JPMorgan cuts KKR private credit fund FSK private credit fund $648 million credit line

A banking group led by JPMorgan will, on May 8, cut the revolving credit facility of KKR’s private credit fund FS KKR Capital Corp. (NYSE: FSK) from $4.7 billion to $4.05 billion, a reduction of $648 million (about 14%), while raising the interest rate on the remaining facility. According to CNBC, FSK is responding to the crisis, with KKR injecting $150 million and launching a $150 million stock repurchase offer.

FSK Q1 earnings: Net asset value per share fell 9.9% in the quarter; non-accrual loans rose to 4.2%

FSK is a publicly listed business development company (BDC) that mainly invests in private credit for mid-sized companies. Q1 fiscal 2026 results reveal:

Loss per share: $1.57 (prior quarter: $0.41)

Net asset value per share: $18.83, down about 10% from $20.89 at the end of 2025

Non-accrual (stops accruing interest) loans: 4.2%, up from 3.4% at the end of 2025

Net investment income: $0.42 per share (prior quarter: $0.48)

Cumulative unrealized and realized losses: $558 million, more than double the $244 million from the prior quarter

In a press release, FSK explained the decline in net asset value with “legacy investments, new non-accrual loans, and the widening of parts of the investment portfolio spreads,” but did not specify which industries or borrowers were problematic.

KKR $600 million strategic action plan: capital injection, buyback, and fee relief

KKR, as a co-investment adviser to FSK, announced a $600 million strategic action plan in four parts:

KKR subsidiary to purchase $150 million of preferred stock (cumulative convertible perpetual preferred stock, 5% cash dividend, or 7% PIK), with the initial conversion price corresponding to the net asset value per share of $18.83 as of March 31

A $150 million fixed-price stock acquisition tender offer (at $11 per share, lasting 20 trading days)

A $300 million stock repurchase plan, to be launched after the tender offer closes, and to be executed through June 1, 2027

Starting from Q2 2026, 100% fee waivers for four consecutive quarters for “subordinated incentive fees”

Meanwhile, the bank group led by JPMorgan also adjusted the covenant terms—reducing the minimum shareholders’ equity threshold that FSK must not fall below from $5.05 billion to $3.75 billion—giving FSK more room to absorb losses and avoiding triggering a default.

Market significance: Concrete pressure emerges in private credit

Over the past year, markets have focused on whether private credit has reached the point where risk has concentrated and exploded, with the main focus on the rise in non-accrual rates for BDCs and direct lending funds. The FSK case is a specific example in public markets: the non-accrual rate for a listed BDC (FSK is in the top 3 by industry scale) jumped from 3.4% to 4.2% quarter over quarter, net asset value per share fell nearly 10% in the quarter, and the bank side proactively reduced credit.

This outlet’s observation: This package of measures (KKR’s capital injection to shore up the downside + banks reducing credit facilities + shareholder lawsuit pressure) reflects two signals—first, that repayment stress from borrowers at the mid-sized enterprise level has spread to the BDC layer; second, that the “scale expansion by leveraging” model in private credit needs structural adjustments in the downcycle. However, which specific industries are affected has not been disclosed by FSK, and detailed information will require waiting for the 10-Q.

Trackable upcoming events include: the execution status of FSK’s stock acquisition tender offer (at a discount of $11 per share versus net asset value of $18.83), changes in the non-accrual rate in Q2, and whether other large BDCs will follow with similar structural adjustments.

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