Group 1 - FS KKR Capital (NYSE: FSK) is trading at a significant discount to its net asset value (NAV) per share while offering a double-digit base dividend yield from a credit portfolio under elevated stress [1] - The company is based in Philadelphia and operates as a Business Development Company (BDC) [1] - The equity market serves as a mechanism for wealth creation or destruction over the long term, with Pacifica Yield focusing on undervalued high-growth companies, high-dividend stocks, REITs, and green energy firms [1]

Group 1 - FS KKR Capital (NYSE: FSK) is trading at a significant discount to its net asset value (NAV) per share while offering a double-digit base dividend yield from a credit portfolio experiencing elevated stress [1] - The equity market serves as a powerful mechanism for wealth creation or destruction over the long term, with Pacifica Yield focusing on undervalued high-growth companies, high-dividend stocks, REITs, and green energy firms [1]

Group 1 - Roberts Berzins has over a decade of experience in financial management, assisting top-tier corporates in shaping financial strategies and executing large-scale financings [1] - Significant efforts have been made to institutionalize the REIT framework in Latvia to enhance the liquidity of pan-Baltic capital markets [1] - Development of national SOE financing guidelines and frameworks for channeling private capital into affordable housing stock has been a focus [1] - Roberts is a CFA Charterholder and holds an ESG investing certificate, with experience from an internship at the Chicago Board of Trade [1] - Active involvement in "thought-leadership" activities supports the development of pan-Baltic capital markets [1]

Financial Data and Key Metrics Changes - In Q2 2025, the company generated net investment income of $0.62 per share and adjusted net investment income of $0.60 per share, compared to public guidance of approximately $0.64 and $0.62 per share respectively [9] - The net asset value (NAV) per share declined by 6.2% from $23.37 to $21.93 during the quarter [9] - Total investment income was $398 million for the second quarter, a decrease of $2 million compared to the first quarter [25] - Total expenses increased to $225 million during the second quarter, up by $12 million compared to the first quarter [26] Business Line Data and Key Metrics Changes - The company originated $3.4 billion of investments in 2025, with $1.4 billion originated in Q2 [10] - Approximately 72% of new investments were focused on add-on financings to existing portfolio companies and long-term KKR relationships [21] - New investments consisted of approximately 83% in first lien loans, 5% in subordinated debt, and 12% in asset-based finance investments [21] Market Data and Key Metrics Changes - Global M&A volume is down close to 10% year over year, but the company evaluated more opportunities in Q2 than in any of the previous eight quarters [13] - The company estimates that direct tariff exposure has declined to the low to mid-single digit range [14] Company Strategy and Development Direction - The company continues to focus on upper middle market companies with EBITDA in the $50 million to $150 million range across diverse industries [21] - The distribution strategy for 2025 is designed to provide shareholders with additional distributions from accumulated spillover income, with a total expected distribution of $2.80 per share [11] - The company plans to provide additional details regarding its 2026 dividend strategy in the third quarter earnings call [12] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the significant work needed regarding four companies that were placed on non-accrual status [31] - There is cautious optimism for an increase in M&A activity later this year and into next year [13] - The company remains focused on maintaining strong liquidity to support funding needs, ending the quarter with $3.1 billion of availability [11] Other Important Information - Non-accruals represented 5.3% of the portfolio on a cost basis and 3% on a fair value basis as of the end of Q2 [22] - The weighted average yield on accruing debt investments was 10.6% as of June 30, a decrease of 20 basis points compared to the previous quarter [25] Q&A Session Summary Question: What are you seeing in terms of originations in the second half? - Management noted that there has been increased activity and deal count, with more deals evaluated in Q2 than in the prior eight quarters [34][35] Question: Are there any other companies on your watch list? - Management indicated that approximately 7% of the portfolio is in risk ratings that are concerning, with some names showing positive momentum [39] Question: Can you provide insight into the joint venture's earnings situation? - The anticipated dividend from the joint venture for Q3 is lower due to timing issues with certain dividends [44][45] Question: What is the company's view on buybacks? - Management stated that buybacks will be balanced with market opportunities and target leverage ratios [49] Question: How many troubled assets are currently being monitored? - Management confirmed that the workout team is actively engaged with companies on the watch list, with a focus on maximizing outcomes [56] Question: What is the outlook for the dividend policy? - Management indicated that the dividend policy will be tied to net investment income and will consider market conditions [76][95]

Financial Data and Key Metrics Changes - FSK generated net investment income of $0.62 per share and adjusted net investment income of $0.60 per share, compared to public guidance of approximately $0.64 and $0.62 per share respectively [8] - Net asset value per share declined 6.2% from $23.37 to $21.93 during the quarter [8] - Total investment income was $398 million for the second quarter, a decrease of $2 million compared to the first quarter [25] - Total expenses were $225 million during the second quarter, an increase of $12 million compared to the first quarter [26] Business Line Data and Key Metrics Changes - New investment activity remained strong with $3.4 billion of investments originated in 2025, of which $1.4 billion were originated during the second quarter [9] - Approximately 72% of new investments were focused on add-on financings to existing portfolio companies and long-term KKR relationships [21] - Non-accruals represented 5.3% of the portfolio on a cost basis and 3% on a fair value basis as of the end of the second quarter [22] Market Data and Key Metrics Changes - Global M&A volume is down close to 10% year over year, but the team evaluated more opportunities in Q2 than in any of the previous eight quarters [12] - Direct tariff exposure has declined and now falls within the low to mid single-digit range [13] Company Strategy and Development Direction - The company continues to focus on senior secured investments, with approximately 59% of the portfolio in first lien loans and 64% in senior secured debt as of June 30 [24] - The 2025 distribution strategy aims to provide shareholders with additional distributions from accumulated spillover income, with a total expected distribution of $2.80 per share [10] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for an increase in M&A activity later this year and into next year, despite current market volatility [12] - The company is focused on stabilizing operations and realizing meaningful cost efficiencies in response to headwinds from tariffs and softer consumer demand [19] Other Important Information - The weighted average yield on accruing debt investments was 10.6% as of June 30, a decrease of 20 basis points compared to the previous quarter [25] - The company plans to provide additional details regarding its 2026 dividend strategy on the third quarter earnings call [11] Q&A Session Summary Question: What are you seeing in terms of originations in the second half? - Management noted increased activity and deal count, with more deals evaluated in Q2 than in the previous eight quarters, indicating a busier environment [36] Question: Do you have any other companies on a watch list beyond the four mentioned? - Management indicated that approximately 7% of the portfolio is in risk ratings QAR bucket three and four, with some names showing positive momentum [39] Question: Can you explain the anticipated dividend from the joint venture for Q3? - The anticipated dividend for Q3 is lower due to the timing of certain ABF dividends, which tend to be lumpy [45] Question: What is the company's view on buybacks given the current portfolio conditions? - Management stated that they have historically been active in buybacks but will balance that with market opportunities and target leverage ratios [50] Question: Are there any themes leading to re-defaults in the portfolio? - Management clarified that each situation is unique, and while some companies are facing challenges, proactive restructuring efforts are ongoing [60] Question: How does the company plan to manage inflow and outflow of investments? - Management emphasized the correlation between new deal flow and repayments, indicating that they have levers to manage growth within their target leverage band [78] Question: What is the current status of spillover income? - Spillover income has been reduced to the mid-400 million range, with a target of aligning it to approximately two quarters' worth of dividends [100]

