FS KKR Capital (FS5A) Risk Analysis
Risk Overview Q2, 2026
Source: the company's latest filing for the period ended Jun 30, 2026, filed Aug 06, 2026
Risk Change Over Time
- Share Price & Shareholder Rights - Risk 1We issued the Convertible Preferred Stock on June 29, 2026 and may in the future determine to issue additional preferred stock, which could adversely affect the market value of our common stock.
On June 29, 2026, we issued and sold 6,000,000 shares of the Convertible Preferred Stock, at a price of $25.00 per share, for gross proceeds of $150.0 million, pursuant to the Purchase Agreement. The Convertible Preferred Stock ranks senior to our common stock with respect to the payment of dividends and the distribution of assets upon liquidation. The Convertible Preferred Stock has a liquidation preference equal to $25.00 per share, plus any accumulated but unpaid dividends to, but excluding, the date of distribution. The Convertible Preferred Stock is convertible, in whole or in part, at the option of a holder, after the six-month anniversary of the issue date, into shares of our common stock at an initial conversion price of $18.83 per share, subject to certain anti-dilution adjustments as set forth in the Articles Supplementary; provided that in no event will the conversion price be less than the NYSE Minimum Price (as defined in the Articles Supplementary). At any time on or after the three-year anniversary of the issue date, upon Board approval (including a majority of our independent directors), and provided that the volume weighted average price of our common stock on the NYSE for the 30 consecutive trading days preceding our notice of redemption equals or exceeds the then-applicable conversion price, we may also redeem the Convertible Preferred Stock by delivering shares of our common stock in lieu of cash. The issuance of the Convertible Preferred Stock and any additional preferred stock with dividend or conversion rights, liquidation preferences or other economic terms favorable to preferred holders could adversely affect the market price of our common stock by making an investment in our common stock less attractive. Dividends on the Convertible Preferred Stock are cumulative and must take priority over any dividends or other payments to our common stockholders. Holders of the Convertible Preferred Stock are not subject to any of our expenses or losses and are not entitled to participate in any income or appreciation in excess of their stated preference (other than through conversion into shares of our common stock). Under the 1940 Act, the Convertible Preferred Stock constitutes a "senior security" for purposes of the 150% asset coverage test.
- Share Price & Shareholder Rights - Risk 2Our common stockholders may experience dilution upon the conversion of the Convertible Preferred Stock.
If we deliver shares of our common stock upon a conversion of the Convertible Preferred Stock at a time when our net asset value per share exceeds the conversion price then in effect, our common stockholders may incur dilution. Our stockholders will also experience dilution in their ownership percentage of common stock upon our issuance of common stock in connection with the conversion of the Convertible Preferred Stock. In addition, to the extent that we elect to redeem shares of the Convertible Preferred Stock by delivering shares of our common stock pursuant to our stock redemption right, our common stockholders will similarly experience dilution. Any dividends paid on our common stock will also be paid on shares of our common stock issued in connection with a conversion of the Convertible Preferred Stock after such issuance.
- Share Price & Shareholder Rights - Risk 3Holders of the Convertible Preferred Stock have the right to elect members of our Board of Directors and have class voting rights on certain matters, which may limit our ability to pursue certain actions that might otherwise be in the interests of our common stockholders.
