially could jeopardize confidential and other information, including nonpublic personal information and sensitive business data, processed and stored in, and transmitted through, computer systems and networks, or otherwise cause interruptions or malfunctions in our operations or the operations of our affiliates and our and their respective third-party service providers. This could result in significant losses, reputational damage, litigation, regulatory fines or penalties, or otherwise adversely affect our business, financial condition or results of operations.
In the current period of technological and commercial innovation, startup and other companies have found success disrupting traditional approaches to industry or market practices, and the frequency of such disruptions is expected to increase. Such disruptions could negatively impact us and our investments, alter market practices on which our investment strategy depends to create investment returns, significantly disrupt the market in which we operate, or subject us to increased competition.
Recent technological advances in AI pose risks to the Company, the Adviser, and our portfolio investments. The Company and our portfolio investments could also be exposed to the risks of AI if third-party service providers or any counterparties, whether or not known to the Company, also use AI in their business activities. We and our portfolio companies may not be in a position to control the use of AI technology in third-party products or services.
In addition, the Adviser’s and its affiliates’ business is subject to extensive regulation, legislative focus and regulatory scrutiny, and their respective compliance with laws and regulations is subject to frequent examinations, inquiries and investigations by U.S. federal and state as well as non-U.S. governmental agencies and regulators and self-regulatory organizations in the various jurisdictions in which the Adviser and/or its affiliates operate around the world.
Any of these governmental and regulatory authorities may challenge the Adviser’s, its affiliates’ and their respective employees’ compliance with any applicable laws and regulations, and the Adviser, its affiliates and its employees could become subject to civil or criminal proceedings or other sanctions brought by them for such noncompliance.
For instance, on January 14, 2025, the Antitrust Division of the U.S. Department of Justice, or the DOJ, filed a civil antitrust complaint, or the DOJ Complaint, in the U.S. District Court for the Southern District of New York against KKR & Co. and various KKR-sponsored investment entities, or the KKR Defendants, alleging violations of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, or the HSR Act. The DOJ Complaint requests various relief for the alleged violations of the HSR Act by the KKR Defendants, including civil penalties in an amount to be determined and various equitable relief, including disgorgement and enjoining future violations of the HSR Act. On January 14, 2025, KKR & Co. and its subsidiaries filed a complaint, or the KKR Complaint, in the U.S. District Court for the District of Columbia against Doha Mekki in her official capacity as Acting Assistant Attorney General of the United States for the Antitrust Division, the DOJ, the Federal Trade Commission, or the FTC, and the United States of America pertaining to the HSR-related investigations conducted by the DOJ. On January 16, 2025, KKR & Co. voluntarily dismissed the KKR Complaint filed in the U.S. District Court for the District of Columbia and re-filed it in the U.S. District Court for the Southern District of New York as related to the DOJ Complaint. The KKR Complaint requests various forms of relief, including declaratory judgments that: (i) KKR & Co. did not violate the HSR Act; (ii) the DOJ’s and FTC’s interpretations of the HSR Act are unconstitutionally vague; and (iii) the DOJ seeks an excessive fine in violation of the U.S. Constitution. KKR & Co. intends to vigorously defend against the DOJ Complaint and filed a motion to dismiss the DOJ Complaint on April 17, 2025. The DOJ filed its motion to dismiss the KKR Complaint on April 23, 2025, and KKR & Co. and the DOJ agreed to dismiss one count of the KKR Complaint and to stay the rest of the DOJ’s motion to dismiss pending resolution of KKR & Co.’s motion to dismiss the DOJ Complaint. The DOJ has continued its investigations into certain of KKR & Co.’s past HSR filings, and KKR & Co. continues to cooperate in connection with these investigations. The DOJ may initiate additional civil or criminal proceedings or take other actions against KKR & Co., its employees or portfolio companies, which could include further antitrust investigations into past HSR filings or transactions or other purported violations of law. There can be no certainty as to the possible outcome of the DOJ Complaint, the KKR Complaint, the DOJ’s investigations, or such other proceedings or other actions, any of which could result in a range of adverse financial and non-financial consequences to KKR & Co. Even in the event that the parties are able to settle the pending litigation, it is possible that any such settlement could involve significant monetary penalties and/or other possible remedial measures.
Any resolution of claims brought by a governmental and regulatory authority may also require an admission of wrongdoing or result in adverse limitations or prohibitions on the Adviser’s ability to conduct its business. In addition, the adverse publicity, costs relating to legal defenses, and reputational harm relating to the regulatory activity or imposition of these sanctions could be significant.
It may be difficult to bring suit or foreclosure in non-U.S. countries.
Because the effectiveness of the judicial systems in the countries in which the Company may invest varies, the Company (or any portfolio company) may have difficulty in foreclosing or successfully pursuing claims in the courts of such countries, as compared to the United States or other countries. Further, to the extent the Company or a portfolio company may obtain a judgment but is required to seek its enforcement in the courts of one of these countries in which the Company invests, there can be no assurance that such courts will enforce such judgment. The laws of other countries often lack the sophistication and consistency found in the United States with respect to foreclosure, bankruptcy, corporate reorganization or creditors’ rights.
Any unrealized losses we experience on our portfolio may be an indication of future realized losses, which could reduce our income available for distribution.
As a BDC, we are required to carry our investments at market value or, if no market value is ascertainable, at the fair value as determined pursuant to policies adopted by the Adviser and subject to the oversight of our Board of Directors. Decreases in the market value or fair value of our investments relative to amortized cost are and will be recorded as unrealized depreciation. Any unrealized losses in our portfolio could be an indication of a portfolio company’s inability to meet its repayment obligations to us with respect to the affected loans. This could result in realized losses in the future and ultimately in reductions of our income available for distribution in future periods. In addition, decreases in the market value or fair value of our investments will reduce our NAV.
We may not be able to obtain all required state licenses.
We may be required to obtain various state licenses in order to, among other things, originate commercial loans. Applying for and obtaining required licenses can be costly and take several months. There is no assurance that we will obtain all of the licenses that we need on a timely basis. Furthermore, we are and will be subject to various information and other requirements in order to obtain and maintain these licenses, and there is no assurance that we will satisfy those requirements. Our failure to obtain or maintain licenses might restrict investment options and have other adverse consequences.
Risks Related to the Adviser and its Affiliates; Conflicts of Interest
For U.S. federal income tax purposes, we are required to recognize taxable income (such as deferred interest that is accrued as original issue discount) in some circumstances in which we do not receive a corresponding payment in cash. Under such circumstances, we may have difficulty meeting the Annual Distribution Requirement necessary to qualify for and maintain RIC tax treatment under the Code. This difficulty in making the required distribution may be amplified to the extent that we are required to pay an incentive fee with respect to such accrued income. As a result, we may have to sell some of our investments at times and/or at prices we would not consider advantageous, raise additional debt or equity capital, or forgo new investment opportunities for this purpose. If we are not able to obtain cash from other sources, we may fail to qualify for RIC tax treatment and thus become subject to corporate-level income tax.
We may be obligated to pay the Adviser incentive compensation even if we incur a net loss due to a decline in the value of our portfolio.
Our Advisory Agreement entitles the Adviser to receive a portion of our pre-incentive fee net investment income regardless of any capital losses. In such case, we may be required to pay the Adviser incentive compensation for a fiscal quarter even if there is a decline in the value of our portfolio or if we incur a net loss for that quarter.
Management's Discussion & Analysis (MD&A)
New heading “Provision for Taxes on Investments”
New heading “Realized Losses from Extinguishment of Debt”
New heading “Equity Issuances”
New heading “Off-Balance Sheet Arrangements”
New heading “Recently Issued Accounting Standards”
Removed heading “Provision for Taxes on Realized and Unrealized Gains on Investments”
Removed heading “Meadowbrook Run Credit Facility”
Removed heading “8.625% Notes Due 2025”
Largest changes
“Domestic and foreign fixed-income instruments and non-exchange traded derivatives are normally valued on the basis of quotes obtained from brokers and dealers or pricing services using data reflecting the earlier closing of the principal markets for those securities. …”see in full comparison
“Provision for Taxes on Realized and Unrealized Gains on Investments”see in full comparison
Full comparison: every changed paragraph (82)
All dollar amounts (except per share amounts) in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are presented in millions unless otherwise noted.
The information contained in this section should be read in conjunction with our consolidated financial statements and related notes thereto appearing elsewhere in this annual report on Form 10-K. In this report, “we,” “us,” “our” and the “Company” refer to FS KKR Capital Corp. and the “Adviser” refers to FS/KKR Advisor, LLC.
