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FS KKR Capital Corp (NYSE:FSK), a leading investment firm with a market capitalization of $5.8 billion and a solid P/E ratio of 9.9, has successfully closed a $380 million debt securitization, as announced on Thursday. According to InvestingPro data, the company maintains strong financial health with a current ratio of 2.86, indicating robust liquidity management. This strategic financial move, completed on March 28, 2025, involved the private placement of various classes of secured debt by the company’s wholly owned subsidiary, KKR – FSK CLO 2 LLC.
The securitization includes a diverse portfolio primarily composed of middle market loans and interests, with the potential addition of broadly syndicated loans and non-loan assets. The private placement comprised $160 million of Class A-1 Senior Secured Floating Rate Notes, $100 million of Class A-1L Senior Secured Floating Rate Loans, and $30 million of Class A-1W Senior Secured Floating Rate Loans, all bearing interest at Term SOFR plus 1.48%. Additionally, $20 million of Class A-2L Senior Secured Floating Rate Loans were placed at Term SOFR plus 1.60%, along with $30 million of Class B Senior Secured Floating Rate Notes and $40 million of Class C Secured Deferrable Floating Rate Notes at higher interest rates.
The company, which has owned 100% of the membership interests in the issuer since January 15, 2025, received a portion of the net cash proceeds from the sale of the debt in exchange for transferring the initial loan portfolio to the issuer. With total debt of $7.35 billion and annual revenue of $1.72 billion, FSK demonstrates significant operational scale. InvestingPro analysis reveals several positive indicators, including strong liquidity metrics and consistent dividend payments, with more detailed insights available in the comprehensive Pro Research Report. Any excess in the fair market value of the loan portfolio over the cash purchase price is considered a capital contribution by FS KKR Capital Corp to the issuer.
The debt, scheduled to mature on April 15, 2037, is governed by an indenture and credit agreements that include standard covenants and default events. It is noteworthy that the debt has not been registered under the Securities Act of 1933 and is thus not offered for sale in the United States without registration or an applicable exemption.
FS KKR Capital Corp will also serve as portfolio manager to the issuer under the Portfolio Management Agreement, waiving any base management fee or subordinated interest it may be entitled to while in this role.
This transaction is part of FS KKR Capital Corp’s broader financial strategy, as detailed in their recent SEC filing. The company’s actions reflect a continued effort to leverage its assets and secure financing to support its investment activities. The information is based on a press release statement.
In other recent news, FS KKR Capital Corp reported its fourth-quarter 2024 earnings, revealing earnings per share of $0.66, aligning closely with forecasts, but revenue fell short at $407 million against an anticipated $420.09 million. Despite the revenue miss, the company reduced non-accrual investments significantly by 58% and deployed $4.7 billion in capital throughout 2024. Analysts from RBC Capital Markets and Keefe, Bruyette & Woods have raised their price targets for FS KKR Group to $22, maintaining their respective Sector Perform and Market Perform ratings. RBC Capital’s Kenneth S. Lee highlighted FS KKR Group’s optimistic dividend forecast for 2025, with an expected total distribution of $2.80 per share, potentially yielding 11.9%.
Keefe, Bruyette & Woods noted a slight revision in estimates due to higher-than-expected repayment activity and a marginal decline in Net Asset Value. The firm also pointed out a reduction in nonaccruals but noted an increase in watchlist investments. FS KKR Capital’s Net Asset Value per share slightly decreased to $23.64, and the company expects total distributions of $2.8 per share in 2025. The company also anticipates increased M&A activity in upcoming quarters, aiming to maintain leverage close to its targeted range. These developments reflect a nuanced investor reaction and ongoing confidence in FS KKR Capital’s dividend outlook and strategic initiatives.
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