We recently published 10 Stocks Investors Have Ditched. FS KKR Capital Corp. (NYSE:FSK) was one of the worst performers on Thursday. FS KKR Capital snapped a two-day rally on Thursday, slashing 15.24 percent to finish at $11.29 apiece, as investor sentiment was dampened by a 31-percent cut in its quarterly dividends beginning in the first quarter of the year. In an updated report, FS KKR Capital Corp. (NYSE:FSK) said that it would pay a $0.48 per share dividend to its shareholders on record as of March 1 ...

(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. A ...

Core Viewpoint - Barings BDC (BBDC) reported a fourth-quarter EPS of $0.27, surpassing Wall Street's consensus estimate by $0.01, indicating a positive performance despite challenges in the portfolio [1] Financial Performance - The investment firm experienced a minor contraction in its portfolio compared to the previous year, suggesting potential challenges in maintaining growth [1] - The warning to investors about lower base performance indicates a cautious outlook for future earnings [1]

Core Insights - Investor confidence in private credit has been shaken following Blue Owl's decision to halt redemptions from its fund, raising concerns about the stability of other private-debt funds and BDCs [3][5][12] - The situation is being viewed as either a company-specific issue or indicative of broader industry problems, particularly with lending to software companies facing disruption from artificial intelligence [2][15] - The shares of asset managers involved in private credit have experienced significant declines, with Blue Owl's shares dropping around 12% in one week, and other firms like Blackstone and Apollo also facing losses [5][12] Group 1: Market Reactions - Shares of asset managers have been under pressure due to concerns over underwriting standards and the recent selloff in software companies, which are heavily represented in their loan portfolios [4][6] - The VanEck BDC Income ETF has seen a 1.9% weekly loss and has dropped over 25% in the past year, reflecting investor worries about the BDC sector [9] - Apollo Global's shares fell more than 4%, while Blackstone and Ares Management saw losses of 6.6% and 8% respectively during the same week [12] Group 2: Industry Concerns - The liquidity mismatch in publicly traded vehicles that package private loans is becoming apparent, leading to increased scrutiny from investors [8] - U.S. Treasury Secretary Scott Bessent expressed concerns about the growth of private credit outside the banking system and its potential impact on the regulated financial system [13][14] - The current economic expansion, despite a slowdown, may provide some support for private-credit managers, although fears of a recession could lead to higher default rates [14][15] Group 3: Company-Specific Developments - Blue Owl announced it would return 30% of OBDC II investors' capital at book value, aiming to alleviate concerns over liquidity [13] - The firm emphasized that it is not halting investor liquidity, but rather accelerating capital returns to shareholders [13] - The private-equity giants like Blackstone, Apollo, and KKR have significantly contributed to the growth of private credit, which is now facing scrutiny [11][10]

Group 1 - Blue Owl Capital (OBDC) experienced a significant widening in the gap between its share price and net asset value in Q4 2025 [1] - The primary reason for this discrepancy was the company's mismanagement of a merger [1]

Core Insights - Blue Owl Capital Corporation (OBDC) is scheduled to report its fourth-quarter 2025 results on February 18, with earnings estimated at 35 cents per share and revenues at $446.15 million [1] Financial Performance - The fourth-quarter earnings estimate has remained stable over the past 60 days, indicating a 25.5% year-over-year decrease in earnings, while revenues are projected to grow by 13.1% year-over-year [2] - For the full year 2025, the revenue estimate stands at $1.85 billion, reflecting a year-over-year growth of 15.8%, whereas the earnings per share estimate is $1.52, suggesting a decline of 20% from the previous year [3] Earnings Prediction - The model indicates that OBDC has an Earnings ESP of 0.00% and a Zacks Rank of 4 (Sell), suggesting no clear odds for an earnings beat [4][7] - The consensus estimate for non-controlled, non-affiliated interest income suggests a 16.3% year-over-year growth, while the model projects a 19.8% increase [6] - The total operating expenses for the fourth quarter are estimated to be $260.7 million, reflecting a 24.3% year-over-year growth due to higher management fees and interest expenses [9] Industry Context - Major peers such as SLR Investment Corp. (SLRC), Blackstone Secured Lending Fund (BXSL), and FS KKR Capital Corp. (FSK) are also set to report earnings, providing insights into industry trends [10] - Blackstone Secured is predicted to have an earnings beat with an Earnings ESP of +0.76% and a Zacks Rank of 3, while SLR Investment and FS KKR Capital have uncertain earnings beat prospects with Earnings ESP of 0.00% [12][13]

Core Insights - Prospect Capital (PSEC) reported net investment income (NII) results that exceeded market expectations, indicating strong performance in the last quarter [1] - The company experienced an improvement in dividend coverage quarter-over-quarter, suggesting better financial health [1] - Despite the positive NII results, PSEC continues to face net asset value erosion, which may raise concerns about long-term sustainability [1]

Industry Overview - The private credit market has grown significantly, reaching approximately $2 trillion in 2020 and projected to grow by roughly 50% by early 2025, potentially reaching close to $5 trillion by 2029 [1] Concerns and Warnings - Experts, including Jeffery Gundlach and Jamie Dimon, have raised concerns about the quality of loans in the private credit market, with warnings about potential credit issues in the event of an economic downturn [1] - Wall Street is sounding alarms regarding a possible collapse in the private credit market, particularly affecting ultra-high-yield business development company (BDC) stocks [1] Company-Specific Insights - Prospect Capital (NASDAQ: PSEC) is highlighted as a BDC showing potential cracks, despite its long history and attractive forward dividend yield of 19.7%. However, its net asset value (NAV) has significantly eroded, and it relies heavily on issuing perpetual preferred stock, increasing fixed-payment obligations [3][4] - FS KKR Capital (NYSE: FSK) also presents problematic signs, with a forward dividend yield of 20.3% and non-accruals at 5% of its total investment portfolio as of Q3 2025. Fitch has lowered its outlook on FS KKR Capital to negative due to persistently elevated non-accruals [5] - Ares Capital (NASDAQ: ARCC) is presented as a more resilient direct lender that may weather potential market storms better than its peers [5]

Group 1 - Ares Capital (ARCC) and FS KKR Capital Corp. (FSK) are direct competitors in the Business Development Company (BDC) sector, both having access to institutional capital [1] - The analysis emphasizes the importance of identifying profitable and undervalued investment opportunities primarily in the U.S. market to build a high-yield, balanced portfolio [1] - The author combines macro-economic analysis with real-world trading experience to provide actionable investment ideas [1] Group 2 - The article does not provide any specific financial data or performance metrics related to ARCC or FSK [3]

Ares Capital ( ARCC ) and FS KKR Capital Corp. ( FSK ) are two direct competitors in the BDC sector. While they are similar in appearance due to their access to institutional capital fromMy professional journey in the investment field began in 2011. Today, I combine the roles of an Investment Consultant and an Active Intraday Trader. This synergistic approach allows me to maximize returns by leveraging deep knowledge in economics, fundamental investment analysis, and technical trading. What You Will Find in ...