•receiving and maintaining corporate credit ratings and changes in the general interest rate environment;
•the elevated levelsimpact of inflation,changing interest rate and itsinflation levels, and their impact on our portfolio companies and on the industries in which we invest;
•actual and potential conflicts of interest with the other funds managed by the Adviser, FSFuture Investments,Standard, KKR Credit or any of their respective affiliates;
We are externally managed by the Adviser pursuant to the investment advisory agreement dated as of June 16, 2021, or the Advisory Agreement, and supervised by our board of directors, or the Board or the Board of Directors, a majority of whom are independent.
Our primary operating expenses include the payment of management and incentive fees and other expenses under the investmentAdvisory advisory agreementAgreement and the administration agreement,agreement dated as of April 9, 2018 between us and our Adviser, or the Administration Agreement, interest expense from financing arrangements and other indebtedness, and other expenses necessary for our operations. The management and incentive fees compensate the Adviser for its work in identifying, evaluating, negotiating, executing, monitoring and servicing our investments.
Pursuant to the administrationAdministration agreement,Agreement, we reimburse the Adviser for expenses necessary to perform services related to our administration and operations, including the Adviser’s allocable portion of the compensation and related expenses of certain personnel of FSFuture InvestmentsStandard and KKR Credit providing administrative services to us on behalf of the Adviser. We reimburse the Adviser no less than quarterly for all costs and expenses incurred by the Adviser in performing its obligations and providing personnel and facilities under the administrationAdministration agreement.Agreement. The Adviser allocates the cost of such services to us based on factors such as total assets, revenues, time allocations and/or other reasonable metrics. Our board of directorsBoard reviews the methodology employed in determining how the expenses are allocated to us and the proposed allocation of administrative expenses among us and certain affiliates of the Adviser. Our board of directorsBoard then assesses the reasonableness of such reimbursements for expenses allocated to us based on the breadth, depth and quality of such services as compared to the estimated cost to us of obtaining similar services from third-party service providers known to be available. In addition, our board of directorsBoard considers whether any single third-party service provider would be capable of providing all such services at comparable cost and quality. Finally, our board of directorsBoard compares the total amount paid to the Adviser for such services as a percentage of our net assets to the same ratio as reported by other comparable BDCs.
•corporate and organization expenses relating to offerings of our securities, subject to limitations included in the investmentAdvisory advisory agreementAgreement;
•all other expenses incurred by the Adviser or us in connection with administering our business, including expenses incurred by the Adviser in performing administrative services for us and administrative personnel paid by the Adviser, to the extent they are not controlling persons of the Adviser or any of its affiliates, subject to the limitations included in the investmentAdvisory advisory agreementAgreement and the administrationAdministration agreement.Agreement.
In addition, we have contracted with State Street Bank and Trust Company to provide various accounting and administrative services, including, but not limited to, preparing preliminary financial information for review by the Adviser, preparing and monitoring expense budgets, maintaining accounting and corporate books and records, processing trade information provided by us and performing testing with respect to RIC compliance.
For the year ended December 31, 2025, our total return based on net asset value was 0.21% and our total return based on market value was (20.31)%. For the year ended December 31, 2024, our total return based on net asset value was 8.50% and our total return based on market value was 25.29%. For the year ended December 31, 2023, our total return based on net asset value was 10.12% and our total return based on market value was 32.45%. See footnotes 76 and 87 to the table included in Note 1211 to our audited consolidated financial statements included herein for information regarding the calculation of our total return based on net asset value and total return based on market value, respectively.
Set forth below is a comparison of the results of operations for the years ended December 31, 2025 and December 2024. The comparison of the fiscal years ended December 31, 2024 and December 31, 2023 can be found within “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Part II of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, which is incorporated herein by reference.
Our investment income for the years ended December 31, 2024, 20232025 and 20222024 was as follows:
____________ (1)Such revenues represent $1,467, $1,584$1,267 and $1,398$1,467 of cash income earned as well as $254, $246$252 and $237$254 in non-cash portions relating to accretion of discount and PIK interest for the years ended December 31, 2024, 20232025 and 2022,2024, respectively. Cash flows related to such non-cash revenues may not occur for a number of reporting periods or years after such revenues are recognized.
The level of interest income we receive is generally related to the balance of income-producing investments, multiplied by the weighted average yield of our investments. Fee income is transaction based, and typically consists of amendment and consent fees, prepayment fees, structuring fees and structuringother non-recurring fees. As such, fee income is generally dependent on new Directdirect Originationorigination investments and the occurrence of events at existing portfolio companies resulting in such fees.
The decrease in combined interest and PIK income during the year ended December 31, 2024 compared to the year ended December 31, 2023 can primarily be attributed to the lower interest rate environment, the repayment of higher yielding investments, the renegotiation of certain investments to lower rates, and lower average debt utilization. Additionally, certain assets either were restructured or placed on non-accrual status during the year ended December 31, 2024, which also contributed to the reduction in combined interest and PIK income.
PIK income increased during the year ended December 31, 2024, as the number of investments paying PIK interest during the year increased. The increase in interest and PIK income during the year ended December 31, 2023 compared to the year ended December 31, 2022 can primarily be attributed to the rising interest rate environment.
The increasedecrease in feecombined interest and PIK income during the year ended December 31, 20242025 compared to the year ended December 31, 20232024 canis primarily be attributedattributable to increaseda originationdecline activityin yields during the year ended December 31, 2024. The decrease in fee income during the year ended December 31, 20232025 compared to the year ended December 31, 2022 can primarily be attributed to reduced structuring fees2024 and repaymentthe activityCompany placing certain assets on non-accrual status during the year ended December 31, 2023.2025.
The decrease in dividendfee income during the year ended December 31, 20242025 compared to the year ended December 31, 20232024 can primarily be primarily attributed to lowerdecreased dividendsorigination on certain asset based finance investmentsactivity during the year ended December 31, 2024. The increase in dividend income during the year ended December 31, 2023 compared to the year ended December 31, 2022 can be primarily attributed to the increase in dividends paid in respect to our investment in COPJV.2025.
The increase in dividend income during the year ended December 31, 2025 compared to the year ended December 31, 2024 can be primarily attributed to higher dividends on certain asset based finance investments and the increase in dividends paid in respect to our investment in COPJV during the year ended December 31, 2025.
Our operating expenses, together with excise taxes, for the years ended December 31, 2024, 20232025 and 20222024 were as follows:
The following table reflects selected expense ratios as a percent of average net assets for the years ended December 31, 2024, 2023 and 2022:
(1)Ratio data may be rounded in order to recompute the ending ratio of net operating expenses, excluding certain expenses, to average net assets.
The following table reflects selected expense ratios as a percent of average net assets for the years ended December 31, 2025 and 2024:
(1)Ratio data may be rounded in order to recompute the ending ratio of net operating expenses to average net assets or net operating expenses, excluding certain expenses, to average net assets.
Our net investment income totaled $813$654 ($2.90 per share), $892 ($3.18$2.34 per share) and $865$813 ($3.05$2.90 per share) for the years ended December 31, 2024, 20232025 and 2022,2024, respectively.
The decrease in net investment income during the year ended December 31, 20242025 compared to the year ended December 31, 20232024 can primarily be attributed to lower investment income during the year ended December 31, 2024,2025 as discussed above. The increase in net investment income during the year ended December 31, 2023 compared to the year ended December 31, 2022 can primarily be attributed to higher investment income during the respective year ended December 31, 2023, as discussed above.
Our net realized gains (losses) on investments, financial instruments and foreign currency for the years ended December 31, 2024, 20232025 and 20222024 were as follows:
(1)We sold investments and received principal repayments, respectively, of $2,929 and $2,414 during the year ended December 31, 2025 and $1,892 and $4,082 during the year ended December 31, 2024, $1,659 and $911 during the year ended December, 31, 2023 and $2,076 and $2,665 during the year ended December 31, 2022.2024.
Provision for Taxes on Realized and Unrealized Gains on Investments
We recorded a provision for taxes on realized and unrealized gains with respect to two of our equity investments of $0 and $(3) and $(5) during the years ended December 31, 2024, 2023 and 2022, respectively.
Our net change in unrealized appreciation (depreciation) on investments, foreign currency forward contracts and unrealized gain (loss) on foreign currency for the years ended December 31, 2024, 20232025 and 20222024 were as follows:
During the year ended December 31, 2025, the net losses and change in unrealized appreciation (depreciation) was driven primarily by reduced valuations of certain portfolio companies during the year, including Production Resources Group, 48Forty Solutions and Kellermeyer Bergensons Services. During the year ended December 31, 2024, the net losses and change in unrealized appreciation (depreciation) was driven primarily by reduced valuations of certain portfolio companies during the year, including Miami Beach Medical Group, Production Resources Group, Maverick Natural Resources and Bowery Farming.