Financial Performance - Net investment income (NII) was $173 million, or $0.62 per share, down from $187 million, or $0.67 per share in the previous quarter[2] - Adjusted net investment income (Adjusted NII) was $168 million, or $0.60 per share, compared to $182 million, or $0.65 per share for the quarter ended March 31, 2025[2] - Net asset value (NAV) per share decreased to $21.93 as of June 30, 2025, from $23.37 as of March 31, 2025[2] - Adjusted NII coverage of the base dividend was 94%, and total dividend coverage was 86% for the quarter ended June 30, 2025[2] Investment Activity & Portfolio - New investment fundings totaled approximately $1.4 billion in the second quarter[2] - Net investment activity for the second quarter was $311 million, including $561 million of sales to Credit Opportunities Partners JV, LLC (COPJV)[2] - The portfolio is diversified across 218 companies in 23 industries[2,10] - Exposure to the top ten largest portfolio companies was 19% of the total portfolio fair value[2,10] - Senior secured investments represent 64.1% of the portfolio fair value, or 73.4% when looking through to COPJV investments[10,16] Capital Structure & Liquidity - The company has $3.1 billion of liquidity, including undrawn debt, cash, and unsettled trades[2,26] - 54% of drawn leverage was unsecured as of June 30, 2025, and the weighted average effective rate on borrowings was 5.34%[2,28] - 90% of liabilities mature in 2027 and beyond[2,26]

Core Insights - FS KKR Capital reported revenue of $398 million for the quarter ended June 2025, a decrease of 9.3% year-over-year [1] - The company's EPS was -$0.60, down from $0.75 in the same quarter last year, indicating a significant decline [1] - Revenue fell short of the Zacks Consensus Estimate of $401.13 million, resulting in a surprise of -0.78% [1] - The EPS surprise was -195.24%, with the consensus estimate being $0.63 [1] Financial Performance Metrics - Investment income from fee income was $9 million, below the average estimate of $15.41 million from four analysts [4] - Dividend and other income amounted to $91 million, exceeding the average estimate of $81.05 million based on four analysts [4] - Paid-in-kind interest income was reported at $53 million, lower than the estimated $61.66 million, but showed a year-over-year increase of 23.3% [4] - Interest income reached $245 million, slightly above the average estimate of $241.38 million from three analysts [4] Stock Performance - FS KKR Capital's shares have returned -5% over the past month, contrasting with the Zacks S&P 500 composite's +0.5% change [3] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3]

Core Viewpoint - FS KKR Capital reported a quarterly loss of $0.6 per share, missing the Zacks Consensus Estimate of $0.63, and a decline from earnings of $0.75 per share a year ago, indicating a significant earnings surprise of -195.24% [1] Financial Performance - The company posted revenues of $398 million for the quarter ended June 2025, which was below the Zacks Consensus Estimate by 0.78% and a decrease from $439 million in the same quarter last year [2] - Over the last four quarters, FS KKR Capital has surpassed consensus EPS estimates two times and topped consensus revenue estimates twice [2] Stock Performance - FS KKR Capital shares have declined approximately 7.3% since the beginning of the year, contrasting with the S&P 500's gain of 7.1% [3] - The current status of estimate revisions has resulted in a Zacks Rank 3 (Hold) for the stock, suggesting it is expected to perform in line with the market in the near future [6] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.63 on revenues of $402.16 million, while for the current fiscal year, the estimate is $2.54 on revenues of $1.6 billion [7] - The outlook for the industry, specifically the Financial - SBIC & Commercial Industry, is currently in the top 41% of Zacks industries, indicating a favorable environment for stock performance [8] Industry Comparison - Main Street Capital, another company in the same industry, is expected to report quarterly earnings of $0.99 per share, reflecting a year-over-year change of -2%, with revenues anticipated to be $137.23 million, up 3.8% from the previous year [9][10]

[PART I—FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) [ITEM 1. FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents the unaudited consolidated financial statements for the quarter ended June 30, 2025, including balance sheets, statements of operations, changes in net assets, cash flows, and detailed schedules of investments, along with comprehensive notes [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity as of June 30, 2025, and December 31, 2024 | Metric | June 30, 2025 (Unaudited) | December 31, 2024 | | :--------------------------------- | :-------------------------- | :------------------ | | Total investments, at fair value | $13,648 million | $13,490 million | | Cash and cash equivalents | $244 million | $278 million | | Total assets | $14,593 million | $14,219 million | | Debt (net) | $8,041 million | $7,351 million | | Total liabilities | $8,452 million | $7,597 million | | Total stockholders' equity | $6,141 million | $6,622 million | | Net asset value per share | $21.93 | $23.64 | - Total assets increased by **$374 million** from December 31, 2024, to June 30, 2025, primarily driven by an increase in total investments at fair value and receivables for investments sold and repaid, while total liabilities also increased significantly by **$855 million**, mainly due to an increase in debt[14](index=14&type=chunk) - Stockholders' equity decreased by **$481 million**, leading to a decrease in net asset value per share from **$23.64 to $21.93**[14](index=14&type=chunk) [Unaudited Consolidated Statements of Operations](index=4&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Operations) This section outlines the company's financial performance over the three and six months ended June 30, 2025, compared to the prior year, detailing investment income, operating expenses, and net changes in assets | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total investment income | $398 million | $439 million | $798 million | $873 million | | Total operating expenses | $225 million | $224 million | $438 million | $446 million | | Net investment income | $173 million | $215 million | $360 million | $427 million | | Total net realized and unrealized gain (loss) | $(368) million | $(110) million | $(435) million | $(149) million | | Net increase (decrease) in net assets resulting from operations | $(209) million | $105 million | $(89) million | $278 million | | Earnings (Losses) per Share | $(0.75) | $0.37 | $(0.32) | $0.99 | - Total investment income decreased by **$41 million (9.3%)** for the three months ended June 30, 2025, and by **$75 million (8.6%)** for the six months ended June 30, 2025, compared to the respective periods in 2024[17](index=17&type=chunk) - Net investment income decreased by **$42 million (19.5%)** for the three months and **$67 million (15.7%)** for the six months ended June 30, 2025, compared to the same periods in 2024[17](index=17&type=chunk) - The company reported a net decrease in net assets from operations of **$(209) million** for the three months and **$(89) million** for the six months ended June 30, 2025, a significant decline from the net increases reported in the prior year periods[17](index=17&type=chunk) [Unaudited Consolidated Statements of Changes in Net Assets](index=6&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Changes%20in%20Net%20Assets) This section details the changes in the company's net assets for the three and six months ended June 30, 2025, reflecting operational results and stockholder distributions | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net increase (decrease) in net assets from operations | $(209) million | $105 million | $(89) million | $278 million | | Stockholder distributions | $(196) million | $(210) million | $(392) million | $(420) million | | Total increase (decrease) in net assets | $(405) million | $(105) million | $(481) million | $(142) million | | Net assets at end of period | $6,141 million | $6,707 million | $6,141 million | $6,707 million | - Net assets decreased by **$405 million** for the three months and **$481 million** for the six months ended June 30, 2025, primarily due to a net decrease from operations and stockholder distributions[23](index=23&type=chunk) [Unaudited Consolidated Statements of Cash Flows](index=7&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents the cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2025, and 2024 | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by (used in) operating activities | $(310) million | $842 million | | Net cash provided by (used in) financing activities | $326 million | $(640) million | | Total increase (decrease) in cash | $16 million | $202 million | | Cash, cash equivalents and foreign currency at end of period | $312 million | $433 million | - Operating activities shifted from providing **$842 million** in cash in the first six months of 2024 to using **$310 million** in the same period of 2025, largely due to increased purchases of investments and a decrease in net assets from operations[29](index=29&type=chunk) - Financing activities provided **$326 million** in cash for the six months ended June 30, 2025, a significant improvement from using **$640 million** in the prior year, driven by higher borrowings under financing arrangements[29](index=29&type=chunk) - The company contributed **$294 million** of investments at fair value to Credit Opportunities Partners JV, LLC during the six months ended June 30, 2025, as a non-cash operating activity[30](index=30&type=chunk) [Consolidated Schedules of Investments](index=8&type=section&id=Consolidated%20Schedules%20of%20Investments) This section provides a detailed breakdown of the company's investment portfolio by type and industry as of June 30, 2025 Investment Portfolio by Type | Investment Type | Amortized Cost (June 30, 2025) | Fair Value (June 30, 2025) | Percentage of Portfolio (June 30, 2025) | | :---------------------------------- | :----------------------------- | :------------------------- | :-------------------------------------- | | Senior Secured Loans—First Lien | $8,397 million | $8,055 million | 59.0% | | Senior Secured Loans—Second Lien | $692 million | $673 million | 4.9% | | Other Senior Secured Debt | $33 million | $30 million | 0.2% | | Subordinated Debt | $207 million | $225 million | 1.6% | | Asset Based Finance | $2,119 million | $2,000 million | 14.7% | | Credit Opportunities Partners JV, LLC | $1,869 million | $1,632 million | 12.0% | | Equity/Other | $1,054 million | $1,033 million | 7.6% | | **Total** | **$14,371 million** | **$13,648 million** | **100.0%** | - As of June 30, 2025, the portfolio primarily consists of **Senior Secured Loans—First Lien (59.0% of fair value)** and **Asset Based Finance (14.7% of fair value)**[213](index=213&type=chunk) - The company held investments in **32 controlled portfolio companies** and **11 affiliated (non-controlled) portfolio companies** as of June 30, 2025[215](index=215&type=chunk) Investment Portfolio by Industry Classification | Industry Classification | Fair Value (June 30, 2025) | Percentage of Portfolio | | :-------------------------------------- | :------------------------- | :---------------------- | | Software & Services | $2,331 million | 17.1% | | Commercial & Professional Services | $1,741 million | 12.8% | | Health Care Equipment & Services | $1,611 million | 11.8% | | Credit Opportunities Partners JV, LLC | $1,632 million | 12.0% | | Capital Goods | $1,658 million | 12.1% | - Unfunded commitments totaled **$1,730.1 million** for debt investments, **$369.7 million** for equity/other, and **$577.5 million** for COPJV as of June 30, 2025[217](index=217&type=chunk) [Notes to Unaudited Consolidated Financial Statements](index=60&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) This section provides comprehensive explanations of the company's significant accounting policies, related party transactions, distributions, financial instruments, fair value measurements, financing arrangements, commitments, and financial highlights [Note 1. Principal Business and Organization](index=60&type=section&id=Note%201.%20Principal%20Business%20and%20Organization) This note describes FS KKR Capital Corp.'s (FSK) business structure, regulatory status, and primary investment objectives - FS KKR Capital Corp. (FSK) is an externally managed, non-diversified, closed-end management investment company regulated as a Business Development Company (BDC) under the 1940 Act and intends to qualify as a Regulated Investment Company (RIC) for tax purposes[160](index=160&type=chunk) - The company's primary investment objectives are current income and, to a lesser extent, long-term capital appreciation, achieved mainly through investments in senior secured and second lien secured loans of private middle-market U.S. companies[161](index=161&type=chunk) - FSK is externally managed by FS/KKR Advisor, LLC (the Adviser) under an investment advisory agreement[162](index=162&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=60&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the key accounting principles and methods used in preparing the financial statements, including revenue recognition, incentive fees, and derivative instruments - Financial statements are prepared in accordance with GAAP for interim financial information, emphasizing estimates and assumptions that affect reported amounts[163](index=163&type=chunk)[164](index=164&type=chunk) - The company operates as a single operating and reporting segment[165](index=165&type=chunk) - Incentive fees include a **capital gains incentive fee (20% of cumulative realized gains net of losses and unrealized depreciation)** and a **subordinated income incentive fee (17.5% of pre-incentive fee net investment income above a 1.75% quarterly hurdle rate, with a 'catch-up' provision up to 2.12%)**[166](index=166&type=chunk)[169](index=169&type=chunk) - Revenue recognition for security transactions is on the trade date, with interest income accrued to the extent collectable, PIK income accumulated onto the principal balance, and loans placed on non-accrual status when collectability is doubtful[170](index=170&type=chunk) - Derivative instruments, including foreign currency forward contracts and interest rate swaps, are recognized at fair value, with certain interest rate swaps designated as fair value hedges and changes in fair value recorded in interest expense[172](index=172&type=chunk)[173](index=173&type=chunk) - Recent accounting pronouncements ASU 2023-09 (Income Tax Disclosures) and ASU 2024-03 (Expense Disaggregation Disclosures) are being assessed for impact, but no material impact is expected[174](index=174&type=chunk)[176](index=176&type=chunk) [Note 3. Share Transactions](index=63&type=section&id=Note%203.%20Share%20Transactions) This note details the company's share-related activities, including purchases through the Dividend Reinvestment Plan (DRP) and other equity issuances | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Shares purchased via DRP | 351,873 | 1,628,448 | | Total cost of DRP purchases | $7 million | $32 million | | Average price per share (DRP) | $21.03 | $19.95 | - The company did not issue or sell shares of its common stock under the 'At the Market' Offering during the three and six months ended June 30, 2025[181](index=181&type=chunk) - Post-period, from July 1 to July 31, 2025, an additional **343,451 shares** were purchased in the open market for **$7 million** via the DRP at an average price of **$21.36 per share**[177](index=177&type=chunk) [Note 4. Related Party Transactions](index=64&type=section&id=Note%204.%20Related%20Party%20Transactions) This note describes transactions and agreements with related parties, primarily concerning management and incentive fees paid to the Adviser and administrative service reimbursements | Fee Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Base Management Fee | $53 million | $54 million | $105 million | $109 million | | Subordinated Incentive Fee on Income | $36 million | $45 million | $75 million | $88 million | | Administrative Services Expenses | $2 million | $2 million | $5 million | $5 million | - The Adviser's annual base management fee is **1.50% of average weekly gross assets (excluding cash)**, reduced to **1.0%** on assets financed using leverage over 1.0x debt-to-equity since June 15, 2019[183](index=183&type=chunk) - The company reimburses the Adviser for administrative services, including allocable compensation and related expenses of personnel providing services, with the methodology reviewed by the board of directors[186](index=186&type=chunk) - The company relies on an exemptive relief order (January 5, 2021) for co-investments with Adviser affiliates and has applied for streamlined co-investment relief on June 16, 2025[193](index=193&type=chunk)[194](index=194&type=chunk) [Note 5. Distributions](index=66&type=section&id=Note%205.