A KKR emblem displayed on the ground of the New York Inventory Alternate on Aug. 23, 2018.
Brendan McDermid | Reuters
Moody’s Rankings on Monday downgraded a non-public credit score fund run by KKR and Future Customary to junk amid rising unhealthy loans and a string of weak earnings.
The rankings agency lowered the debt rankings of FS KKR Capital Corp by one notch to Ba1 from Baa3 — pushing it into “junk” territory — saying that the fund’s underlying asset high quality had worsened greater than its friends.
Non-accrual loans, which means debtors who’ve stopped making funds, rose to five.5% of complete investments on the finish of 2025, one of many highest charges amongst rated BDCs, in keeping with the report.
“The downgrade displays FSK’s continued asset high quality challenges, which have resulted in weaker profitability and larger web asset worth erosion over time relative to enterprise growth firm (BDC) friends,” Moody’s mentioned.
The transfer by Moody’s is the most recent signal of misery within the personal credit score world. Retail traders have been dashing to withdraw funds, working into gates amid issues about upcoming credit score losses, particularly associated to software program loans. Funds like FS KKR concern debt to assist juice returns, so the Moody’s downgrade might enhance its borrowing prices and, subsequently, decrease future returns.
Moody’s additionally flagged different facets of the fund that would expose it to larger losses over time, together with increased leverage, the next proportion of payment-in-kind loans, and a decrease proportion of first-lien loans than friends.
FS KKR posted a web lack of $114 million within the fourth quarter alone and earned simply $11 million in web revenue for all of 2025, in keeping with Moody’s.
The fund did not instantly return a request for remark.