Provision for Taxes on Investments
We recorded a provision for taxes on realized and unrealized gains of $(12) and $0 during the years ended December 31, 2025 and 2024, respectively.
Realized Losses from Extinguishment of Debt
During the year ended December 31, 2025, we recorded a net realized loss from the extinguishment of debt of $(7). See Note 9 to our audited consolidated financial statements included herein for additional information regarding our financing arrangements.
During the year ended December 31, 2024, the net losses and change in unrealized appreciation (depreciation) was driven primarily by reduced valuations of certain portfolio companies during the year, including Miami Beach Medical Group, Production Resources Group, Maverick Natural Resources and Bowery Farming. During the year ended December 31, 2023, the net change in unrealized appreciation (depreciation) was driven primarily by the conversion of unrealized depreciation to realized losses on several specific assets in the portfolio. During the year ended December 31, 2022, the net change in unrealized appreciation (depreciation) on our investments was driven primarily by a general widening of credit spreads.
For the years ended December 31, 2024, 20232025 and 2022,2024, the net increase (decrease) in net assets resulting from operations was $11 ($0.04 per share) and $585 ($2.09 per share), $696 ($2.48 per share) and $92 ($0.32 per share), respectively.
As of December 31, 2024,2025, we had $296$208 in cash, cash equivalentsequivalents, including money market funds, and foreign currency, which we or our wholly-owned financing subsidiaries held in custodial accounts, and $4,363$3,268 in borrowings available under our financing arrangements, subject to borrowing base and other limitations. As of December 31, 2024,2025, we also had broadly syndicated investments and opportunistic investments that could be sold to create additional liquidity. As of December 31, 2024,2025, we had unfunded debt investments with aggregate unfunded commitments of $1,534.1,$1,447.4, unfunded equity/other commitments of $387.1$87.5 and unfunded commitments of $735.2$245.0 of COPJV. We maintain sufficient cash on hand, available borrowings and liquid securities to fund such unfunded commitments should the need arise.
We currently generate cash primarily from cash flows from fees, interest and dividends earned from our investments, as well as principal repayments and proceeds from sales of our investments. We may also fund a portion of our investments through borrowings from banks and issuances of senior securities or other financing transactions. Our primary use of cash is investments in portfolio companies, payments of our expenses, including management fees, incentive fees and cost of any borrowings or other financing arrangements, including interest expenses, and the payment of cash distributions to our shareholders.
Asset Coverage
We currently generate cash primarily from cash flows from fees, interest and dividends earned from our investments, as well as principal repayments and proceeds from sales of our investments. To seek to enhance our returns, we also employ leverage as market conditions permit and at the discretion of the Adviser, but in no event will leverage employed exceed the maximum amount permitted by the 1940 Act. Prior to June 14, 2019, in accordance with the 1940 Act, we were allowed to borrow amounts such that our asset coverage, calculated pursuant to the 1940 Act, was at least 200% after such borrowing. Effective June 15, 2019, our asset coverage requirement applicable to senior securities was reduced from 200% to 150%. For purposes of the 1940 Act, “asset coverage” means the ratio of (1) the total assets of a BDC, less all liabilities and indebtedness not represented by senior securities, to (2) the aggregate amount of senior securities representing indebtedness (plus, in the case of senior securities represented by preferred stock, the aggregate involuntary liquidation preference of such BDC’s preferred stock). As of December 31, 2024,2025, the aggregate amount outstanding of the senior securities issued by us was $7.4$7.6 billion. As of December 31, 2024,2025, our asset coverage was 190%.177%. See “—FinancingNote Arrangements.”9 for a discussion of the Company’s financing arrangements.
(5)Amount includes borrowing in Euros, Canadian dollars, pounds sterling and Australian dollars. Euro balance outstanding of €455361 has been converted to U.S. dollars at an exchange rate of €1.00 to $1.04$1.17 as of December 31, 2024 to reflect total amount outstanding in U.S. dollars. Canadian dollar balance outstanding of CAD3 has been converted to U.S dollars at an exchange rate of CAD1.00 to $0.69 as of December 31, 20242025 to reflect total amount outstanding in U.S. dollars. Pounds sterling balance outstanding of £165180 has been converted to U.S dollars at an exchange rate of £1.00 to $1.25$1.34 as of December 31, 20242025 to reflect total amount outstanding in U.S. dollars. Australian dollar balance outstanding of AUD4AUD3 has been converted to U.S dollars at an exchange rate of AUD1.00 to $0.62$0.67 as of December 31, 20242025 to reflect total amount outstanding in U.S. dollars.
(7)As of December 31, 2024,2025, the fair value of the 4.125% notes, the 4.250% notes, the 8.625% notes, the 3.400% notes,Notes due 2026, the 2.625% notes,Notes due 2027, the 3.250% notes,Notes due 2027, the 3.125% notes,Notes due 2028, the 7.875% notes,Notes due 2029, the 6.875% notesNotes due 2029, the 6.125% Notes due 2030 and the 6.125% notesNotes due 2031 was approximately $469,$1,000, $474,$389, $251,$483, $981,$692, $379,$414, $474,$624, $680, $426, $615$732 and $700$403, respectively. These valuations are considered Level 2 valuations within the fair value hierarchy.
(8)As of December 31, 2024,2025, the carrying values of the 6.875% notesNotes due 2029, the 6.125% Notes due 2030 and the 6.125% notesdue 2031 include a $15$24, $32 and $0$3 increase, respectively, as a result of an effective hedge accounting relationship. See Note 7 for additional information.
(9)As of December 31, 2025, there were $160.0 of Class A-1 notes outstanding at SOFR+1.48%, $100.0 of Class A-1L notes outstanding at SOFR+1.48%, $30.0 of Class A-1W notes outstanding at SOFR+1.48%, $20.0 of Class A-2L notes outstanding at SOFR+1.60%, $30.0 of Class B notes outstanding at SOFR+1.75% and $40.0 of Class C notes outstanding at SOFR+2.15%.
(10)As of December 31, 2025, there were $125.5 of Class A-1 Notes outstanding at SOFR+1.47%, $150.0 of Class A-1 Senior Floating Rate Loans outstanding at SOFR+1.47%, $19.0 of Class A-2 notes outstanding at SOFR+1.65%, $35.6 of Class B notes outstanding at SOFR+1.80% and $33.2 of Class C notes outstanding at SOFR+2.10%.
(9)As of December 31, 2024, there were $161.8 of Class A-1R notes outstanding at SOFR+1.85%, $20.5 of Class A-2R notes outstanding at SOFR+2.25%, $32.4 of Class B-1R notes outstanding at SOFR+2.60% and $17.4 of Class B-2R notes outstanding at 3.011%.
Equity Issuances
On May 9, 2025, we entered into separate equity distribution agreements, or the Equity Distribution Agreements, with each of Truist Securities, Inc., RBC Capital Markets, LLC, KKR Capital Markets LLC, and SMBC Nikko Securities America, Inc., pursuant to which we may, from time to time, issue and sell up to an aggregate gross amount of $750 million in shares of our common stock through public or at-the-market offerings, or the ATM Program. During the year ended December 31, 2025, the Company did not issue or sell shares of its common stock under the ATM Program. For further details regarding the ATM Program and the Equity Distribution Agreements, see “At the Market” Offering” in Note 3 to our consolidated financial statements included herein.
We have elected to be subject to tax as a RIC under Subchapter M of the Code. In order to qualify for RIC tax treatment, we must, among other things, make timely distributions of an amount at least equal to 90% of our investment company taxable income, determined without regard to any deduction for distributions paid, each tax year. As long as the distributions are declared by the later of the fifteenth day of the tenth month following the close of a tax year or the due date of the tax return for such tax year, including extensions, distributions paid up to twelve months after the current tax year can be carried back to the prior tax year for determining the distributions paid in such tax year. We intend to make sufficient distributions to our stockholders to qualify for and maintain our RIC tax status each tax year. We are also subject to a 4% nondeductible federal excise tax on certain undistributed income unless we make distributions in a timely manner to our stockholders generally of an amount at least equal to the sum of (1) 98% of our net ordinary income (taking into account certain deferrals and elections) for the calendar year, (2) 98.2% of our capital gain net income, which is the excess of capital gains in excess of capital losses, or “capital gain net income” (adjusted for certain ordinary losses), for the one-year period ending October 31 of that calendar year and (3) any net ordinary income and capital gain net income for the preceding years that were not distributed during such years and on which we paid no U.S. federal income tax. Any distribution declared by us during October, November or December of any calendar year, payable to stockholders of record on a specified date in such a month and actually paid during January of the following calendar year, will be treated as if it had been paid by us, as well as received by our stockholders, on December 31 of the calendar year in which the distribution was declared. We can offer no assurance that we will achieve results that will permit us to pay any cash distributions. If we issue senior securities, we willmay be prohibited from making distributions if doing so causes us to fail to maintain the asset coverage ratios stipulated by the 1940 Act or if distributions are limited by the terms of any of our borrowings.
