(Bloomberg) — A private credit fund jointly managed by Future Standard and KKR & Co. plunged after cutting its dividend more than forecast, as earnings declined amid lower interest rates and losses from troubled investments.
FS KKR Capital Corp., a business development company that makes direct loans, tumbled as much as 18% Thursday, the most intraday since 2020. The BDC slashed its quarterly distribution to 48 cents a share from 70 cents, a deeper cut than the 55 cents executives had previously signaled. About 3.4% of the portfolio, or roughly $440 million, was on non-accrual at year-end, meaning the fund no longer expects to collect interest on those investments, up from 2.9% three months earlier.
“Specific challenges associated with a few investments” weighed on results, Chief Executive Officer Michael Forman said in a statement.
On Thursday’s earnings call, management said they remain satisfied with the FS-KKR partnership and focused on expanding the portfolio, responding to a question from Wells Fargo analyst Finian O’Shea about the BDC’s path forward.
“The low hanging fruit there is that we do have too many non-income producing assets,” said Dan Pietrzak, the fund’s chief investment officer.
During the fourth quarter, loans to Dental Care Alliance, Gracent and Lionbridge Technologies were placed on non-accrual status. So were investments in AmeriVet Partners and Alacrity Solutions. Lenders including KKR took control of Alacrity early last year.
From Bloomberg Intelligence: FS KKR’s Repair Effort Faces New Hurdles
FS KKR also marked down its loan to software company Medallia to about 79 cents on the dollar, from 91 cents in the prior quarter.
–With assistance from Brian Chappatta.
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