FS KKR Capital Reports Robust Q2 Performance
FS KKR Capital Corp (NYSE: FSK) has reported a net investment income of $0.77 per share for the second quarter of 2024. The company also reported an adjusted net investment income of $0.75 per share. These figures underscore a steady performance, supported by a total investment income increase of $5 million, reaching $439 million for the quarter.
Key Financial Metrics
- Net Investment Income: $0.77 per share
- Adjusted Net Investment Income: $0.75 per share
- Total Investment Income for Q2 2024: $439 million
- Third-Quarter Distribution: $0.70 per share
- Total Expected Distribution for 2024: At least $2.90 per share
- Available Liquidity: Approximately $4.7 billion
- Investment Portfolio Fair Value: $14.1 billion
- Weighted Average Yield on Debt Investments: 12%
- Non-Accruals: 4.3% of the portfolio on a cost basis, 1.8% on a fair value basis
Company Outlook
FSK has expressed confidence in its future opportunities, given its robust liquidity position of around $4.7 billion. The company anticipates that the elevated rate environment and spillover income will continue to drive earnings. For the third quarter, GAAP net investment income is projected to be around $0.72 per share, with adjusted net investment income estimated at $0.70 per share.
Investment Highlights
- The investment team originated $2.7 billion of investments in the first half of 2024.
- The top 10 portfolio companies make up 20% of the investment portfolio's fair value.
- FSK's joint venture represents 9.8% of the portfolio's fair value and is performing well.
- Global Jet Capital, a key investment, maintains a stable and competitive position with solid returns.
Bearish Highlights
- The company acknowledges earnings pressure in a downward rate environment.
- Non-accruals remain in the portfolio but have decreased in fair value terms.
Bullish Highlights
- FSK is satisfied with the quality of new investments and the performance of portfolio companies.
- The company is considering simplifying the capital structure of JW Aluminum for potential monetization.
- Management is focused on rotating out of legacy investments into more defensive industries.
Misses and Concerns
- Concerns were raised about spread compression due to competitive pressure.
- Average EBITDA on new originations decreased in the quarter.
Q&A Highlights
- The company intends to pay out what they earn, maintaining a focus on earnings growth.
- Management is working on a value creation plan for Kellermeyer after a 50% equity write-down.
- FSK is open to reducing non-income producing assets to drive earnings growth.
In conclusion, FS KKR Capital Corp closed the second quarter of 2024 with a strong performance. The company's focus on high-quality investments and effective liquidity management positions it well to navigate the competitive market and continue delivering value to its investors.