%20Distributions) This note provides details on distributions declared and paid to stockholders, including their sources and tax characteristics Distributions Declared Per Share | Distribution Type | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------- | :----------------------------- | :----------------------------- | | Total Declared | $1.40 per share | $1.50 per share | Source of Distributions (Tax Basis) | Source of Distribution (Tax Basis) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Net investment income | $392 million (100%) | $420 million (100%) | - Distributions are funded from legally available sources, including investment income, capital gains, and borrowings, with no established limits on funding sources, and no portion of distributions represented a return of capital during the reported periods[203](index=203&type=chunk)[100](index=100&type=chunk) - As of June 30, 2025, the company had capital loss carryforwards of approximately **$2,871 million** to offset future realized capital gains[206](index=206&type=chunk) - The aggregate net unrealized depreciation on investments on a tax basis was **$(1,375) million** as of June 30, 2025, compared to **$(1,270) million** as of December 31, 2024[208](index=208&type=chunk) [Note 6. Investment Portfolio](index=68&type=section&id=Note%206.%20Investment%20Portfolio) This note provides a detailed breakdown of the company's investment portfolio by type and industry, along with information on unfunded commitments and investment sales Investment Portfolio by Type | Investment Type | Fair Value (June 30, 2025) | Percentage of Portfolio | | :---------------------------------- | :------------------------- | :---------------------- | | Senior Secured Loans—First Lien | $8,055 million | 59.0% | | Senior Secured Loans—Second Lien | $673 million | 4.9% | | Other Senior Secured Debt | $30 million | 0.2% | | Subordinated Debt | $225 million | 1.6% | | Asset Based Finance | $2,000 million | 14.7% | | Credit Opportunities Partners JV, LLC | $1,632 million | 12.0% | | Equity/Other | $1,033 million | 7.6% | | **Total** | **$13,648 million** | **100.0%** | Investment Portfolio by Industry Classification | Industry Classification | Fair Value (June 30, 2025) | Percentage of Portfolio | | :-------------------------------------- | :------------------------- | :---------------------- | | Software & Services | $2,331 million | 17.1% | | Commercial & Professional Services | $1,741 million | 12.8% | | Capital Goods | $1,658 million | 12.1% | | Credit Opportunities Partners JV, LLC | $1,632 million | 12.0% | | Health Care Equipment & Services | $1,611 million | 11.8% | - Unfunded commitments totaled **$1,730.1 million** for debt, **$369.7 million** for equity/other, and **$577.5 million** for COPJV as of June 30, 2025[217](index=217&type=chunk) - The company sold investments with a cost of **$836.6 million** for proceeds of **$850.5 million** to COPJV during the six months ended June 30, 2025, recognizing a net realized gain of **$13.9 million**[222](index=222&type=chunk) [Note 7. Financial Instruments](index=70&type=section&id=Note%207.%20Financial%20Instruments) This note describes the company's use of derivative financial instruments, such as foreign currency forward contracts and interest rate swaps, to manage market risks Derivative Instruments at Fair Value | Derivative Instrument | Statement Location | June 30, 2025 (Unaudited) | | :------------------------------ | :-------------------------------------------------- | :------------------------ | | Foreign currency forward contracts | Unrealized depreciation on foreign currency forward contracts | $(18) million | Net Realized and Unrealized Gains (Losses) on Derivatives | Derivative Instrument | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------ | :----------------------------- | :----------------------------- | | Net realized gain (loss) on foreign currency forward contracts | $(3) million | $19 million | | Net change in unrealized appreciation (depreciation) on foreign currency forward contracts | $(20) million | $(13) million | - The company uses foreign currency forward contracts and cross currency swaps to manage foreign exchange rate risk, with an average notional balance of **$174.4 million** for foreign currency forward contracts during the six months ended June 30, 2025[231](index=231&type=chunk)[233](index=233&type=chunk) - Interest rate swaps with a total notional amount of **$1,300 million** are used to hedge exposure to changes in fair value of **6.875% Notes due 2029** and **6.125% Notes due 2030**, designated as qualifying fair value hedges[234](index=234&type=chunk)[235](index=235&type=chunk) [Note 8. Fair Value of Financial Instruments](index=73&type=section&id=Note%208.%20Fair%20Value%20of%20Financial%20Instruments) This note details the fair value measurements of the company's financial instruments, categorized by the three-tier hierarchy of valuation inputs Fair Value Hierarchy of Investments | Valuation Inputs | June 30, 2025 (Unaudited) | December 31, 2024 | | :----------------------------------- | :------------------------ | :---------------- | | Level 1—Price quotations in active markets | $3 million | $1 million | | Level 2—Significant other observable inputs | $23 million | $91 million | | Level 3—Significant unobservable inputs | $11,990 million | $12,035 million | | Investments measured at net asset value | $1,632 million | $1,363 million | | **Total** | **$13,648 million** | **$13,490 million** | - The majority of investments (**87.8% of total fair value**) are classified as Level 3, indicating significant unobservable inputs are used in their valuation[241](index=241&type=chunk) Quantitative Information about Level 3 Fair Value Measurements | Type of Investment | Valuation Technique | Unobservable Input | Range (Weighted Average) | | :----------------- | :------------------ | :----------------- | :----------------------- | | Senior Debt | Discounted Cash Flow | Discount Rate | 6.8% - 20.1% (10.5%) | | Senior Debt | Waterfall | EBITDA Multiple | 0.5x - 12.6x (8.2x) | | Subordinated Debt | Discounted Cash Flow | Discount Rate | 9.0% - 15.5% (11.9%) | | Subordinated Debt | Waterfall | EBITDA Multiple | 5.0x - 9.0x (5.4x) | | Equity/Other | Discounted Cash Flow | Discount Rate | 4.0% - 21.0% (13.5%) | | Equity/Other | Waterfall | EBITDA Multiple | 1.2x - 19.0x (10.0x) | - For Level 3 investments, an increase in discount rate generally decreases valuation, while an increase in EBITDA multiple generally increases valuation[253](index=253&type=chunk) [Note 9. Financing Arrangements](index=77&type=section&id=Note%209.%20Financing%20Arrangements) This note details the company's debt obligations, including revolving credit facilities, unsecured notes, and collateralized loan obligations, along with associated interest expenses and recent changes - As of June 30, 2025, the aggregate amount outstanding of senior securities was **$8,022 million**, with an asset coverage of **177%**, meeting the **150%** requirement[256](index=256&type=chunk) Outstanding Financing Arrangements | Arrangement Type | Amount Outstanding (June 30, 2025) | Rate Range (June 30, 2025) | | :------------------------------- | :--------------------------------- | :------------------------- | | Revolving Credit Facilities | $3,130 million | SOFR+1.75% to SOFR+2.25% | | Unsecured Notes | $4,350 million | 2.63% to 7.88% | | Collateralized Loan Obligations (CLO) | $542 million | 3.01% to SOFR+2.15% | | **Total** | **$8,022 million** | | Interest Expense Components | Interest Expense Component | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------- | :----------------------------- | :----------------------------- | | Direct Interest Expense | $227 million | $222 million | | Amortization of Deferred Financing Costs and Discount/Premium | $11 million | $9 million | | **Total Interest Expense** | **$238 million** | **$231 million** | - The weighted average effective interest rate on borrowings was **5.34%** as of June 30, 2025, consistent with June 30, 2024[274](index=274&type=chunk)[275](index=275&type=chunk) - On June 2, 2025, the company entered into the Callowhill Credit Facility for up to **$400 million**, maturing June 3, 2030, with interest at **SOFR+1.75%** plus benchmark rates[277](index=277&type=chunk)[280](index=280&type=chunk)[281](index=281&type=chunk) - On June 5, 2025, the Darby Creek Credit Facility was repaid and terminated, resulting in a realized loss on extinguishment of debt of **$3 million**[282](index=282&type=chunk) [Note 10. Commitments and Contingencies](index=81&type=section&id=Note%2010.