KKR Bails Out Troubled BDC (FSK) with $300 Million Support Package After JPMorgan Group Cuts Credit Line
In response to mounting distress, rising defaults, and a severe first-quarter loss, KKR & Co. has intervened to stabilize its flagship $12.3 billion business development company, FS KKR Capital Corp (FSK). KKR announced a $300 million capital support package for FSK, consisting of a $150 million preferred equity injection and a $150 million share tender offer.1 This rescue package was launched shortly after a bank syndicate led by JPMorgan Chase reined in FSK's credit facility.
Bank Credit Cut and KKR's Capital Injection
FSK's credit stress reached a boiling point in May 2026. A banking group led by JPMorgan Chase moved to reduce its exposure to FSK, cutting the fund's credit facility2 just days before KKR stepped in.
To prevent a liquidity crisis and support exiting investors, KKR announced a dual-pronged support package.
As reported by CNBC:
"KKR said last week it will inject $150 million into its FSK fund while spending another $150 million to buy out investors who want to leave the fund. A group of banks led by JPMorgan reduced their exposure to the fund days before, CNBC reported."
The capital injection consists of $150 million in preferred equity to shore up FSK's balance sheet, alongside a $150 million share tender offer to absorb the wave of retail and wealth-channel redemption requests.
Context of FSK's Distress
The bailout follows FSK's disclosure of a massive $560 million loss for the first quarter of 2026, with its non-accrual default rate jumping to a staggering 8.1%. This stress is representative of the wider retail Business Development Company (BDC) market, which has faced record redemption requests and declining Net Asset Values in early 2026.
By injecting capital and buying back shares from fleeing investors, KKR is attempting to restore confidence in its credit franchise, though the reduction in bank leverage facilities underscores the tightening credit conditions facing even the largest managers.
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An instance of Illiquid private credit sold with retail liquidity inevitably forces gated withdrawals. — Faced with severe retail outflows and credit cuts, direct lenders must inject proprietary rescue capital to avoid hard gating. ↩︎
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An instance of Offloaded bank risk inevitably loops back to bank balance sheets as back-leveraged debt. — This illustrates bank syndicates reclaiming liquidity by reducing the back-leverage lines they extend to direct lenders. ↩︎