Fubotv earnings beat by $0.10, revenue topped estimates
Introduction & Market Context
FS KKR Capital Corp (NYSE:FSK), a leading business development company (BDC) in the private credit space, released its second quarter 2025 earnings presentation on August 7, 2025. The slides reveal a challenging quarter for the company, with declining net investment income and net asset value amid continued market volatility.
FSK shares closed at $20.14 on August 6, 2025, with a slight increase of 0.2% in after-hours trading to $20.18. The stock is currently trading at a significant discount to its net asset value of $21.93 per share, within its 52-week range of $17.42 to $24.10.
Quarterly Performance Highlights
FSK reported net investment income (NII) of $173 million, or $0.62 per share, for the second quarter of 2025, compared to $187 million, or $0.67 per share, for the first quarter. Adjusted net investment income, which excludes certain non-recurring items, was $168 million, or $0.60 per share, down from $182 million, or $0.65 per share, in the previous quarter.
The company’s net asset value per share declined to $21.93 as of June 30, 2025, from $23.37 as of March 31, 2025, primarily due to net realized and unrealized losses of $1.36 per share during the quarter.
As shown in the following quarterly results summary:
FSK maintained its total distribution of $0.70 per share for the second quarter, consisting of a $0.64 per share base distribution and a $0.06 supplemental distribution. The company also declared the same distribution level for the third quarter. However, the adjusted NII coverage of the base dividend fell to 94% for Q2, while the coverage of the total dividend dropped to 86%, raising potential concerns about dividend sustainability if the downward trend continues.
The dividend yield stood at 12.8% based on NAV and 13.7% based on market value as of August 1, 2025, reflecting the stock’s significant discount to book value.
Portfolio Composition and Investment Activity
FSK’s investment portfolio remains well-diversified across 218 portfolio companies spanning 23 industries, with the top 10 investments representing 19.2% of the portfolio by fair value. The portfolio maintains a focus on senior secured investments, which comprise 64.1% of the total portfolio.
The following chart illustrates the company’s security and sector exposure:
During the quarter, FSK originated approximately $1.4 billion in new investments while sales and redemptions totaled $1.65 billion. Net investment activity was positive at $311 million when including $561 million of sales to Credit Opportunities Partners JV, LLC (COPJV), the company’s joint venture with South Carolina Retirement Systems Group Trust.
The portfolio’s weighted average yield on accruing debt investments was 10.6%, while the non-accrual rate at fair value stood at 3.0%, indicating some credit quality concerns in the portfolio.
The quarterly investment activity demonstrates FSK’s continued focus on capital deployment and portfolio management:
Capital Structure and Liquidity
FSK reported a net debt-to-equity ratio of 1.20x as of June 30, 2025, an increase from 1.14x as of March 31, 2025. The company maintains a strong liquidity position with $3.1 billion available through undrawn debt facilities, cash, and unsettled trades.
During the quarter, FSK closed a new 5-year $400 million bilateral lending facility with CIBC (TSX:CM) priced at SOFR+1.75%. In July, the company amended and upsized its Senior Secured Revolver, increasing the total commitment from $4,595 million to $4,700 million, extending the maturity from October 2028 to July 2030, and reducing the spread by 10 basis points.
The weighted average effective interest rate on borrowings decreased to 5.34% as of June 30, 2025, from 5.48% as of March 31, 2025, helping to partially offset pressure on net interest margins.
The following capital structure overview provides additional details on FSK’s funding sources and maturity profile:
Strategic Initiatives
FSK continues to leverage its joint venture, Credit Opportunities Partners JV, LLC (COPJV), as a strategic component of its investment strategy. The joint venture, in which FSK holds an 87.5% equity ownership stake, focuses primarily on senior secured assets and allows FSK to access the full KKR platform capabilities while enhancing yield.
The following slide details the COPJV structure and portfolio composition:
The company’s direct origination investments continue to target middle-market companies with median EBITDA of $114 million and median leverage of 5.8x. FSK’s focus on upper middle-market companies provides some resilience against economic headwinds, though the elevated leverage levels could pose risks in a deteriorating economic environment.
Forward-Looking Statements
The NAV bridge chart below illustrates the components that affected FSK’s net asset value during the quarter, with net realized and unrealized losses having the most significant negative impact:
Looking ahead, FSK faces several challenges, including continued market volatility, potential yield compression in the lending market, and credit quality concerns as evidenced by the 3.0% non-accrual rate at fair value. The declining trend in NII and NAV, combined with dividend coverage ratios below 100%, suggests potential pressure on distributions if performance does not improve in coming quarters.
However, the company’s diversified portfolio, strong liquidity position, and strategic capital structure management provide some cushion against market headwinds. FSK’s ability to maintain its dividend at current levels will depend largely on its success in deploying capital into high-quality, yield-generating investments while managing credit risk effectively in an uncertain economic environment.
Investors should monitor FSK’s ability to improve its NII coverage of distributions and stabilize its NAV in future quarters as key indicators of the company’s financial health and dividend sustainability.
Full presentation:
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