Holders of the Convertible Preferred Stock are entitled to vote on an as-converted basis on each matter submitted to a vote of our stockholders. In addition, for so long as we are subject to the 1940 Act, the holders of Convertible Preferred Stock, voting separately as a single class, have the right to elect two members of the Board at all times, and the balance of directors is elected by the holders of our common stock and the Convertible Preferred Stock voting together. If at any time accumulated dividends on the outstanding shares of Convertible Preferred Stock equal to at least two full years' dividends are due and unpaid, or if holders of any other preferred stock become entitled to elect a majority of our directors under the 1940 Act, the number of directors constituting the Board will automatically increase and holders of the Convertible Preferred Stock and any other preferred stock will have the power to elect such additional directors to constitute a majority of the Board, voting separately as a class. Furthermore, holders of the Convertible Preferred Stock have class voting rights on certain matters, including amendments to our charter that materially and adversely affect the rights of the Convertible Preferred Stock, increases or decreases in the authorized number of preferred shares or issuances of additional preferred stock, and the creation of any new class or series of shares ranking senior or on parity with the Convertible Preferred Stock with respect to dividends or liquidation. In addition, upon the occurrence of a Change of Control (as defined in the Articles Supplementary), at the option of holders of a majority of the then-outstanding shares of Convertible Preferred Stock, we will be required to redeem all of the then-outstanding shares of Convertible Preferred Stock upon 60 days' notice following the announcement or occurrence of such Change of Control, for cash consideration equal to the Liquidation Preference plus accumulated but unpaid dividends. These provisions may limit our ability to pursue strategic transactions or other actions that might otherwise be in the best interests of our common stockholders. Restrictions imposed on the declarations and payment of dividends or other distributions to the holders of our common stock and preferred stock, both by the 1940 Act and by requirements imposed by rating agencies or the terms of our credit facilities or other financing arrangements, might also impair our ability to maintain our qualification as a RIC for U.S. federal income tax purposes.
- Share Price & Shareholder Rights - Risk 4Purchases of our common stock under the Company Share Repurchase Authorization may have the effect of maintaining the market price of our common stock at levels above those that would otherwise prevail in the open market.
On May 6, 2026, the Board approved the Company Share Repurchase Authorization, which authorizes the repurchase of up to $300.0 million in aggregate of our outstanding common stock in the open market, by tender offer or in privately negotiated purchases in compliance with the Exchange Act and other applicable law. The Company Share Repurchase Authorization is scheduled to expire on June 1, 2027, unless extended, or until the aggregate repurchase amount approved by the Board has been expended. Pursuant to the Company Share Repurchase Authorization, we are authorized to repurchase shares of our common stock at prices below our most recently reported net asset value per share, including in accordance with the guidelines specified in Rules 10b-18 and 10b5-1 under the Exchange Act, and we will determine, in our discretion, the timing, manner, price and amount of any repurchases based upon the evaluation of economic and market conditions, stock price, available cash, applicable legal, contractual and regulatory requirements and other factors. The Company Share Repurchase Authorization does not require us to repurchase any specific number of shares and may be suspended, extended, modified or discontinued at any time, subject to applicable law. Repurchases under the Company Share Repurchase Authorization may have the effect of maintaining the market price of our common stock or retarding a decline in the market price of our common stock, and, as a result, the price of our common stock may be higher than the price that otherwise might have existed in the open market.
- Share Price & Shareholder Rights - Risk 5There is no assurance that the Company Share Repurchase Authorization will result in repurchases of our common stock or enhance long-term stockholder value, and repurchases, if any, could affect our stock price and increase its volatility and will diminish our cash reserves.
There can be no assurance that any repurchases will occur under the Company Share Repurchase Authorization, or, if they occur, that they will enhance stockholder value. In addition, any repurchases under the Company Share Repurchase Authorization could have a material adverse effect on our business for the following reasons: - Repurchases may not prove to be the best use of our cash resources. - Repurchases will diminish our cash reserves, which could impact our ability to finance future growth and to pursue possible future strategic opportunities. - We may incur debt in connection with our business in the event that we use other cash resources to repurchase shares, which may affect the financial performance of our business during future periods or our liquidity and the availability of capital for other needs of the business. - Repurchases could affect the trading price of our common stock or increase its volatility and may reduce the market liquidity for our stock. - Repurchases may not be made at the best possible price and the market price of our common stock may decline below the levels at which we repurchased shares of common stock. - Any suspension, modification or discontinuance of the Company Share Repurchase Authorization could result in a decrease in the trading price of our common stock. - Repurchases may make it more difficult for us to meet the diversification requirements necessary to qualify for tax treatment as a RIC for U.S. federal income tax purposes; failure to qualify for tax treatment as a RIC would render our taxable income subject to corporate-level U.S. federal income taxes. - Repurchases may cause our non-compliance with covenants under our financing agreements, which could have an adverse effect on our operating results and financial condition. - To the extent we use proceeds from the Convertible Preferred Stock to fund repurchases, the amount of capital available for portfolio investments may be reduced, which could adversely affect our net investment income and ability to pay distributions to our common stockholders.
