FSK KKR Capital Takes $560M Loss as JPMorgan-Led Syndicate Cuts Credit Line
FS KKR Capital Corp (FSK), the second-largest publicly traded business development company (BDC) co-managed by KKR and Future Standard (formerly FS Investments), reported a massive $560 million loss in the first quarter of 2026. The fund's nonaccrual loans—debt where borrowers have stopped paying interest—surged to 8.1% of the portfolio, driven by stress in dental services firm Affordable Care and software maker Medallia.
In response to the mounting credit stress, a JPMorgan Chase-led syndicate of banks slashed FSK's revolving credit facility by $648 million (approximately 14%), reducing it to $4.05 billion. The banks also raised borrowing costs on the remaining facility and lowered the fund's minimum shareholders' equity floor from $5.05 billion to $3.75 billion, signaling expectations of further valuation write-downs. To shore up the vehicle, KKR announced a $300 million support package, comprising a $150 million equity injection and $150 million to purchase shares from exiting retail investors.
Additionally, this event highlights a broader retrenchment by traditional banks from private credit leverage. JPMorgan has reportedly begun marking down the value of private credit loans held as collateral on its own books, particularly in the software sector, which faces disruption from artificial intelligence. This credit squeeze is part of a broader pattern of rising defaults and valuation stress across the sector, as analyzed in Private Credit Market Update (Late May 2026): Rising Defaults, AI Software Pullback, and Regulator Stress Tests.