FS KKR Capital (US:FSK)2024-05-08 20:38Financial Performance - For the three months ended March 31, 2024, total purchases amounted to $1,444 million, while sales and repayments totaled $1,855 million, resulting in a net portfolio activity of $(411) million[292]. - The company reported a net investment activity of $(753) million for the year ended December 31, 2023[292]. - Total investment income for the three months ended March 31, 2024, was $434 million, a decrease from $456 million in the same period of 2023, primarily due to lower interest and PIK income[304]. - Net investment income for Q1 2024 was $212 million ($0.76 per share), compared to $229 million ($0.81 per share) in Q1 2023, reflecting lower overall investment income[311]. - The company reported a net realized loss of $246 million for Q1 2024, compared to a loss of $54 million in Q1 2023, driven by sales and repayments of investments[312]. - The net change in unrealized appreciation for Q1 2024 was $207 million, significantly higher than $24 million in Q1 2023, indicating improved asset valuations[314]. Investment Portfolio - The company’s investment portfolio primarily consists of senior secured loans and second lien secured loans of private middle market U.S. companies[281]. - As of March 31, 2024, the total fair value of the investment portfolio is $14,221 million, down from $14,649 million as of December 31, 2023, representing a decrease of 2.9%[293]. - The number of portfolio companies increased to 197 as of March 31, 2024, from 196 as of December 31, 2023[296]. - The percentage of investments on non-accrual based on fair value decreased to 2.9% as of March 31, 2024, from 4.5% as of December 31, 2023[296]. - The largest investment in a single portfolio company as of March 31, 2024, was $126 million, compared to $134.2 million as of December 31, 2023[299]. - The fair value of investments in the Capital Goods sector increased to $1,985 million, representing 14.0% of the total portfolio as of March 31, 2024, compared to 13.5% as of December 31, 2023[301]. - The fair value of investments in the Software & Services sector was $2,351 million, accounting for 16.5% of the total portfolio as of March 31, 2024, down from 16.9% as of December 31, 2023[301]. - As of March 31, 2024, the portfolio's fair value totaled $14.221 billion, with 71% rated as performing investments (Rating 1) and 23% as performing investments requiring closer monitoring (Rating 2)[303]. Revenue Sources - The company generated revenues primarily from interest income on debt investments, along with non-recurring fees such as commitment, closing, and performance-based fees[286]. - Interest income accounted for 72.6% of total investment income in Q1 2024, while dividend income decreased to 15.4% from 18.0% in Q1 2023[304]. Operating Expenses - Operating expenses for Q1 2024 were $222 million, down from $227 million in Q1 2023, mainly due to reduced management and incentive fees[308]. - The management and incentive fees paid to the Adviser are a significant component of the company's operating expenses[287]. Debt and Financing - The total debt investments in the Credit Opportunities Partners JV, LLC amounted to $3,149.8 million as of March 31, 2024, slightly up from $3,131.6 million as of December 31, 2023[299]. - The unfunded commitments for the Credit Opportunities Partners JV, LLC decreased to $4.5 million as of March 31, 2024, from $24.7 million as of December 31, 2023[299]. - The aggregate amount of senior securities issued by the company was $8.0 billion, with an asset coverage ratio of 185% as of March 31, 2024[317]. - The company maintains unfunded commitments totaling $1.1427 billion for debt investments and $579.3 million for equity/other commitments, ensuring liquidity for future investments[316]. - As of March 31, 2024, the total outstanding financing arrangements amount to $7.968 billion, with $3.588 billion available for borrowing[319]. - The company has a total of $1.164 billion under the Senior Secured Revolving Credit Facility, with a maturity date of October 31, 2028[319]. Cash and Distributions - As of March 31, 2024, the company had $242 million in cash and $3.588 billion in available borrowings under financing arrangements[316]. - The company declared a cash distribution of $0.75 per share for the three months ended March 31, 2024, totaling $210 million, compared to $0.70 per share totaling $196 million for the same period in 2023[331]. - The company intends to make distributions sufficient to qualify for RIC tax treatment, requiring at least 90% of investment company taxable income to be distributed[327]. Interest Rate and Currency Exposure - The company expects that a 250 basis point increase in interest rates would result in an increase of $244 million in interest income and $71 million in interest expense, leading to a net interest income increase of $173 million, or 18.4%[352]. - The net contractual amount of foreign currency forward contracts totaled $159.7 million as of March 31, 2024, all related to hedging foreign currency denominated debt investments[359]. - The company had outstanding borrowings denominated in foreign currencies totaling €386 million, CAD4 million, £82 million, and AUD36 million under its Senior Secured Revolving Credit Facility[359]. - The fair value of investments denominated in foreign currencies would decrease by $60.2 million if there were a 10% adverse change in exchange rates as of March 31, 2024[357]. - The company did not engage in interest rate hedging activities during the three months ended March 31, 2024 and 2023[354]. Valuation Methods - The valuation methods for portfolio companies may vary based on industry and company-specific considerations, with enterprise value assessments being a key initial step[340]. - The company utilizes independent third-party pricing services for fair valuation, which involves a multi-step process including feedback and approval from internal valuation committees[338]. - The company’s equity interests in public companies are valued based on the most recent closing public market price, while those without a liquid market are valued at fair value[344]. - The company has no off-balance sheet arrangements, including any risk management of commodity pricing or other hedging practices[348].