%20Commitments%20and%20Contingencies) This note outlines the company's legal proceedings, unfunded commitments, and liquidity position to meet future obligations - The company is not currently subject to any material legal proceedings[286](index=286&type=chunk) Unfunded Commitments | Commitment Category | Commitment Amount (June 30, 2025) | | :------------------------------ | :-------------------------------- | | Senior Secured Loans—First Lien | $1,730.1 million | | Senior Secured Loans—Second Lien | $3.0 million | | Subordinated Debt | $1.6 million | | Asset Based Finance | $369.7 million | | Equity/Other | $9.2 million | | **Total Unfunded Commitments** | **$2,113.6 million** | - Unfunded commitments to Credit Opportunities Partners JV, LLC (COPJV) totaled **$577.5 million** as of June 30, 2025, which can be satisfied with cash and/or investments and require affirmative vote from both partners[297](index=297&type=chunk) - The company has sufficient liquidity to fund its unfunded commitments, which include **$841.3 million** in revolving credit facilities and **$888.8 million** in delayed draw term loans[295](index=295&type=chunk) [Note 11. Financial Highlights](index=86&type=section&id=Note%2011.%20Financial%20Highlights) This note presents key financial metrics and ratios, including per share data, total returns, and expense ratios, for the six months ended June 30, 2025, and 2024 Per Share Data | Per Share Data | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------- | :----------------------------- | :----------------------------- | | Net asset value, beginning of period | $23.64 | $24.46 | | Net increase (decrease) in net assets from operations | $(0.31) | $0.99 | | Stockholder distributions | $(1.40) | $(1.50) | | Net asset value, end of period | $21.93 | $23.95 | | Per share market value, end of period | $20.75 | $19.73 | Ratios and Supplemental Data | Ratios/Supplemental Data | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------- | :----------------------------- | :----------------------------- | | Total return based on net asset value | (1.33)% | 4.05% | | Total return based on market value | 1.95% | 6.47% | | Ratio of net investment income to average net assets | 10.88% | 12.38% | | Ratio of total operating expenses to average net assets | 13.24% | 12.93% | | Portfolio turnover | 21.99% | 18.82% | | Asset coverage per unit | 1.77 | 1.84 | - Net asset value per share decreased from **$23.64 to $21.93** during the six months ended June 30, 2025, primarily due to a net decrease in net assets from operations and stockholder distributions[301](index=301&type=chunk) [Note 12. Segment Reporting](index=87&type=section&id=Note%2012.%20Segment%20Reporting) This note clarifies that the company operates as a single reporting segment, with performance assessed on a consolidated basis - The company operates through a single operating and reporting segment, with the Chief Operating Decision Maker (CODM) assessing performance and making decisions on a consolidated basis, primarily using net increase in stockholders' equity from operations (net income)[306](index=306&type=chunk) [Note 13. Subsequent Events](index=87&type=section&id=Note%2013.%20Subsequent%20Events) This note discloses significant events that occurred after the reporting period, including distribution declarations and amendments to financing arrangements - On July 31, 2025, the board declared a regular quarterly distribution of **$0.70 per share ($0.64 base + $0.06 supplemental)**, payable October 2, 2025[307](index=307&type=chunk) - On July 16, 2025, the company entered into a Third Amended and Restated Senior Secured Revolving Credit Facility, increasing initial aggregate borrowings to **$4,700 million** (with an option for **$2,350 million** additional commitments) and extending maturity to July 16, 2030[308](index=308&type=chunk)[311](index=311&type=chunk) - The amended facility includes new interest rate structures based on borrowing base value and requires compliance with financial covenants, including a **150% asset coverage ratio** and minimum shareholders' equity[312](index=312&type=chunk)[313](index=313&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=89&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on the company's financial condition, results of operations, and liquidity for the three and six months ended June 30, 2025, compared to the prior year, covering investment objectives, revenue and expense drivers, portfolio activity, asset quality, and financial resources [Overview](index=90&type=section&id=Overview) This overview outlines the company's investment objectives, primary portfolio composition, and definition of direct originations - The company's investment objectives are to generate current income and, to a lesser extent, long-term capital appreciation, primarily by investing in debt of middle-market U.S. companies through direct originations[321](index=321&type=chunk) - The portfolio mainly consists of senior secured and second lien secured loans, with potential investments in subordinated loans, equity, and equity-related securities[322](index=322&type=chunk) - Direct originations are defined as investments where the Adviser or its affiliates negotiate transaction terms beyond just price, including financial covenants, maturity dates, or interest rates[321](index=321&type=chunk) [Revenues](index=91&type=section&id=Revenues) This section describes the primary sources of the company's revenues and the principal measure of its financial performance - Revenues are primarily generated from interest income on debt investments, supplemented by non-recurring fees (commitment, closing, origination, structuring, diligence, monitoring, consulting, prepayment, and performance-based fees) and dividends/distributions on equity securities[328](index=328&type=chunk) - The principal measure of financial performance is net increase in net assets from operations, encompassing net investment income, realized/unrealized gains/losses on investments and foreign currency[327](index=327&type=chunk) [Expenses](index=91&type=section&id=Expenses) This section details the company's primary operating expenses, including management and incentive fees, interest expense, and administrative service reimbursements - Primary operating expenses include management and incentive fees to the Adviser, interest expense from financing arrangements, and administrative services expenses[329](index=329&type=chunk) - The Adviser oversees day-to-day operations and administrative services, for which the company reimburses allocable costs, subject to board review for reasonableness[330](index=330&type=chunk)[331](index=331&type=chunk) [Portfolio Investment Activity for the Three and Six Months Ended June 30, 2025 and for the Year Ended December 31, 2024](index=92&type=section&id=Portfolio%20Investment%20Activity%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202025%20and%20for%20the%20Year%20Ended%20December%2031%2C%202024) This section provides an overview of the company's investment purchases, sales, and repayments, along with key portfolio characteristics and the extent of direct originations Net Investment Activity | Net Investment Activity | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :---------------------- | :------------------------------- | :----------------------------- | | Purchases | $1,400 million | $3,398 million | | Sales and Repayments | $(1,650) million | $(3,057) million | | Net Portfolio Activity | $(250) million | $341 million | Investment Activity by Asset Class (Six Months Ended June 30, 2025) | Asset Class | Purchases (6M 2025) | Sales & Repayments (6M 2025) | | :------------------------------ | :------------------ | :--------------------------- | | Senior Secured Loans—First Lien | $2,419 million | $(2,014) million | | Asset Based Finance | $558 million | $(695) million | | Credit Opportunities Partners JV, LLC | $297 million | $0 million | Portfolio Characteristics | Portfolio Characteristic | June 30, 2025 | December 31, 2024 | | :---------------------------------------- | :------------ | :---------------- | | Number of Portfolio Companies | 218 | 214 | | % Variable Rate Debt Investments (fair value) | 66.0% | 65.8% | | % Fixed Rate Debt Investments (fair value) | 8.1% | 9.5% | | % Non-Income Producing Investments (fair value) | 5.4% | 6.1% | | % of Investments on Non-Accrual (fair value) | 3.0% | 2.2% | | Weighted Average Annual Yield on Accruing Debt Investments | 10.8% | 11.3% | - Total fair value of direct originations was **$13,305.2 million** as of June 30, 2025, representing **97.5%** of total investments[339](index=339&type=chunk) [Credit