- Accounting & Financial Operations - Risk 6Dividend payments on the Convertible Preferred Stock are not guaranteed.
Although dividends on the Convertible Preferred Stock are cumulative, the Board must approve the actual payment of dividends. The Board can elect at any time, and for an indefinite duration, not to pay any or all accrued dividends. The Board could elect to suspend dividends for any reason, and may be prohibited from approving dividends in the following instances: - poor historical or projected cash flows;- the need to make payments on our indebtedness;- concluding that payment of dividends on the Convertible Preferred Stock would cause us to breach the terms of any indebtedness or other instrument or agreement; or - determining that the payment of dividends would violate applicable law regarding unlawful distributions to stockholders.
- Accounting & Financial Operations - Risk 7Our ability to pay dividends on and/or repurchase shares of Convertible Preferred Stock may be limited by Maryland law, the 1940 Act and the terms of our debt facilities as well as future agreements we may enter.
Under Maryland law, a corporation may pay dividends on and repurchase stock where authorized by the Board and as long as, the Board is able to determine that, after giving effect to the dividend payment or repurchase, (i) the corporation is able to pay its debts as they become due in the usual course of business (the equity solvency test), and (ii) except in limited circumstances, the corporation's total assets exceed the sum of its total liabilities plus the amount that would be needed, if the corporation were to be dissolved at the time of the dividend payment or repurchase, to satisfy the preferential rights upon dissolution of stockholders whose preferential rights on dissolution are superior to those receiving the dividend or whose stock is being repurchased (the balance sheet solvency test). If we are insolvent at any time when a repurchase of shares of Convertible Preferred Stock is desired or required to be made (or such repurchase would render us so under either of the above tests), we may not be able to effect such repurchase. Furthermore, the terms of our debt facilities or other financing arrangements may restrict our ability to repurchase shares of Convertible Preferred Stock for cash during an event of default, and we expect to enter into agreements in the future that may similarly restrict our ability to repurchase in cash in such instances. In addition, under the 1940 Act, we may not (1) pay dividends or distributions (other than dividends payable in our common stock) to holders of any class of our capital stock, including the Convertible Preferred Stock, or to purchase any such capital stock, if our "senior securities representing indebtedness" fail to have an asset coverage of at least 150% (measured at the time of declaration of such distribution or at the time of any such purchase, and accounting for such distribution or purchase price) or (2) pay dividends or distributions (other than dividends payable in our common stock) to our common stockholders, or to purchase any shares of our common stock, if our "senior securities that are stock" fail to have an asset coverage of at least 150% (measured at the time of declaration of such distribution, or at the time of any such purchase, and accounting for such distribution or purchase price). If the value of our assets declines, we might be unable to satisfy these asset coverage requirements.
Risk Highlights Q2, 2026
Risk Word Cloud
Risk Factors Full Breakdown - Total Risks 8
- Share Price & Shareholder Rights - Risk 1AddedWe issued the Convertible Preferred Stock on June 29, 2026 and may in the future determine to issue additional preferred stock, which could adversely affect the market value of our common stock.
