FS KKR Capital Corp 8-K

What Happened

• FS KKR Capital Corp (FSK) announced on June 29, 2026 that it closed a sale of 6,000,000 shares of Cumulative Convertible Perpetual Preferred Stock, Series A, to KKR Alternative Assets L.P. at $25.00 per share for gross proceeds of $150.0 million. The Company said proceeds will be used for general corporate purposes, including possible common‑stock repurchases or debt repayment.
• The Company entered into a Registration Rights Agreement giving the purchaser demand registration rights (up to three demand requests in any 365‑day period), piggyback rights and an obligation to use commercially reasonable efforts to maintain a Form N‑2 shelf registration starting six months after closing.
• The Company filed Articles Supplementary that set the terms of the new preferred shares: $25 liquidation preference per share; initial dividend 5.00% per annum payable in cash (or 7.00% PIK at the Company’s option, subject to limits); conversion allowed after six months with an initial conversion price of $18.83 (not less than a defined NYSE Minimum Price); various redemption and change‑of‑control protections; and certain voting and director‑election rights while subject to the 1940 Act.
• Separately, FS/KKR Advisor, LLC (the Adviser) delivered a waiver letter on June 29, 2026 agreeing to waive 50% of the subordinated income incentive fee otherwise payable to the Adviser for each fiscal quarter from the quarter ending June 30, 2026 through the quarter ending March 31, 2027. No portion of the waived fees is subject to recoupment.

Key Details

• Sale: 6,000,000 shares × $25.00 = $150.0 million gross proceeds (Closing: June 29, 2026).
• Dividend: 5.00% cash per annum (or 7.00% PIK at Company option); dividend rate increases by 1.00% per year after 5.5 years (no cap).
• Conversion: Convertible beginning after 6 months; initial conversion price $18.83 (floor = NYSE Minimum Price).
• Governance & transfer: Preferred holders vote on an as‑converted basis and, while subject to the 1940 Act, the preferred holders elect two directors (initially James H. Kropp and Elizabeth J. Sandler). Purchaser agreed to a one‑year transfer restriction (until June 29, 2027) with limited exceptions.

Why It Matters

• Liquidity and flexibility: The $150M capital infusion improves FSK’s liquidity and gives management cash to pursue share repurchases or debt paydown, which could affect leverage and NAV management.
• Potential dilution and recurring cost: The preferred shares are convertible into common stock and pay quarterly dividends; conversion or PIK dividends could dilute common shareholders and PIK increases the outstanding preferred balance if chosen. The conversion price and future dividend step‑ups (after 5.5 years) are relevant to dilution and future cash/dividend obligations.
• Governance impact: Preferred holders have specified voting and director‑election rights while the company remains subject to the 1940 Act, which may influence board composition and oversight.
• Short‑term expense relief: The Adviser’s temporary 50% waiver of subordinated incentive fees reduces advisory expense for several quarters, modestly supporting net income/NAV during the waiver period.