FS KKR Capital wins BBB- rating on $900 million unsecured notes

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FS KKR Capital wins BBB- rating on $900 million unsecured notes — FS KKR earns BBB- rating

FS KKR Capital Corp. is securing fresh long-term funding as it issues $900 million of 7.50% senior unsecured notes due 2031 with a BBB- rating and a Stable Outlook. The proceeds are intended for general corporate purposes and may also be used to repay outstanding secured debt, supporting the business development company's funding flexibility.

Highlights

Kroll Bond Rating Agency assigns BBB- rating to FS KKR Capital Corp.'s $900 million senior unsecured notes, citing ties to KKR's $758 billion platform and diverse funding mix.
FSK's credit profile faces elevated risk due to $624 million in 2025 realized/unrealized losses, $558 million net loss in 1Q26, and non-accrual investments rising to 8.1% of cost.
Regulatory leverage at 1.38x exceeds FSK's 1.0x–1.25x target, and KBRA warns high non-qualifying investments and worsening macro backdrop could trigger downgrade or Negative Outlook.

Rating rationale and funding profile

As reported by Kroll Bond Rating Agency, the BBB- rating on FS KKR Capital Corp.'s senior unsecured notes reflects the company's ties to KKR's roughly $758 billion platform, including a $293 billion credit business that supports sourcing, underwriting, restructuring and capital markets access.

KBRA says FSK also benefits from a diversified funding mix spanning unsecured debt, bank facilities and CLOs, with a meaningful share of unsecured funding improving financial flexibility. As of March 31, 2026, the company has $2.6 billion in available bank lines and $129 million in cash, against $900 million of unsecured debt maturing within two years and $1.8 billion of unfunded portfolio commitments, most of which are not expected to be drawn.

In 2Q26, KKR announces additional shareholder support measures for FSK, including a planned $150 million tender offer for common shares and a $150 million convertible preferred equity investment. KBRA says those steps add support to the issuer's overall credit profile as it raises new debt capital.

Portfolio pressure and downgrade risks

KBRA says those strengths are offset by sustained deterioration in FSK's credit profile, including elevated realized and unrealized losses, a material rise in non-accrual investments and pressure on net asset value. Regulatory leverage stands at 1.38x, above the company's 1.0x to 1.25x target range, while the asset coverage ratio of 172% leaves a 15% cushion above the 150% regulatory minimum.

Total realized and unrealized losses approximate $624 million in 2025, with an additional net loss of $558 million in 1Q26 tied to portfolio company credit deterioration, particularly in concentrated underperforming investments. At 1Q26, non-accrual investments rise to 8.1% of total investments at cost and 4.2% at fair value, and KBRA says weaker portfolio valuations from wider credit spreads could further pressure metrics.

KBRA also points to a relatively high share of non-qualifying investments, at 25.8%, including equity positions, joint venture investment, and holdings in non-U.S. and public companies, which add complexity and volatility versus traditional senior secured lending strategies. The agency says an upgrade is unlikely in the intermediate term, while a weaker macroeconomic backdrop, higher leverage or a meaningful rise in non-accrual investments relative to peers could lead to a Negative Outlook or a downgrade.

Our earlier report on The Methodist Hospitals’ BBB- ratings explained how the provider’s outlook improved to Stable as stronger supplemental Medicaid DSH payments supported a fragile financial recovery. We noted that the hospital’s low debt and supportive liquidity helped offset ongoing operating pressures, while continued stability hinged on sustaining operating improvements and avoiding renewed margin or liquidity deterioration.

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