Subject to applicable legal restrictions and the sole discretion of our board of directors,Board, we intend to authorize, declare and pay regular cash distributions on a quarterly basis. We will calculate each stockholder’s specific distribution amount for the period using record and declaration dates and each stockholder’s distributions will begin to accrue on the date that shares of our common stock are issued to such stockholder. From time to time, we may also pay special interim distributions in the form of cash or shares of our common stock at the discretion of our board of directors.Board.
We intend to make our regular distributions in the form of cash, out of assets legally available for distribution, except for those stockholders who receive their distributions in the form of shares of our common stock under our distribution reinvestment plan. Any distributions reinvested under the plan will nevertheless remain taxable to a U.S. stockholder.
The following tables reflect the distributions per share that we have declared on our common stock during the years ended December 31, 2024, 20232025 and 20222024:
On February 25,19, 2025,2026, our board of directorsBoard declared a regular quarterly distribution of $0.70$0.48 per share consisting of a $0.64$0.45 base distribution and a $0.06$0.03 supplemental distribution, which will be paid on or about April 2, 20252026 to stockholders of record as of the close of business on March 19,18, 2025.2026. The timing and amount of any future distributions to stockholders are subject to applicable legal restrictions and the sole discretion of our board of directors.Board.
On February 23, 2026, the Company sold $189 million of its equity interests in COPJV to SCRS. In connection therewith, SCRS increased its capital commitment by a net amount of $175 million. Giving effect to the transaction, COPJV had total capital commitments of $2.975 billion, $2.45 billion of which was from us and the remaining $525 million of which was from SCRS. Based on current funded capital, SCRS’ ownership percentage of COPJV increased from 12.5% to 21.1% and the Company’s ownership percentage decreased from 87.5% to 78.9%.
Meadowbrook Run Credit Facility
On January 22, 2025, Meadowbrook Run, a wholly-owned special purpose financing subsidiary of the Company, entered into a 7th Amendment to the Meadowbrook Run Credit Facility, or 7th Amendment, with Morgan Stanley, as administrative agent, Wells Fargo, as collateral agent, account bank and collateral custodian, and the lenders from time to time party thereto. The 7th Amendment provides for an extension of the revolving period to February 22, 2025.
What changed in the latest 10-Q
Risk Factors
New heading “We issued the Convertible Preferred Stock on June 29, 2026 and may in the future determine to issue additional preferred stock, which could adversely affect the market value of our common stock.”
New heading “Our common stockholders may experience dilution upon the conversion of the Convertible Preferred Stock.”
New heading “Holders of the Convertible Preferred Stock have the right to elect members of our Board of Directors and have class voting rights on certain matters, which may limit our ability to pursue certain actions that might otherwise be in the interests of our common stockholders.”
New heading “Dividend payments on the Convertible Preferred Stock are not guaranteed.”
New heading “Our ability to pay dividends on and/or repurchase shares of Convertible Preferred Stock may be limited by Maryland law, the 1940 Act and the terms of our debt facilities as well as future agreements we may enter.”
New heading “Purchases of our common stock under the Company Share Repurchase Authorization may have the effect of maintaining the market price of our common stock at levels above those that would otherwise prevail in the open market.”
New heading “There is no assurance that the Company Share Repurchase Authorization will result in repurchases of our common stock or enhance long-term stockholder value, and repurchases, if any, could affect our stock price and increase its volatility and will diminish our cash reserves.”
Largest changes
“Under Maryland law, a corporation may pay dividends on and repurchase stock where authorized by the Board and as long as, the Board is able to determine that, after giving effect to the dividend payment or repurchase, (i) the corporation is able to pay its debts as they become due in the usual course of business (the equity solvency test), and (ii) except in limited circumstances, the corporation’s total assets exceed the sum of its total liabilities plus the amount that would be needed, if the corporation were to be dissolved at the time of the dividend payment or repurchase, to satisfy the …”see in full comparison
“There is no assurance that the Company Share Repurchase Authorization will result in repurchases of our common stock or enhance long-term stockholder value, and repurchases, if any, could affect our stock price and increase its volatility and will diminish our cash reserves.”see in full comparison
“Holders of the Convertible Preferred Stock have the right to elect members of our Board of Directors and have class voting rights on certain matters, which may limit our ability to pursue certain actions that might otherwise be in the interests of our common stockholders.”see in full comparison
“Purchases of our common stock under the Company Share Repurchase Authorization may have the effect of maintaining the market price of our common stock at levels above those that would otherwise prevail in the open market.”see in full comparison
“Our ability to pay dividends on and/or repurchase shares of Convertible Preferred Stock may be limited by Maryland law, the 1940 Act and the terms of our debt facilities as well as future agreements we may enter.”see in full comparison
“We issued the Convertible Preferred Stock on June 29, 2026 and may in the future determine to issue additional preferred stock, which could adversely affect the market value of our common stock.”see in full comparison
Full comparison: every changed paragraph (33)
ThereIn have been no material changes during the three months ended March 31, 2026addition to the risk factors previously disclosed in our Annual Report on Form 10‑K10-K for the year ended December 31, 2025 (filed with the SEC on February 25, 2026), whichthe couldfollowing risk factors may materially affect our business, financial condition and/or operating results.results, as well as the market price of our securities.
We issued the Convertible Preferred Stock on June 29, 2026 and may in the future determine to issue additional preferred stock, which could adversely affect the market value of our common stock.
On June 29, 2026, we issued and sold 6,000,000 shares of the Convertible Preferred Stock, at a price of $25.00 per share, for gross proceeds of $150.0 million, pursuant to the Purchase Agreement. The Convertible Preferred Stock ranks senior to our common stock with respect to the payment of dividends and the distribution of assets upon liquidation. The Convertible Preferred Stock has a liquidation preference equal to $25.00 per share, plus any accumulated but unpaid dividends to, but excluding, the date of distribution.
The Convertible Preferred Stock is convertible, in whole or in part, at the option of a holder, after the six-month anniversary of the issue date, into shares of our common stock at an initial conversion price of $18.83 per share, subject to certain anti-dilution adjustments as set forth in the Articles Supplementary; provided that in no event will the conversion price be less than the NYSE Minimum Price (as defined in the Articles Supplementary). At any time on or after the three-year anniversary of the issue date, upon Board approval (including a majority of our independent directors), and provided that the volume weighted average price of our common stock on the NYSE for the 30 consecutive trading days preceding our notice of redemption equals or exceeds the then-applicable conversion price, we may also redeem the Convertible Preferred Stock by delivering shares of our common stock in lieu of cash.
The issuance of the Convertible Preferred Stock and any additional preferred stock with dividend or conversion rights, liquidation preferences or other economic terms favorable to preferred holders could adversely affect the market price of our common stock by making an investment in our common stock less attractive. Dividends on the Convertible Preferred Stock are cumulative and must take priority over any dividends or other payments to our common stockholders. Holders of the Convertible Preferred Stock are not subject to any of our expenses or losses and are not entitled to participate in any income or appreciation in excess of their stated preference (other than through conversion into shares of our common stock). Under the 1940 Act, the Convertible Preferred Stock constitutes a “senior security” for purposes of the 150% asset coverage test.
Our common stockholders may experience dilution upon the conversion of the Convertible Preferred Stock.
If we deliver shares of our common stock upon a conversion of the Convertible Preferred Stock at a time when our net asset value per share exceeds the conversion price then in effect, our common stockholders may incur dilution. Our stockholders will also experience dilution in their ownership percentage of common stock upon our issuance of common stock in connection with the conversion of the Convertible Preferred Stock. In addition, to the extent that we elect to redeem shares of the Convertible Preferred Stock by delivering shares of our common stock pursuant to our stock redemption right, our common stockholders will similarly experience dilution. Any dividends paid on our common stock will also be paid on shares of our common stock issued in connection with a conversion of the Convertible Preferred Stock after such issuance.
Holders of the Convertible Preferred Stock have the right to elect members of our Board of Directors and have class voting rights on certain matters, which may limit our ability to pursue certain actions that might otherwise be in the interests of our common stockholders.
