FS KKR Sells $400M in Junk-Rated Bonds, Testing BDC Market
FS KKR Capital (FSK) is the issuer of the $400 million junk-rated bonds. The rare high-yield offering may weigh on the stock if the market views the increased debt as a risk, but could also support the shares if the proceeds fund accretive investments. The deal tests BDC funding dynamics and investor appetite for credit risk.
- • $400 million junk bond issuance
- • Junk bond market sell-off could push yields higher, raising borrowing costs
- • BDC regulatory changes limiting leverage ratios
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Will the bond issuance dilute FS KKR's equity?
It doesn't directly dilute equity, but higher interest expenses could reduce net investment income, potentially weighing on dividend payouts.
What is the credit rating of the bonds?
The bonds are junk-rated, likely below investment grade, reflecting the BDC's leveraged balance sheet and the inherent risk of its portfolio.
How does this compare to other BDC funding?
Most BDCs rely on investment-grade bonds or bank credit facilities; this rare junk deal may set a new benchmark for BDC debt issuance in the high-yield market.