FS KKR Capital Corp.

FSK reported Q2 2026 net investment income of $0.44 per share and adjusted net investment income of $0.43 per share. Total investment income was $290 million, down $14 million sequentially, while net expenses were $168 million, down $19 million. NAV per share declined from $18.83 to $18.30, a 2.8% drop, and the quarterly dividend was $0.42 per share with a third-quarter distribution of $0.44 per share declared. Management said Q2 NII annualized to 9.6% of June 30 NAV, above prior guidance of 8% to 9%, and reiterated expectations for 2026 balance-of-year NII to remain in the 8% to 9% range on an annualized basis. Capital structure metrics improved to 127% debt-to-equity and 122% net debt-to-equity from 138% and 131% at March 31, with available liquidity of $3.5 billion.

Michael Forman said the quarter reflected progress on the strategic actions announced earlier, especially around improving FSK’s financial and trading profile. He noted the company is still stabilizing the portfolio and that there is “important work ahead,” but framed the initiative as a long-term value creation effort supported by strong FS/KKR collaboration. His tone was constructive but cautious, emphasizing consistency in results and regaining market confidence as key goals.

Steven Lilly walked through the quarter’s financial drivers, including $217 million of interest income, $73 million of dividend and fee income, and $168 million of net expenses. He highlighted a weighted average cost of debt of 5.5%, management fees of $44 million, and income incentive fees of $12 million net of the KKR waiver. He also noted the portfolio’s fair value was $11.4 billion across 232 companies, the weighted average yield on accruing debt was 9.8%, and the balance sheet was strengthened by the June issuance of $900 million of 7.5% unsecured notes due 2031, later swapped to SOFR plus 3.488%.

Analysts focused on the $500 million of loan sales, asking whether they were an ongoing practice and what types of assets were sold; management said the sales were ordinary-course portfolio management, aimed at reducing larger positions and improving leverage, not a specific thematic trade. Questions also centered on share repurchases and what happens after the fee waiver ends; management said it intends to complete the $300 million buyback program, while staying mindful of liquidity and leverage, and expects the repurchases to play out over 2026 and 2027. On repayments and new deal activity, management said repayments have been slower than expected amid muted M&A, though activity has picked up somewhat and Q3 repayments should remain light.