Opportunities Partners JV, LLC](index=94&type=section&id=Credit%20Opportunities%20Partners%20JV%2C%20LLC) This section details the company's joint venture with South Carolina Retirement Systems Group Trust (SCRS), including committed capital and portfolio summary - COPJV is a joint venture with South Carolina Retirement Systems Group Trust (SCRS), with committed capital of up to **$2,800 million**, where the company provides **87.5%** and SCRS **12.5%**[342](index=342&type=chunk) - As of June 30, 2025, the company and SCRS have funded approximately **$2,140.0 million** to COPJV, with the company's share being **$1,872.5 million**[342](index=342&type=chunk) COPJV Portfolio Summary | COPJV Portfolio Summary | June 30, 2025 | December 31, 2024 | | :-------------------------------------- | :------------ | :---------------- | | Total debt investments | $3,706.6 million | $3,019.6 million | | Weighted average annual yield on accruing debt investments | 10.1% | 10.3% | | Number of portfolio companies | 136 | 117 | | Unfunded commitments | $81.8 million | $45.6 million | [Portfolio Composition by Industry Classification](index=95&type=section&id=Portfolio%20Composition%20by%20Industry%20Classification) This section presents the distribution of the company's investment portfolio across various industry sectors as of June 30, 2025 Portfolio by Industry Classification | Industry Classification | Fair Value (June 30, 2025) | Percentage of Portfolio | | :-------------------------------------- | :------------------------- | :---------------------- | | Software & Services | $2,331 million | 17.1% | | Commercial & Professional Services | $1,741 million | 12.8% | | Capital Goods | $1,658 million | 12.1% | | Credit Opportunities Partners JV, LLC | $1,632 million | 12.0% | | Health Care Equipment & Services | $1,611 million | 11.8% | - The top five industry classifications represent approximately **65.8%** of the total portfolio fair value as of June 30, 2025[345](index=345&type=chunk) [Portfolio Asset Quality](index=95&type=section&id=Portfolio%20Asset%20Quality) This section describes the Adviser's investment rating system and the quality of the portfolio assets, highlighting changes in underperforming investments - The Adviser uses a **1 to 4 investment rating system** to monitor expected returns, with '1' being performing and '4' indicating concerns about principal or interest recoverability[346](index=346&type=chunk) Investment Rating Distribution | Investment Rating | Fair Value (June 30, 2025) | Percentage of Portfolio | | :---------------- | :------------------------- | :---------------------- | | 1 (Performing) | $9,247 million | 68% | | 2 (Performing) | $3,423 million | 25% | | 3 (Underperforming) | $691 million | 5% | | 4 (Underperforming) | $287 million | 2% | - The fair value of investments rated '4' (underperforming with principal/interest recoverability concerns) increased from **$152 million (1%)** at December 31, 2024, to **$287 million (2%)** at June 30, 2025[347](index=347&type=chunk) [Results of Operations](index=96&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, detailing changes in revenues, expenses, net investment income, and realized/unrealized gains and losses [Revenues](index=96&type=section&id=Revenues) This subsection analyzes the components of total investment income, highlighting changes in interest, PIK, fee, and dividend income for the reported periods Total Investment Income by Type | Revenue Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Interest income | $245 million (61.6%) | $310 million (70.6%) | $485 million (60.7%) | $625 million (71.6%) | | Paid-in-kind interest income | $53 million (13.3%) | $43 million (9.8%) | $115 million (14.4%) | $78 million (8.9%) | | Fee income | $9 million (2.2%) | $18 million (4.1%) | $26 million (3.3%) | $35 million (4.0%) | | Dividend income | $91 million (22.9%) | $68 million (15.5%) | $172 million (21.6%) | $135 million (15.5%) | | **Total investment income** | **$398 million (100.0%)** | **$439 million (100.0%)** | **$798 million (100.0%)** | **$873 million (100.0%)** | - Interest and PIK income decreased for both the three and six months ended June 30, 2025, primarily due to certain assets being placed on non-accrual status[350](index=350&type=chunk) - Dividend income increased for both periods, mainly due to higher dividends from certain asset-based finance investments and the investment in COPJV[351](index=351&type=chunk) [Expenses](index=97&type=section&id=Expenses) This subsection details the company's operating expenses, including management fees, incentive fees, and interest expense, and analyzes their impact on overall financial performance Total Operating Expenses | Expense Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Management fees | $53 million | $54 million | $105 million | $109 million | | Subordinated income incentive fees | $36 million | $45 million | $75 million | $88 million | | Interest expense | $125 million | $115 million | $238 million | $231 million | | **Total operating expenses** | **$225 million** | **$224 million** | **$438 million** | **$446 million** | - Total operating expenses remained relatively stable for the three months ended June 30, 2025, but decreased for the six-month period, primarily due to lower subordinated income incentive fees[353](index=353&type=chunk) Expense Ratio | Expense Ratio (as % of average net assets) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Ratio of operating expenses | 3.43% | 3.26% | 6.62% | 6.46% | [Net Investment Income](index=97&type=section&id=Net%20Investment%20Income) This subsection reports the company's net investment income and per share amounts for the three and six months ended June 30, 2025, compared to the prior year Net Investment Income | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net investment income | $173 million ($0.62 per share) | $215 million ($0.77 per share) | $360 million ($1.29 per share) | $427 million ($1.53 per share) | - Net investment income decreased by **$42 million (19.5%)** for the three months and **$67 million (15.7%)** for the six months ended June 30, 2025, compared to the prior year periods, primarily due to lower investment income[357](index=357&type=chunk) [Net Realized Gains or Losses](index=97&type=section&id=Net%20Realized%20Gains%20or%20Losses) This subsection details the net realized gains and losses from investments and foreign currency transactions for the three and six months ended June 30, 2025, and 2024 Net Realized Gains (Losses) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net realized gain (loss) on investments | $(135) million | $(64) million | $(153) million | $(307) million | | Net realized gain (loss) on foreign currency forward contracts | $(3) million | $19 million | $(3) million | $19 million | | Net realized gain (loss) on foreign currency | $(6) million | $0 million | $(5) million | $(3) million | | **Total net realized gain (loss)** | **$(144) million** | **$(45) million** | **$(161) million** | **$(291) million** | - The company experienced a higher net realized loss on investments for the three months ended June 30, 2025, compared to the same period in 2024, but a lower net realized loss for the six-month period[358](index=358&type=chunk) [Net Change in Unrealized Appreciation (Depreciation)](index=98&type=section&id=Net%20Change%20in%20Unrealized%20Appreciation%20(Depreciation)) This subsection presents the net change in unrealized appreciation or depreciation on investments and foreign currency for the three and six months ended June 30, 2025, and 2024 Net Change in Unrealized Appreciation (Depreciation) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net change in unrealized appreciation (depreciation) on investments | $(155) million | $(48) million | $(169) million | $138 million | | Net change in unrealized appreciation (depreciation) on foreign currency forward contracts | $(10) million | $(21) million | $(20) million | $(13) million | | Net change in unrealized gain (loss) on foreign currency | $(59) million | $4 million | $(85) million | $17 million | | **Total net change in unrealized appreciation (depreciation)** | **$(224) million** | **$(65) million** | **$(274) million** | **$142 million** | - The net change in unrealized appreciation (depreciation) on investments for the three and six months ended June 30, 2025, was primarily driven by reduced valuations of certain portfolio companies, including Production Resources Group, 48Forty Solutions, and Kellermeyer Bergensons Services LLC[360](index=360&type=chunk) [Provision for Taxes on Realized Gains on Investments](index=98&type=section&id=Provision%20for%20Taxes%20on%20Realized%20Gains%20on%20Investments) This subsection reports the