On June 29, 2026, we issued and sold 6,000,000 shares of the Convertible Preferred Stock, at a price of $25.00 per share, for gross proceeds of $150.0 million, pursuant to the Purchase Agreement. The Convertible Preferred Stock ranks senior to our common stock with respect to the payment of dividends and the distribution of assets upon liquidation. The Convertible Preferred Stock has a liquidation preference equal to $25.00 per share, plus any accumulated but unpaid dividends to, but excluding, the date of distribution. The Convertible Preferred Stock is convertible, in whole or in part, at the option of a holder, after the six-month anniversary of the issue date, into shares of our common stock at an initial conversion price of $18.83 per share, subject to certain anti-dilution adjustments as set forth in the Articles Supplementary; provided that in no event will the conversion price be less than the NYSE Minimum Price (as defined in the Articles Supplementary). At any time on or after the three-year anniversary of the issue date, upon Board approval (including a majority of our independent directors), and provided that the volume weighted average price of our common stock on the NYSE for the 30 consecutive trading days preceding our notice of redemption equals or exceeds the then-applicable conversion price, we may also redeem the Convertible Preferred Stock by delivering shares of our common stock in lieu of cash. The issuance of the Convertible Preferred Stock and any additional preferred stock with dividend or conversion rights, liquidation preferences or other economic terms favorable to preferred holders could adversely affect the market price of our common stock by making an investment in our common stock less attractive. Dividends on the Convertible Preferred Stock are cumulative and must take priority over any dividends or other payments to our common stockholders. Holders of the Convertible Preferred Stock are not subject to any of our expenses or losses and are not entitled to participate in any income or appreciation in excess of their stated preference (other than through conversion into shares of our common stock). Under the 1940 Act, the Convertible Preferred Stock constitutes a "senior security" for purposes of the 150% asset coverage test.
- Share Price & Shareholder Rights - Risk 2AddedOur common stockholders may experience dilution upon the conversion of the Convertible Preferred Stock.
If we deliver shares of our common stock upon a conversion of the Convertible Preferred Stock at a time when our net asset value per share exceeds the conversion price then in effect, our common stockholders may incur dilution. Our stockholders will also experience dilution in their ownership percentage of common stock upon our issuance of common stock in connection with the conversion of the Convertible Preferred Stock. In addition, to the extent that we elect to redeem shares of the Convertible Preferred Stock by delivering shares of our common stock pursuant to our stock redemption right, our common stockholders will similarly experience dilution. Any dividends paid on our common stock will also be paid on shares of our common stock issued in connection with a conversion of the Convertible Preferred Stock after such issuance.
- Share Price & Shareholder Rights - Risk 3AddedHolders of the Convertible Preferred Stock have the right to elect members of our Board of Directors and have class voting rights on certain matters, which may limit our ability to pursue certain actions that might otherwise be in the interests of our common stockholders.
Holders of the Convertible Preferred Stock are entitled to vote on an as-converted basis on each matter submitted to a vote of our stockholders. In addition, for so long as we are subject to the 1940 Act, the holders of Convertible Preferred Stock, voting separately as a single class, have the right to elect two members of the Board at all times, and the balance of directors is elected by the holders of our common stock and the Convertible Preferred Stock voting together. If at any time accumulated dividends on the outstanding shares of Convertible Preferred Stock equal to at least two full years' dividends are due and unpaid, or if holders of any other preferred stock become entitled to elect a majority of our directors under the 1940 Act, the number of directors constituting the Board will automatically increase and holders of the Convertible Preferred Stock and any other preferred stock will have the power to elect such additional directors to constitute a majority of the Board, voting separately as a class. Furthermore, holders of the Convertible Preferred Stock have class voting rights on certain matters, including amendments to our charter that materially and adversely affect the rights of the Convertible Preferred Stock, increases or decreases in the authorized number of preferred shares or issuances of additional preferred stock, and the creation of any new class or series of shares ranking senior or on parity with the Convertible Preferred Stock with respect to dividends or liquidation. In addition, upon the occurrence of a Change of Control (as defined in the Articles Supplementary), at the option of holders of a majority of the then-outstanding shares of Convertible Preferred Stock, we will be required to redeem all of the then-outstanding shares of Convertible Preferred Stock upon 60 days' notice following the announcement or occurrence of such Change of Control, for cash consideration equal to the Liquidation Preference plus accumulated but unpaid dividends. These provisions may limit our ability to pursue strategic transactions or other actions that might otherwise be in the best interests of our common stockholders. Restrictions imposed on the declarations and payment of dividends or other distributions to the holders of our common stock and preferred stock, both by the 1940 Act and by requirements imposed by rating agencies or the terms of our credit facilities or other financing arrangements, might also impair our ability to maintain our qualification as a RIC for U.S. federal income tax purposes.
