FSK: ﹩0.44 Distribution Matches NII as NAV Falls
FS KKR Capital Corp. reported second-quarter net investment income of ﹩0.44 per share and adjusted net investment income of ﹩0.43 per share. It also declared a third-quarter distribution of ﹩0.44 per share.
NAV fell to ﹩18.30 per share from ﹩18.83 at March 31, a decline of 2.8%. Net realized and unrealized losses totaled ﹩0.56 per share. Debt to equity improved to 127% from 138%.
Why it matters
The distribution matched reported net investment income, but it was one cent above adjusted net investment income. An approximately ﹩11 million incentive-fee waiver supported the quarter’s earnings, making the durability of coverage an important issue.
Credit indicators moved in a better direction. Investments on nonaccrual represented 3.8% of the portfolio at fair value, down from 4.2%, and 7.1% at cost, down from 8.1%. The company also repurchased shares below NAV after quarter-end, which can support per-share value when executed at a sufficient discount.
What to watch
Future distribution coverage will depend on portfolio income after the fee waiver, the pace of credit improvement, and realized outcomes on weaker investments. Continued repurchases could help NAV per share, but they do not remove the underlying credit risk reflected in the quarter’s losses.
Sources
This article is general information, not personalized investment advice. Fly High Investing may hold securities discussed in this article.