provision for taxes on realized gains from investments for the three and six months ended June 30, 2025 - A provision for taxes on realized gains of **$(11) million** was recorded for the three and six months ended June 30, 2025, related to one equity investment, compared to **$0** in the prior year[361](index=361&type=chunk) [Realized Losses from Extinguishment of Debt](index=98&type=section&id=Realized%20Losses%20from%20Extinguishment%20of%20Debt) This subsection details any realized losses incurred from the extinguishment of debt during the three and six months ended June 30, 2025 - A net realized loss of **$(3) million** from the extinguishment of debt was recorded for the three and six months ended June 30, 2025, compared to **$0** in the prior year[362](index=362&type=chunk) [Net Increase (Decrease) in Net Assets Resulting from Operations](index=98&type=section&id=Net%20Increase%20(Decrease)%20in%20Net%20Assets%20Resulting%20from%20Operations) This subsection summarizes the overall impact of the company's operations on its net assets for the three and six months ended June 30, 2025, and 2024 Net Increase (Decrease) in Net Assets from Operations | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net increase (decrease) in net assets from operations | $(209) million ($(0.75) per share) | $105 million ($0.37 per share) | $(89) million ($(0.32) per share) | $278 million ($0.99 per share) | - The company experienced a net decrease in net assets from operations for both the three and six months ended June 30, 2025, a reversal from the net increases reported in the prior year periods[363](index=363&type=chunk)[364](index=364&type=chunk) [Financial Condition, Liquidity and Capital Resources](index=98&type=section&id=Financial%20Condition%2C%20Liquidity%20and%20Capital%20Resources) This section assesses the company's financial health, liquidity position, and available capital resources, including cash, financing arrangements, and unfunded commitments - As of June 30, 2025, the company had **$312 million** in cash, cash equivalents, and foreign currency, with **$2,425 million** available under financing arrangements[365](index=365&type=chunk) - Unfunded commitments totaled **$1,730.1 million** for debt investments, **$369.7 million** for equity/other, and **$577.5 million** for COPJV, which the company maintains sufficient liquidity to fund[365](index=365&type=chunk) - The company's asset coverage ratio was **177%** as of June 30, 2025, exceeding the **150%** requirement under the 1940 Act[365](index=365&type=chunk) [Financing Arrangements](index=99&type=section&id=Financing%20Arrangements) This section details the company's various financing arrangements, including revolving credit facilities, unsecured notes, and collateralized loan obligations, along with available borrowings Outstanding Financing Arrangements | Arrangement Type | Amount Outstanding (June 30, 2025) | Rate Range (June 30, 2025) | | :------------------------------- | :--------------------------------- | :------------------------- | | Revolving Credit Facilities | $3,130 million | SOFR+1.75% to SOFR+2.25% | | Unsecured Notes | $4,350 million | 2.63% to 7.88% | | Collateralized Loan Obligations (CLO) | $542 million | 3.01% to SOFR+2.15% | | **Total** | **$8,022 million** | | - The company had **$2,425 million** in available borrowings under its financing arrangements as of June 30, 2025[368](index=368&type=chunk) - The Senior Secured Revolving Credit Facility had **$2,188 million** outstanding and **$2,377 million** available, with **$30 million** in standby letters of credit issued[370](index=370&type=chunk) [Equity Issuances](index=99&type=section&id=Equity%20Issuances) This section reports on the company's equity issuance activities, specifically noting no shares were issued under the 'At the Market' Offering during the reported period - The company did not issue or sell shares of its common stock under the 'At the Market' Offering during the three and six months ended June 30, 2025[375](index=375&type=chunk) [RIC Status and Distributions](index=100&type=section&id=RIC%20Status%20and%20Distributions) This section discusses the company's intention to maintain its Regulated Investment Company (RIC) tax status and its distribution policies to stockholders - The company intends to maintain its RIC tax status by distributing at least **90%** of its investment company taxable income annually[377](index=377&type=chunk) - Regular cash distributions are paid quarterly, with the option for stockholders to reinvest in common stock under the DRP[378](index=378&type=chunk)[380](index=380&type=chunk) - No portion of distributions paid during the six months ended June 30, 2025, or 2024, represented a return of capital[379](index=379&type=chunk) [Recent Developments](index=101&type=section&id=Recent%20Developments) This section highlights significant events that occurred after the reporting period, including distribution declarations and amendments to the Senior Secured Revolving Credit Facility - On July 31, 2025, the board declared a regular quarterly distribution of **$0.70 per share ($0.64 base + $0.06 supplemental)**, payable October 2, 2025[382](index=382&type=chunk) - On July 16, 2025, the company amended and restated its Senior Secured Revolving Credit Facility, increasing initial aggregate borrowings to **$4,700 million** and extending maturity to July 16, 2030[383](index=383&type=chunk)[384](index=384&type=chunk) - The amended facility includes new interest rate structures and requires compliance with financial covenants, including a **150% asset coverage ratio**[385](index=385&type=chunk)[387](index=387&type=chunk) [Critical Accounting Policies and Estimates](index=102&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section identifies the critical accounting policies and estimates, particularly the valuation of portfolio investments, which involve significant judgment and assumptions - The valuation of portfolio investments, particularly Level 3 investments, is identified as a critical accounting policy due to significant judgments and assumptions about inherently uncertain matters[390](index=390&type=chunk) - Fair value is defined as the price received for selling an asset or paid to transfer a liability in an orderly transaction, classified into a three-tier hierarchy (Level 1, 2, 3) based on input observability[392](index=392&type=chunk) - For investments without readily available market prices, the Adviser uses discounted cash flow models, market comparables (EBITDA multiples), and other factors, with oversight from the board of directors[393](index=393&type=chunk)[397](index=397&type=chunk) [Other Contractual Obligations](index=104&type=section&id=Other%20Contractual%20Obligations) This section outlines the company's contractual agreements, specifically those with the Adviser for investment advisory and administrative services - The company has agreements with the Adviser for investment advisory and administrative services, involving base management fees, incentive fees, and reimbursement of administrative expenses[404](index=404&type=chunk) [Off-Balance Sheet Arrangements](index=104&type=section&id=Off-Balance%20Sheet%20Arrangements) This section confirms the absence of any off-balance sheet arrangements for the company during the reporting period - The company currently has no off-balance sheet arrangements, including risk management of commodity pricing or other hedging practices[405](index=405&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=104&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section details the company's exposure to market risks, specifically interest rate risk and foreign currency risk, and outlines strategies used to manage these exposures, including sensitivity analyses [Interest Rate Risk](index=104&type=section&id=Interest%20Rate%20Risk) This section analyzes the company's exposure to interest rate fluctuations, detailing the composition of its debt investments and the potential impact of rate changes on net interest income - As of June 30, 2025, **66.0%** of portfolio investments were variable interest rate debt, **8.1%** fixed rate debt, **17.5%** other income-producing, **5.4%** non-income producing, and **3.0%** on non-accrual status[406](index=406&type=chunk) - Many variable rate investments have interest rate floors, meaning interest income may not increase until benchmark rates rise above a threshold, though rising rates beyond this threshold could increase net investment income and incentive fees[406](index=406&type=chunk) Sensitivity of Net Interest Income to Interest Rate Changes | Basis Point Change in Interest Rates | Increase (Decrease) in Net Interest Income | | :----------------------------------- | :----------------------------------------- | | Down 