FS KKR Capital (US:FSK)2025-11-05 21:29Investment Activity - For the three months ended September 30, 2025, total purchases amounted to $1,142 million, while sales and repayments were $1,483 million, resulting in a net portfolio activity of $(341) million[336]. - Senior secured loans accounted for 65% of new investment purchases during the three months ended September 30, 2025, totaling $742 million[336]. - The company made $75 million in subordinated debt purchases, representing 7% of total purchases for the same period[336]. - Asset-based finance investments totaled $171 million, making up 15% of new investment activity for the three months ended September 30, 2025[336]. - For the nine months ended September 30, 2025, total purchases reached $4,540 million, with sales and repayments also at $4,540 million, resulting in no net portfolio activity[336]. Investment Strategy - The company focuses on debt investments in middle-market U.S. companies, defined as those with annual EBITDA between $50 million and $150 million[323]. - The investment portfolio primarily consists of senior secured loans and second lien secured loans of private middle-market U.S. companies[324]. - The company aims to generate current income and long-term capital appreciation through its investment strategy[323]. - The average life of the debt securities in which the company invests is generally three to four years[328]. Portfolio Valuation - As of September 30, 2025, the total investment portfolio's fair value was $13,415 million, a slight decrease from $13,490 million on December 31, 2024[337]. - The number of portfolio companies increased to 224 as of September 30, 2025, up from 214 at the end of 2024[339]. - The percentage of variable rate debt investments based on fair value decreased to 63.8% from 65.8%[339]. - The fair value of investments rated 1 (performing) was $8,870 million, representing 66% of the portfolio, while investments rated 4 (underperforming) were $260 million, or 2% of the portfolio[350]. Financial Performance - Total investment income for the three months ended September 30, 2025, was $373 million, a decrease from $441 million in the same period of 2024, with interest income contributing $231 million (61.9% of total income) in 2025[351]. - Net investment income for the three months ended September 30, 2025, was $159 million ($0.57 per share), down from $215 million ($0.77 per share) in 2024[359]. - The company recorded a net realized loss on investments of $53 million for the three months ended September 30, 2025, compared to a loss of $43 million in the same period of 2024[361]. - The net change in unrealized appreciation on investments for the three months ended September 30, 2025, was $100 million, compared to $22 million in 2024[363]. Debt and Financing - The total cost of Direct Originations increased to $13,645.9 million as of September 30, 2025, from $13,494.8 million at the end of 2024[341]. - The aggregate amount of senior securities outstanding as of September 30, 2025, was $7.4 billion, with an asset coverage ratio of 184%[369]. - The company had unfunded debt investments with aggregate commitments of $1,733.4 million as of September 30, 2025[368]. - As of September 30, 2025, the total outstanding financing arrangements amount to $7.369 billion, with $3.499 billion available for borrowing[371]. Dividends and Tax Status - The company declared total dividends of $2.10 per share for the nine months ended September 30, 2025, compared to $2.20 per share for the same period in 2024[382][383]. - A regular quarterly distribution of $0.70 per share was declared on October 8, 2025, consisting of a $0.64 base distribution and a $0.06 supplemental distribution[384]. - The company intends to maintain its RIC tax status by distributing at least 90% of its investment company taxable income each tax year[379]. Interest Rate and Currency Risk - The company utilizes interest rate swap strategies to hedge against changing interest rate risks[403]. - A rise in interest rates could lead to an increase in net investment income and incentive fees payable to the Adviser, particularly for variable rate investments[401]. - The company utilizes derivative instruments such as foreign currency forward contracts and cross currency swaps to manage foreign currency exchange rate fluctuations[411]. - The company benefits from a weaker U.S. dollar for its unhedged foreign currency investments, while a stronger U.S. dollar adversely affects these investments[411]. Foreign Currency Exposure - As of September 30, 2025, the total fair value of investments denominated in foreign currencies was $921.6 million, with a potential reduction of $92.1 million if there is a 10% adverse change in exchange rates[409]. - The fair value of investments in British Pound Sterling was $406.0 million, with a potential reduction of £40.6 million under adverse exchange rate conditions[409]. - The fair value of investments in Euros was $393.2 million, with a potential reduction of €39.3 million under adverse exchange rate conditions[409]. - The fair value of investments in Swedish Krona was $115.4 million, with a potential reduction of SEK 11.5 million under adverse exchange rate conditions[409].