Holders of the Convertible Preferred Stock are entitled to vote on an as-converted basis on each matter submitted to a vote of our stockholders. In addition, for so long as we are subject to the 1940 Act, the holders of Convertible Preferred Stock, voting separately as a single class, have the right to elect two members of the Board at all times, and the balance of directors is elected by the holders of our common stock and the Convertible Preferred Stock voting together. If at any time accumulated dividends on the outstanding shares of Convertible Preferred Stock equal to at least two full years’ dividends are due and unpaid, or if holders of any other preferred stock become entitled to elect a majority of our directors under the 1940 Act, the number of directors constituting the Board will automatically increase and holders of the Convertible Preferred Stock and any other preferred stock will have the power to elect such additional directors to constitute a majority of the Board, voting separately as a class. Furthermore, holders of the Convertible Preferred Stock have class voting rights on certain matters, including amendments to our charter that materially and adversely affect the rights of the Convertible Preferred Stock, increases or decreases in the authorized number of preferred shares or issuances of additional preferred stock, and the creation of any new class or series of shares ranking senior or on parity with the Convertible Preferred Stock with respect to dividends or liquidation.
In addition, upon the occurrence of a Change of Control (as defined in the Articles Supplementary), at the option of holders of a majority of the then-outstanding shares of Convertible Preferred Stock, we will be required to redeem all of the then-outstanding shares of Convertible Preferred Stock upon 60 days’ notice following the announcement or occurrence of such Change of Control, for cash consideration equal to the Liquidation Preference plus accumulated but unpaid dividends. These provisions may limit our ability to pursue strategic transactions or other actions that might otherwise be in the best interests of our common stockholders. Restrictions imposed on the declarations and payment of dividends or other distributions to the holders of our common stock and preferred stock, both by the 1940 Act and by requirements imposed by rating agencies or the terms of our credit facilities or other financing arrangements, might also impair our ability to maintain our qualification as a RIC for U.S. federal income tax purposes.
Dividend payments on the Convertible Preferred Stock are not guaranteed.
Although dividends on the Convertible Preferred Stock are cumulative, the Board must approve the actual payment of dividends. The Board can elect at any time, and for an indefinite duration, not to pay any or all accrued dividends. The Board could elect to suspend dividends for any reason, and may be prohibited from approving dividends in the following instances:
•poor historical or projected cash flows;
•the need to make payments on our indebtedness;
•concluding that payment of dividends on the Convertible Preferred Stock would cause us to breach the terms of any indebtedness or other instrument or agreement; or
•determining that the payment of dividends would violate applicable law regarding unlawful distributions to stockholders.
Our ability to pay dividends on and/or repurchase shares of Convertible Preferred Stock may be limited by Maryland law, the 1940 Act and the terms of our debt facilities as well as future agreements we may enter.
Under Maryland law, a corporation may pay dividends on and repurchase stock where authorized by the Board and as long as, the Board is able to determine that, after giving effect to the dividend payment or repurchase, (i) the corporation is able to pay its debts as they become due in the usual course of business (the equity solvency test), and (ii) except in limited circumstances, the corporation’s total assets exceed the sum of its total liabilities plus the amount that would be needed, if the corporation were to be dissolved at the time of the dividend payment or repurchase, to satisfy the preferential rights upon dissolution of stockholders whose preferential rights on dissolution are superior to those receiving the dividend or whose stock is being repurchased (the balance sheet solvency test). If we are insolvent at any time when a repurchase of shares of Convertible Preferred Stock is desired or required to be made (or such repurchase would render us so under either of the above tests), we may not be able to effect such repurchase. Furthermore, the terms of our debt facilities or other financing arrangements may restrict our ability to repurchase shares of Convertible Preferred Stock for cash during an event of default, and we expect to enter into agreements in the future that may similarly restrict our ability to repurchase in cash in such instances.
In addition, under the 1940 Act, we may not (1) pay dividends or distributions (other than dividends payable in our common stock) to holders of any class of our capital stock, including the Convertible Preferred Stock, or to purchase any such capital stock, if our “senior securities representing indebtedness” fail to have an asset coverage of at least 150% (measured at the time of declaration of such distribution or at the time of any such purchase, and accounting for such distribution or purchase price) or (2) pay dividends or distributions (other than dividends payable in our common stock) to our common stockholders, or to purchase any shares of our common stock, if our “senior securities that are stock” fail to have an asset coverage of at least 150% (measured at the time of declaration of such distribution, or at the time of any such purchase, and accounting for such distribution or purchase price). If the value of our assets declines, we might be unable to satisfy these asset coverage requirements.
Purchases of our common stock under the Company Share Repurchase Authorization may have the effect of maintaining the market price of our common stock at levels above those that would otherwise prevail in the open market.
On May 6, 2026, the Board approved the Company Share Repurchase Authorization, which authorizes the repurchase of up to $300.0 million in aggregate of our outstanding common stock in the open market, by tender offer or in privately negotiated purchases in compliance with the Exchange Act and other applicable law. The Company Share Repurchase Authorization is scheduled to expire on June 1, 2027, unless extended, or until the aggregate repurchase amount approved by the Board has been expended. Pursuant to the Company Share Repurchase Authorization, we are authorized to repurchase shares of our common stock at prices below our most recently reported net asset value per share, including in accordance with the guidelines specified in Rules 10b-18 and 10b5-1 under the Exchange Act, and we will determine, in our discretion, the timing, manner, price and amount of any repurchases based upon the evaluation of economic and market conditions, stock price, available cash, applicable legal, contractual and regulatory requirements and other factors. The Company Share Repurchase Authorization does not require us to repurchase any specific number of shares and may be suspended, extended, modified or discontinued at any time, subject to applicable law.
Repurchases under the Company Share Repurchase Authorization may have the effect of maintaining the market price of our common stock or retarding a decline in the market price of our common stock, and, as a result, the price of our common stock may be higher than the price that otherwise might have existed in the open market.
There is no assurance that the Company Share Repurchase Authorization will result in repurchases of our common stock or enhance long-term stockholder value, and repurchases, if any, could affect our stock price and increase its volatility and will diminish our cash reserves.
There can be no assurance that any repurchases will occur under the Company Share Repurchase Authorization, or, if they occur, that they will enhance stockholder value. In addition, any repurchases under the Company Share Repurchase Authorization could have a material adverse effect on our business for the following reasons:
•Repurchases may not prove to be the best use of our cash resources.
•Repurchases will diminish our cash reserves, which could impact our ability to finance future growth and to pursue possible future strategic opportunities.
•We may incur debt in connection with our business in the event that we use other cash resources to repurchase shares, which may affect the financial performance of our business during future periods or our liquidity and the availability of capital for other needs of the business.
•Repurchases could affect the trading price of our common stock or increase its volatility and may reduce the market liquidity for our stock.
•Repurchases may not be made at the best possible price and the market price of our common stock may decline below the levels at which we repurchased shares of common stock.
•Any suspension, modification or discontinuance of the Company Share Repurchase Authorization could result in a decrease in the trading price of our common stock.
•Repurchases may make it more difficult for us to meet the diversification requirements necessary to qualify for tax treatment as a RIC for U.S. federal income tax purposes; failure to qualify for tax treatment as a RIC would render our taxable income subject to corporate-level U.S. federal income taxes.
•Repurchases may cause our non-compliance with covenants under our financing agreements, which could have an adverse effect on our operating results and financial condition.
•To the extent we use proceeds from the Convertible Preferred Stock to fund repurchases, the amount of capital available for portfolio investments may be reduced, which could adversely affect our net investment income and ability to pay distributions to our common stockholders.
