Moody’s revises FS KKR view to negative

Moody’s Ratings said it revised the outlook for FS KKR Capital Corp. to negative from stable and affirmed its Baa3 long-term issuer and senior unsecured debt ratings and (P)Baa3 senior unsecured shelf rating.

Moody's said it revised FSK's outlook to negative based on the deterioration in the company's asset quality and its effect on earnings and capital strength.

“Other credit challenges include FSK's higher proportion of junior portfolio investments compared to most rated BDCs and its higher-than-peer median debt-to-equity leverage,” the agency said in a press release.

Additionally, “FSK's debt investments on non-accrual increased significantly in the fourth quarter of 2023 to 6.4% of total debt investments at fair value, up from 2.8% at the end of the third quarter, as a result of the BDC adding five new non-accruals during the fourth quarter. Management's actions to remediate its troubled credits could result in a decline in the BDC's non-accrual percentage this year, but recovering from the negative effect on earnings from loan restructuring will likely be challenging. FSK currently has the highest non-accrual percentage of Moody's Ratings-rated BDCs,” Moody’s noted.

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