FS KKR Capital Corp offers deep-value upside at 0.58x NAV, but recovery depends on credit stabilization, deleveraging, and successful legacy-asset workouts.
Overview
FS KKR Capital Corp is the fifth-largest publicly traded BDC, with approximately $12.8 billion of assets under management, operating through the FS/KKR Advisor platform alongside KKR Credit, which manages more than $293 billion of credit assets and $141 billion in private-credit strategies. It provides customized senior and junior debt financing to diversified U.S. upper-middle-market borrowers, earning recurring floating-rate interest, PIK income, origination fees, and joint-venture dividends. **The investment case is a deeply discounted turnaround rather than a proven compounder:** Q1 2026 revenue declined to $304 million from $348 million, adjusted NII fell to $0.41 per share, NAV dropped 9.9% quarter over quarter to $18.83, and non-accruals reached 4.2% of fair value. At $10.99, FSK traded at only 0.58x NAV versus a potential normalized 0.85x. KKR’s $600 million support package, including $150 million of preferred capital, a $150 million tender offer at $11.00, a $300 million buyback, and a four-quarter fee waiver, provides near-term support. Catalysts are non-accrual stabilization, successful legacy restructurings, deleveraging, litigation resolution, and the August 6, 2026 Q2 earnings release.