Management's Discussion & Analysis (MD&A)
New heading “Provision for Taxes on Realized Gains on Investments”
New heading “Realized Losses from Extinguishment of Debt”
New heading “Convertible Preferred Stock”
New heading “Issuer Share Repurchases”
Removed heading “Senior Secured Revolving Credit Facility”
Removed heading “KKR Tender Offer”
Removed heading “Company Share Repurchase Program”
Removed heading “Registration Rights Agreement”
Removed heading “Subordinated Income Incentive Fee Waiver”
Removed heading “Off-Balance Sheet Arrangements”
Largest changes
“Concurrently with the issuance of the Convertible Preferred Stock, the Company and the Purchaser expect to enter into a Registration Rights Agreement (the “Registration Rights Agreement”), pursuant to which the Purchaser (and certain permitted transferees) will have the right to require the Company to register for resale under the Securities Act shares of the Company’s common stock issued upon conversion of the Convertible Preferred Stock and certain other shares of the Company’s common stock held by the Purchaser and its affiliates as of the closing date of the Convertible Preferred Stock …”see in full comparison
“After the 6-month anniversary of the issue date, the Convertible Preferred Stock will be convertible into (i) the number of shares of the Company’s common stock equal to the quotient of (a) the Liquidation Preference, plus an amount equal to accumulated but unpaid dividends, if any, on such shares (whether or not earned or declared, but excluding interest on such dividends) to, but excluding, the date fixed for such conversion and (b) the conversion price as of the applicable conversion date (which shall not be less than the NYSE Minimum Price (as defined below)), plus (ii) cash in lieu of …”see in full comparison
Full comparison: every changed paragraph (98)
(dollar amounts in millions, except share and per share amounts)
•purchase activity in respect of the Company’s shares of common stock, including with respect to the Company’s publicly announced purchase programs;
Words such as “anticipate,” “believe,” “expectexpect,” “intend,” “project” and “intendfuture” or similar expressions indicate a forward-looking statement, although not all forward-looking statements include these words. The forward-looking statements contained in this quarterly report on Form 10-Q are not guarantees of future performance or events and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict and could cause our actual results or future events to differ materially from those expressed or forecasted in the forward-looking statements.statements for any reason, including those factors set forth in “Item 1A. Risk Factors,” in the Company’s annual report on Form 10-K and subsequent filings. Factors that could cause actual results or future events to differ materially include changes relating to those set forth above and the following, among others:
•the Company Share Repurchase Authorization does not require the Company to repurchase any specific number of shares; there is no assurance that the Company or any of its affiliates will purchase shares of the Company’s common stock at any specific discount levels or in any specific amounts; and there is no assurance that the market price of the Company’s shares of common stock, either absolutely or relative to net asset value, will increase as a result of any share purchase activity, or that any purchase program or plan will enhance stockholder value over the long term;
•the price at which shares of our common stock may trade on the New York Stock Exchange, or NYSE.
Portfolio Investment Activity for the Three and Six Months Ended MarchJune 31,30, 2026 and for the Year Ended December 31, 2025
The following tables present certain selected information regarding our portfolio investment activity for the three and six months ended MarchJune 31,30, 2026 and the year ended December 31, 2025:
(4)The Weighted Average Annual Yield on Accruing Debt Investments is computed as (i) the sum of (a) the stated annual interest rate, dividend rate or other similar stated return of each accruing Debt Investment, multiplied by its par amount, adjusted to U.S. dollars and for any partial income accrual when necessary, as of the end of the applicable reporting period, plus (b) the annual amortization of the purchase or original issue discount or premium of each accruing Debt Investment; divided by (ii) the total amortized cost of Debt Investments included in the calculated group as of the end of the applicable reporting period. Stated annual interest rate for floating rate Debt Investments assumes the greater of (a) the respective base rate in effect as of MarchJune 31,30, 2026, and (b) the stated base rate floor. The base rate utilized in this calculation may not be indicative of the base rates for specific contracts as of MarchJune 31,30, 2026.
(5)The Weighted Average Annual Yield on All Debt Investments is computed as (i) the sum of (a) the stated annual interest rate, dividend rate or other similar stated return of each Debt Investment, multiplied by its par amount, adjusted to U.S. dollars and for any partial income accrual when necessary, as of the end of the applicable reporting period, plus (b) the annual amortization of the purchase or original issue discount or premium of each Debt Investment; divided by (ii) the total amortized cost of Debt Investments included in the calculated group as of the end of the applicable reporting period. Stated annual interest rate for floating rate Debt Investments assumes the greater of (a) the respective base rate in effect as of MarchJune 31,30, 2026, and (b) the stated base rate floor. The base rate utilized in this calculation may not be indicative of the base rates for specific contracts as of MarchJune 31,30, 2026.
For the threesix months ended MarchJune 31,30, 2026, our total return based on net asset value was (7.568.09)% and our total return based on market value was (28.2122.98)%. For the year ended December 31, 2025, our total return based on net asset value was 0.21% and our total return based on market value was (20.31)%. See footnotes 5 and 6 to the table included in Note 11 to our unaudited consolidated financial statements included herein for information regarding the calculation of our total return based on net asset value and total return based on market value, respectively.
We define Direct Originations as any investment where the Adviser or its affiliates negotiates the terms of the transaction beyond just the price, which, for example, may include negotiating financial covenants, maturity dates or interest rate terms. These Direct Originations include participation in other originated transactions where there may be third parties involved, or a bank acting as an intermediary, for a closely held club, or similar transactions. The following table presents certain selected information regarding our Direct Originations as of MarchJune 31,30, 2026 and December 31, 2025:
_____________________ (1)The Weighted Average Annual Yield on Accruing Debt Investments is computed as (i) the sum of (a) the stated annual interest rate, dividend rate or other similar stated return of each accruing Debt Investment, multiplied by its par amount, adjusted to U.S. dollars and for any partial income accrual when necessary, as of the end of the applicable reporting period, plus (b) the annual amortization of the purchase or original issue discount or premium of each accruing Debt Investment; divided by (ii) the total amortized cost of Debt Investments included in the calculated group as of the end of the applicable reporting period. Does not include Debt Investments on non-accrual status. Stated annual interest rate for floating rate Debt Investments assumes the greater of (a) the respective base rate in effect as of MarchJune 31,30, 2026, and (b) the stated base rate floor. The base rate utilized in this calculation may not be indicative of the base rates for specific contracts as of MarchJune 31,30, 2026.
(2)The Weighted Average Annual Yield on All Debt Investments is computed as (i) the sum of (a) the stated annual interest rate, dividend rate or other similar stated return of each Debt Investment, multiplied by its par amount, adjusted to U.S. dollars and for any partial income accrual when necessary, as of the end of the applicable reporting period, plus (b) the annual amortization of the purchase or original issue discount or premium of each Debt Investment; divided by (ii) the total amortized cost of Debt Investments included in the calculated group as of the end of the applicable reporting period. Stated annual interest rate for floating rate Debt Investments assumes the greater of (a) the respective base rate in effect as of MarchJune 31,30, 2026, and (b) the stated base rate floor. The base rate utilized in this calculation may not be indicative of the base rates for specific contracts as of MarchJune 31,30, 2026.
COPJV is a joint venture between the Company and SCRS. COPJV’s second amended and restated limited liability company agreement, or the COPJV Agreement, requires the Company and SCRS to provide capital to COPJV of up to $2,975 in the aggregate where the Company and SCRS would provide approximately 79% and 21%, respectively, of the committed capital. Pursuant to the terms of the COPJV Agreement, the Company and SCRS each have 50% voting control of COPJV and are required to agree on all investment decisions as well as certain other significant actions for COPJV. COPJV invests its capital in a range of investments, including senior secured loans (both first lien and second lien) to middle market companies, broadly syndicated loans, equity, warrants and other investments. As administrative agent of COPJV, the Company performs certain day-to-day management responsibilities on behalf of COPJV and is entitled to a fee of 0.25% of COPJV’s assets under administration, calculated and payable quarterly in arrears. As of MarchJune 31,30, 2026, the Company and SCRS have funded $2,520.0 to COPJV, of which $2,016.0 was from the Company.
Below is a summary of COPJV’s portfolio as of MarchJune 31,30, 2026 and December 31, 2025:
(2)The Weighted Average Annual Yield on Accruing Debt Investments is computed as (i) the sum of (a) the stated annual interest rate, dividend rate or other similar stated return of each accruing Debt Investment, multiplied by its par amount, adjusted to U.S. dollars and for any partial income accrual when necessary, as of the end of the applicable reporting period, plus (b) the annual amortization of the purchase or original issue discount or premium of each accruing Debt Investment; divided by (ii) the total amortized cost of Debt Investments included in the calculated group as of the end of the applicable reporting period. Stated annual interest rate for floating rate Debt Investments assumes the greater of (a) the respective base rate in effect as of MarchJune 31,30, 2026, and (b) the stated base rate floor. The base rate utilized in this calculation may not be indicative of the base rates for specific contracts as of MarchJune 31,30, 2026.
The table below describes investments by industry classification and enumerates the percentage, by fair value, of the total portfolio assets in such industries as of MarchJune 31,30, 2026 and December 31, 2025:
The following table shows the distribution of our investments on the 1 to 4 investment rating scale at fair value as of MarchJune 31,30, 2026 and December 31, 2025:
Comparison of the Three and Six Months Ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025
Our investment income for the three and six months ended MarchJune 31,30, 2026 and 2025 was as follows:
(1)Such revenues represent $262$244 and $330$337 of cash income earned as well as $42$46 and $70$61 in non-cash portions relating to accretion of discount and PIK interest for the three months ended MarchJune 31,30, 2026 and 2025, respectively, and $506 and $667 of cash income earned as well as $88 and $131 in non-cash portions relating to accretion of discount and PIK interest for the six months ended June 30, 2026 and 2025, respectively. Cash flows related to such non-cash revenues may not occur for a number of reporting periods or years after such revenues are recognized.