250 basis points | $(104) million | | Down 100 basis points | $(42) million | | Up 100 basis points | $42 million | | Up 250 basis points | $104 million | - The company uses interest rate swap strategies to minimize exposure to interest rate fluctuations, particularly for floating-rate borrowings under credit facilities and fixed-rate unsecured notes[407](index=407&type=chunk)[410](index=410&type=chunk) [Foreign Currency Risk](index=105&type=section&id=Foreign%20Currency%20Risk) This section discusses the company's exposure to foreign currency exchange rate movements and the hedging strategies employed to mitigate these risks - Investments denominated in foreign currencies are subject to exchange rate movements, affecting fair values and cash flows[411](index=411&type=chunk) Foreign Currency Exposure and Sensitivity | Foreign Currency | Fair Value (June 30, 2025) | Reduction in Fair Value if 10% Adverse Change in Exchange Rate | | :------------------ | :------------------------- | :------------------------------------------------------------- | | British Pound Sterling | $386.1 million | $38.6 million | | Euros | $467.0 million | $46.7 million | | Swedish Krona | $114.6 million | $11.5 million | - The company uses foreign currency forward contracts and cross currency swaps to hedge against foreign currency risks, with **$209.4 million** in net contractual amount of foreign currency forward contracts as of June 30, 2025[414](index=414&type=chunk)[417](index=417&type=chunk) - Borrowing in foreign currencies under the Senior Secured Revolving Credit Facility also provides a natural hedge against exchange rate changes[414](index=414&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=107&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) This section confirms the effectiveness of the company's disclosure controls and procedures and reports no material changes in internal control over financial reporting during the quarter ended June 30, 2025 - The chief executive officer and chief financial officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, providing reasonable assurance of meeting disclosure obligations[419](index=419&type=chunk)[420](index=420&type=chunk) - No material changes in internal control over financial reporting occurred during the three months ended June 30, 2025[421](index=421&type=chunk) [PART II—OTHER INFORMATION](index=108&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) [ITEM 1. LEGAL PROCEEDINGS](index=108&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company is not currently involved in any material legal proceedings, nor are any material legal proceedings threatened against it, with ordinary course legal proceedings not expected to have a material adverse effect on financial condition or results of operations - The company is not currently subject to any material legal proceedings, and none are known to be threatened[424](index=424&type=chunk) - Any legal proceedings in the ordinary course of business are not expected to have a material adverse effect on the company's financial condition or results of operations[424](index=424&type=chunk) [ITEM 1A. RISK FACTORS](index=108&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section refers to the risk factors detailed in the company's most recent Annual Report on Form 10-K, stating that there are no material changes to these risks - There are no material changes to the risk factors previously disclosed in the company's most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q[425](index=425&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=108&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This section details the Affiliated Purchaser Programs, including the August 2023 and March 2024 Affiliated Seller Programs, which facilitated the sale of common stock by an investment vehicle affiliated with the Adviser, and confirms no purchases of common stock by the company or affiliated purchasers during the quarter ended June 30, 2025 - An investment vehicle affiliated with the Adviser committed **$100 million** to a **$350 million** investment vehicle that may invest in the company's common stock[426](index=426&type=chunk) - The August 2023 Affiliated Seller Program allowed for the sale of up to **16.4 million shares** of common stock, and the March 2024 Affiliated Seller Program allowed for the sale of up to **3.8 million shares**, which has concluded[427](index=427&type=chunk)[428](index=428&type=chunk) Purchases of Equity Securities by the Company and Affiliated Purchasers | Period | Total Number of Shares Purchased | | :----------------------------------- | :------------------------------- | | April 1, 2025 through April 30, 2025 | — | | May 1, 2025 through May 31, 2025 | — | | June 1, 2025 through June 30, 2025 | — | - No shares of common stock were purchased by or on behalf of the company or any affiliated purchaser during the quarter ended June 30, 2025[430](index=430&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=108&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) This item is not applicable to the company for the reporting period - This item is not applicable[432](index=432&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=108&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the company for the reporting period - This item is not applicable[433](index=4

[FORM 8-K Filing Details](index=1&type=section&id=FORM%208-K%20Filing%20Details) This section provides essential identification and compliance information for the Form 8-K filing [Registrant and General Information](index=1&type=section&id=Registrant%20and%20General%20Information) This section details the registrant's core identification, including its incorporation state and the earliest event date - **Registrant**: FS KKR Capital Corp[1](index=1&type=chunk) - **Date of Report**: July 10, 2025[1](index=1&type=chunk) - **State of incorporation**: Maryland[1](index=1&type=chunk) [Securities and Compliance Status](index=1&type=section&id=Securities%20and%20Compliance%20Status) This section outlines securities registered under Section 12(b) and the registrant's emerging growth company status Registered Securities | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | :------------------ | :---------------- | :---------------------------------------- | | Common stock | FSK | New York Stock Exchange | - FS KKR Capital Corp. is **not an emerging growth company**[3](index=3&type=chunk) [Item 2.02. Results of Operations and Financial Condition](index=3&type=section&id=Item%202.02.%20Results%20of%20Operations%20and%20Financial%20Condition) This item reports on significant events related to the registrant's financial performance and condition [Second Quarter 2025 Earnings Conference Call Announcement](index=3&type=section&id=Second%20Quarter%202025%20Earnings%20Conference%20Call%20Announcement) The company announced a conference call on August 7, 2025, to discuss second quarter 2025 financial results - Conference call for **Q2 2025 results** scheduled for **August 7, 2025, at 9:00 a.m. ET**[4](index=4&type=chunk) - A press release announcing the call, dated July 10, 2025, is attached as **Exhibit 99.1**[4](index=4&type=chunk) [Item 9.01. Financial Statements and Exhibits](index=3&type=section&id=Item%209.01.%20Financial%20Statements%20and%20Exhibits) This item specifies the financial statements and exhibits included as part of the filing [Exhibits Filed](index=3&type=section&id=Exhibits%20Filed) This section lists the specific exhibits that are incorporated by reference into the Form 8-K filing List of Exhibits | EXHIBIT NUMBER | DESCRIPTION | | :------------- | :------------------------------ | | 99.1 | Press Release, dated July 10, 2025. | [SIGNATURE](index=4&type=section&id=SIGNATURE) This section formally certifies the report's filing and identifies the authorized signatory [Authorization and Signatory Details](index=4&type=section&id=Authorization%20and%20Signatory%20Details) This section formally certifies the report's filing, detailing its authorization and signatory information - Report signed on behalf of **FS KKR Capital Corp**[8](index=8&type=chunk) - **Signatory**: Stephen Sypherd, General Counsel[9](index=9&type=chunk) - **Date of signature**: July 10, 2025[9](index=9&type=chunk) [EXHIBIT INDEX](index=5&type=section&id=EXHIBIT%20INDEX) This index provides a comprehensive list of all exhibits included with the Form 8-K filing [List of Filed Exhibits](index=5&type=section&id=List%20of%20Filed%20Exhibits) This index provides a comprehensive list of all exhibits included with the Form 8-K filing Exhibit Index | EXHIBIT NUMBER | DESCRIPTION | | :------------- | :------------------------------ | | 99.1 | Press Release, dated July 10, 2025. |