- Share Price & Shareholder Rights - Risk 4AddedPurchases of our common stock under the Company Share Repurchase Authorization may have the effect of maintaining the market price of our common stock at levels above those that would otherwise prevail in the open market.
On May 6, 2026, the Board approved the Company Share Repurchase Authorization, which authorizes the repurchase of up to $300.0 million in aggregate of our outstanding common stock in the open market, by tender offer or in privately negotiated purchases in compliance with the Exchange Act and other applicable law. The Company Share Repurchase Authorization is scheduled to expire on June 1, 2027, unless extended, or until the aggregate repurchase amount approved by the Board has been expended. Pursuant to the Company Share Repurchase Authorization, we are authorized to repurchase shares of our common stock at prices below our most recently reported net asset value per share, including in accordance with the guidelines specified in Rules 10b-18 and 10b5-1 under the Exchange Act, and we will determine, in our discretion, the timing, manner, price and amount of any repurchases based upon the evaluation of economic and market conditions, stock price, available cash, applicable legal, contractual and regulatory requirements and other factors. The Company Share Repurchase Authorization does not require us to repurchase any specific number of shares and may be suspended, extended, modified or discontinued at any time, subject to applicable law. Repurchases under the Company Share Repurchase Authorization may have the effect of maintaining the market price of our common stock or retarding a decline in the market price of our common stock, and, as a result, the price of our common stock may be higher than the price that otherwise might have existed in the open market.
- Share Price & Shareholder Rights - Risk 5AddedThere is no assurance that the Company Share Repurchase Authorization will result in repurchases of our common stock or enhance long-term stockholder value, and repurchases, if any, could affect our stock price and increase its volatility and will diminish our cash reserves.
There can be no assurance that any repurchases will occur under the Company Share Repurchase Authorization, or, if they occur, that they will enhance stockholder value. In addition, any repurchases under the Company Share Repurchase Authorization could have a material adverse effect on our business for the following reasons: - Repurchases may not prove to be the best use of our cash resources. - Repurchases will diminish our cash reserves, which could impact our ability to finance future growth and to pursue possible future strategic opportunities. - We may incur debt in connection with our business in the event that we use other cash resources to repurchase shares, which may affect the financial performance of our business during future periods or our liquidity and the availability of capital for other needs of the business. - Repurchases could affect the trading price of our common stock or increase its volatility and may reduce the market liquidity for our stock. - Repurchases may not be made at the best possible price and the market price of our common stock may decline below the levels at which we repurchased shares of common stock. - Any suspension, modification or discontinuance of the Company Share Repurchase Authorization could result in a decrease in the trading price of our common stock. - Repurchases may make it more difficult for us to meet the diversification requirements necessary to qualify for tax treatment as a RIC for U.S. federal income tax purposes; failure to qualify for tax treatment as a RIC would render our taxable income subject to corporate-level U.S. federal income taxes. - Repurchases may cause our non-compliance with covenants under our financing agreements, which could have an adverse effect on our operating results and financial condition. - To the extent we use proceeds from the Convertible Preferred Stock to fund repurchases, the amount of capital available for portfolio investments may be reduced, which could adversely affect our net investment income and ability to pay distributions to our common stockholders.
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