The decrease in interest and PIK income during the three and six months ended MarchJune 31,30, 2026 compared to the three and six months ended MarchJune 31,30, 2025 is primarily attributable to a reduction in the size of our investment portfolio, in addition to the Company placing certain assets on non-accrual status during the three and six months ended MarchJune 31,30, 2026.
The decrease in dividend income during the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025 is primarily attributable to the decrease in dividends paid in respect to certain equity and asset based finance investments, partiallyand offsetthe bydecrease higherin dividends on our investment in COPJV during the three months ended MarchJune 31,30, 2026. The decrease in dividend income during the six months ended June 30, 2026 compared to the six months ended June 30, 2025 is primarily attributable to the decrease in dividends paid in respect to certain equity and asset based finance investments during the six months ended June 30, 2026. On February 23, 2026, we reduced our equity interests in COPJV to approximately 79% from 87.5%.
Our operating expenses for the three and six months ended MarchJune 31,30, 2026 and 2025 were as follows:
The decrease in expenses during the three and six months ended MarchJune 31,30, 2026 compared to the three and six months ended MarchJune 31,30, 2025 can primarily be attributed to a decrease in subordinated income incentivemanagement fees and managementinterest feesexpense as a result of the lower asset base and leverage during the three and six months ended June 30, 2026, in addition to the reduction in subordinated income incentive fees as a result of lower investment income as discussed above.above and the partial waiver of such subordinated income incentive fee during the three months ended June 30, 2026.
The following table reflects selected expense ratios as a percent of average net assets for the three and six months ended MarchJune 31,30, 2026 and 2025:
(2)Ratio of incentive fees, interest expense and excise taxes to average net assets, excluding the effect of incentive fee waivers, was 2.34% and 4.57% for the three and six months ended June 30, 2026, respectively. There was no incentive fee waiver in effect for the three and six months ended June 30, 2025.
(3)Ratio of net operating expenses, excluding certain expenses, to average net assets, excluding the effect of incentive fee waivers, was 1.24% and 2.22% for the three and six months ended June 30, 2026, respectively.
Our net investment income totaled $117$122 ($0.42$0.44 per share) and $187$173 ($0.67$0.62 per share) for the three months ended MarchJune 31,30, 2026 and 2025, respectively. Our net investment income totaled $239 ($0.85 per share) and $360 ($1.29 per share) for the six months ended June 30, 2026 and 2025, respectively.
The decrease in net investment income during the three and six months ended MarchJune 31,30, 2026 compared to the three and six months ended MarchJune 31,30, 2025 can primarily be attributed to lower investment income during the three and six months ended MarchJune 31,30, 2026 as discussed above.
Our net realized gains (losses) on investments, foreign currency forward contracts and foreign currency for the three and six months ended MarchJune 31,30, 2026 and 2025 were as follows:
(1)We sold investments and received principal repayments, respectively, of $585$755 and $125$579 during the three months ended MarchJune 31,30, 2026 and $881$498 and $526$858 during the three months ended MarchJune 31,30, 2025. We sold investments and received principal repayments, respectively, of $1,340 and $704 during the six months ended June 30, 2026 and $1,379 and $1,384 during the six months ended June 30, 2025.
Our net change in unrealized appreciation (depreciation) on investments, foreign forward currency forward contracts and unrealized gain (loss) on foreign currency for the three and six months ended MarchJune 31,30, 2026 and 2025 were as follows:
The net change in unrealized appreciation (depreciation) on investments during the three months ended MarchJune 31,30, 2026 was driven primarily by reduced valuations of certain portfolio companies during the three months ended MarchJune 31,30, 2026, including AffordableCOPJV Careand Inc.,Production Resources Group. The net change in unrealized appreciation (depreciation) on investments during the six months ended June 30, 2026 was driven primarily by reduced valuations of certain portfolio companies during the six months ended June 30, 2026, including COPJV, Production Resources Group and Medallia Inc. The net change in unrealized appreciation (depreciation) on investments during the three and six months ended MarchJune 31,30, 2025 was driven primarily by reduced valuations of certain portfolio companies during the year, including Production Resources GroupGroup, 48Forty Solutions and 48FortyKellermeyer Solutions.Bergensons Services LLC.
Provision for Taxes on Realized Gains on Investments
During the three and six months ended June 30, 2026 and 2025, we recorded a provision for taxes on realized gains with respect to one of our equity investments of $0 and $(11), respectively.
Realized Losses from Extinguishment of Debt
During the three and six months ended June 30, 2026 and 2025, we recorded a net realized loss from the extinguishment of debt of $(2) and $(3), respectively.
For the three months ended MarchJune 31,30, 2026, the net decrease in net assets resulting from operations was $(44134) ($(1.570.13) per share) compared to a net increase in net assets resulting from operations of $120$(209) ($0.43$(0.75) per share) during the three months ended MarchJune 31,30, 2025.
For the six months ended June 30, 2026, the net decrease in net assets resulting from operations was $(475) ($(1.70) per share) compared to a net increase in net assets resulting from operations of $(89) ($(0.32) per share) during the six months ended June 30, 2025.
As of MarchJune 31,30, 2026, we had $133$109 in cash, cash equivalents, including money market funds, restricted cash and foreign currency, which we or our wholly-owned financing subsidiaries held in custodial accounts, and $2,602$3,052 in borrowings available under our financing arrangements, subject to borrowing base and other limitations. As of MarchJune 31,30, 2026, we also had broadly syndicated investments and opportunistic investments that could be sold to create additional liquidity. As of MarchJune 31,30, 2026, we had unfunded debt investments with aggregate unfunded commitments of $1,326.0,$1,110.5, unfunded equity/other commitments of $87.2$70.7 and unfunded commitments of $434.0 to COPJV. We maintain sufficient cash on hand, available borrowings and liquid securities to fund such unfunded commitments should the need arise.
We currently generate cash primarily from cash flows from fees, interest and dividends earned from our investments, as well as principal repayments and proceeds from sales of our investments. We may also fund a portion of our investments through borrowings from banks and issuances of senior securitiessecurities, including preferred stock, or other financing transactions. Our primary use of cash is investments in portfolio companies, payments of our expenses, including management fees, incentive fees and cost of any borrowings or other financing arrangements, including interest expenses, and the payment of cash distributions or dividends to holders of our shareholders.common stock and/or preferred stock.
On June 18, 2026, our stockholders approved a proposal to authorize us, with the approval of the Board, to issue warrants, options or rights to subscribe for, convert to, or purchase shares of our common stock in one or more public or private offerings, which may include convertible preferred stock and convertible debentures. In connection with seeking stockholder approval, our management and the Board determined that it would be advantageous for us to have the ability to issue warrants, options or rights to subscribe for, convert to or purchase shares of our common stock in connection with our financing and capital-raising activities. Each issuance of warrants, options or rights to subscribe for, convert to or purchase shares of our common stock pursuant to the stockholder authorization, which has no expiration, will comply with Section 61(a)(4) of the 1940 Act. We do not currently have any plans to issue warrants, options or rights to subscribe for, convert to, or purchase shares of our common stock pursuant to Section 61(a)(4) of the 1940 Act.
To seek to enhance our returns, we also employ leverage as market conditions permit and at the discretion of the Adviser, but in no event will leverage employed exceed the maximum amount permitted by the 1940 Act. Prior to June 14, 2019, in accordance with the 1940 Act, we were allowed to borrow amounts such that our asset coverage, calculated pursuant to the 1940 Act, was at least 200% after such borrowing. Effective June 15, 2019, our asset coverage requirement applicable to senior securities was reduced from 200% to 150%. For purposes of the 1940 Act, “asset coverage” means the ratio of (1) the total assets of a BDC, less all liabilities and indebtedness not represented by senior securities, to (2) the aggregate amount of senior securities representing indebtedness (plus, in the case of senior securities represented by preferred stock, the aggregate involuntary liquidation preference of such BDC’s preferred stock). As of March 31, 2026,Under the aggregate1940 amountAct, outstandingany preferred shares we issue, including the Convertible Preferred Stock, will constitute a “senior security” for purposes of the senior securities issued by us was $7.3 billion. As of March 31, 2026, our150% asset coverage was 172%. See Note 9 for a discussion of the Company’s financing arrangements.test.
In addition, our ability to pay dividends or distributions (other than dividends payable in our common stock) to holders of any class of our capital stock, or to purchase any such capital stock, would be restricted if our “senior securities representing indebtedness” fail to have an asset coverage of at least 150% (measured at the time of declaration of such distribution or at the time of any such purchase, and accounting for such distribution or purchase price). The 1940 Act does not apply this limitation to privately arranged debt that is not intended to be publicly distributed, unless this limitation is specifically negotiated by the lender. In addition, our ability to pay dividends or distributions (other than dividends payable in our common stock) to our common stockholders, or to purchase any shares of our common stock, would be restricted if our “senior securities that are stock” fail to have an asset coverage of at least 150% (measured at the time of declaration of such distribution, or at the time of any such purchase, and accounting for such distribution or purchase price). If the value of our assets declines, we might be unable to satisfy these asset coverage requirements. To satisfy the 150% asset coverage requirement in the event that we are seeking to pay a distribution, for example, we might either have to (i) liquidate a portion of our portfolio to repay a portion of our indebtedness or (ii) issue common stock. This may occur at a time when a sale of a portfolio asset may be disadvantageous, or when we have limited access to capital markets on agreeable terms. In addition, any amounts that we use to service our indebtedness or outstanding preferred stock, or for offering costs, will not be available for distributions to our stockholders. If we are unable to regain the requisite asset coverage through these methods, we may be forced to suspend the payment of such dividends or distributions. As of June 30, 2026, the aggregate amount outstanding of the senior securities issued by us was $6.6 billion. As of June 30, 2026, our asset coverage on our “senior securities representing indebtedness” was 179% and our asset coverage on our “senior securities that are stock” was 177%. See Note 9 for a discussion of the Company’s financing arrangements.
The following table presents summary information with respect to our outstanding financing arrangements as of MarchJune 31,30, 2026:
(3)As of March 31, 2026, there was $29 term loan outstanding at SOFR+1.90% and $14 revolving commitment outstanding at SOFR+2.05%.
(54)Amount includes borrowing in Euros, pounds sterling and Australian dollars. Euro balance outstanding of €330348 has been converted to U.S. dollars at an exchange rate of €1.00 to $1.15$1.14 as of MarchJune 31,30, 2026 to reflect total amount outstanding in U.S. dollars. Pounds sterling balance outstanding of £13073 has been converted to U.S dollars at an exchange rate of £1.00 to $1.32$1.33 as of MarchJune 31,30, 2026 to reflect total amount outstanding in U.S. dollars. Australian dollar balance outstanding of AUD3AUD6 has been converted to U.S dollars at an exchange rate of AUD1.00 to $0.69 as of MarchJune 31,30, 2026 to reflect total amount outstanding in U.S. dollars.
(65)The amount available for borrowing under the Senior Secured Revolving Credit Facility is reduced by any standby letters of credit issued under the Senior Secured Revolving Credit Facility. As of MarchJune 31,30, 2026, $44$51 of such letters of credit have been issued.
(76)As of MarchJune 31,30, 2026, the fair value of the 2.625% Notes due 2027, the 3.250% Notes due 2027, the 3.125% Notes due 2028, the 7.875% Notes due 2029, the 6.875% Notes due 2029, the 6.125% Notes due 2030 and2030, the 6.125% Notes due 2031 and the 7.500% Notes due 2031 was approximately $388,$393, $480,$487, $685,$706, $405,$411, $609,$612, $715$718, $400 and $399,$900, respectively. These valuations are considered Level 2 valuations within the fair value hierarchy.
(87)As of MarchJune 31,30, 2026, the carrying values of the 6.875% Notes due 2029, the 6.125% Notes due 2030 and2030, the 6.125% Notes due 2031 and the 7.500% Notes due 2031 include a $9,$12, $15$18, $0 and $(1)$0 increase (decrease), respectively, as a result of an effective hedge accounting relationship. See Note 7 for additional information.
(98)As of MarchJune 31,30, 2026, there were $160.0 of Class A-1 Notes outstanding at SOFR+1.48%, $100.0 of Class A-1L Notes outstanding at SOFR+1.48%, $30.0 of Class A-1W Notes outstanding at SOFR+1.48%, $20.0 of Class A-2L Notes outstanding at SOFR+1.60%, $30.0 of Class B Notes outstanding at SOFR+1.75% and $40.0 of Class C Notes outstanding at SOFR+2.15%.
(109)As of MarchJune 31,30, 2026, there were $125.5 of Class A-1 Notes outstanding at SOFR+1.47%, $150.0 of Class A-1 Senior Floating Rate Loans outstanding at SOFR+1.47%, $19.0 of Class A-2 Notes outstanding at SOFR+1.65%, $35.6 of Class B Notes outstanding at SOFR+1.80% and $33.2 of Class C Notes outstanding at SOFR+2.10%.
(10)The Convertible Preferred Stock will pay dividends of 5.00% cash or 7.00% PIK, at the Company’s option, in either case increasing annually by 1.00% per annum beginning on the 5.5-year anniversary of the issue date. See “Note 4. Related Party Transactions” for more information.
On May 9, 2025, we entered into separate equity distribution agreements, or the Equity Distribution Agreements, with each of Truist Securities, Inc., RBC Capital Markets, LLC, KKR Capital Markets LLC, and SMBC Nikko Securities America, Inc., pursuant to which we may, from time to time, issue and sell up to an aggregate gross amount of $750 million in shares of our common stock through public or at-the-market offerings, or the ATM Program. During the threesix months ended MarchJune 31,30, 2026, the Company did not issue or sell shares of its common stock under the ATM Program. For further details regarding the ATM Program and the Equity Distribution Agreements, see “At the Market” Offering” in Note 3 to our unaudited consolidated financial statements included herein.
Convertible Preferred Stock
On June 29, 2026, we issued and sold 6,000,000 shares of the Convertible Preferred Stock to the Purchaser pursuant to the Purchase Agreement, at a price of $25.00 per share. We intend to use the gross proceeds of $150.0 million from the sale of Convertible Preferred Stock for general corporate purposes including, without limitation, funding any repurchase program relating to shares of the our common stock or debt repayment. See “Item 2. Unregistered Sales of Equity Securities and Use of Proceeds” in Part II of this Quarterly Report on Form 10-Q for more information.
Subject to applicable legal restrictions and the sole discretion of our Board, we intend to authorize, declare and pay regular cash distributions to our common stockholders on a quarterly basis. We will calculate each stockholder’s specific distribution amount for the period using record and declaration dates and each stockholder’s distributions will begin to accrue on the date that shares of our common stock are issued to such stockholder. From time to time, we may also pay to our common stockholders special interim distributions in the form of cash or shares of our common stock at the discretion of our Board.
Holders of the Convertible Preferred Stock are entitled to receive cumulative dividends at an annual rate of 5.00% of the Liquidation Preference per share, computed on the basis of a 360-day year consisting of twelve 30-day months, payable in cash. At the Company’s option, dividends may instead be paid at an annual rate of 7.00% of the Liquidation Preference per share in additional shares of Convertible Preferred Stock, or a PIK Dividend, valued at the Liquidation Preference per share; provided that the Company is prohibited from paying dividends in additional shares if the conversion feature at the time of issuance of such additional shares is equal to or greater than 10.00% of the value of the Convertible Preferred Stock. After the 5.5-year anniversary of the issue date, both the cash dividend rate and the PIK Dividend rate will each increase by 1.00% per annum on each annual anniversary thereafter.
Dividends are payable quarterly in arrears on March 31, June 30, September 30, and December 31 of each year, each, a Dividend Payment Date, or, if such date is not a business day, on the next succeeding business day. Dividends accumulate from the date of issuance, June 29, 2026. The first Dividend Payment Date is September 30, 2026, covering the period from June 29, 2026 through September 30, 2026. Dividends are paid to holders of record as of the close of business on the record date designated by the Board for the applicable Dividend Payment Date. Each dividend period begins on and includes a Dividend Payment Date (or, for the initial period, the issue date) and ends on, but excludes, the next succeeding Dividend Payment Date.
FSK insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 2 Form 4 filings (2 insiders, 2 trade dates, 1,900 shares, about $23.2K) and open-market sales in 0 filings. Net open-market shares: 1,900 (purchases minus sales); net value about $23.2K.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-08-31 | Hopkins Jerel A |
Open-market purchase | 800 | $12.44 | $10.0K |
| 2026-08-11 | Kropp James H |
Open-market purchase | 1,100 | $12.08 | $13.3K |
Well-known investors holding FSK (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| D. E. Shaw & Co. | 2026-06-30 | 1,516,058 | $15.9M | 0.01% | Reduced 32% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 239,979 | $2.5M | 0.0% | Reduced 41% |
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 144,381 | $1.5M | 0.0% | Added 629% |
| Two Sigma Investments | 2026-06-30 | 99,589 | $1.0M | 0.0% | Added 56% |
| Bridgewater Associates | 2026-06-30 | 34,694 | $353.2K | — | Sold out |
| Gotham Asset Management (Joel Greenblatt) | 2026-06-30 | 30,000 | $305.4K | — | Sold out |
| Millennium Management (Israel Englander) | 2026-06-30 | 13,011 | $136.6K | 0.0% | Reduced 87% |