The JPMorgan Chase & Co. building before the ribbon cutting ceremony, at the firm’s new headquarters at 270 Park Avenue, in New York City, U.S., Oct. 21, 2025.
Eduardo Munoz | Reuters
A JPMorgan Chase-led group of banks cut their exposure to a private credit fund co-managed by KKR days before the asset manager announced it was spending $300 million to prop up the troubled vehicle.
The fund, FS KKR Capital Corp., said Monday in a release that KKR will inject $150 million into the fund as equity and spend another $150 million to buy shares from investors who want to exit.
Those moves, labeled “Strategic Value Enhancement Actions” by the fund, came after the JPMorgan-led group on May 8 slashed its credit line by $648 million, or about 14%, to $4.05 billion. Some lenders may have exited entirely rather than extend their commitments, according to the filing.
The fund, co-run by KKR and the alternative asset manager Future Standard and often referred to by its ticker, FSK, has become one of the most visible fault lines in the private credit story. Its shares have plunged by nearly half over the past year and trade at a deep discount to the fund’s net asset value.
In March, Moody’s downgraded FSK’s ratings to junk amid mounting stress in the portfolio. Since then, loans to software maker Medallia and dental services firm Affordable Care have stopped paying interest, executives said Monday.
FSK said that it had losses of $2 per share in the first quarter, or about $560 million in total losses given the roughly 280 million share count, as the fund’s net asset value fell about 10%.
“Our first quarter decline in net asset value was driven by investments which have impacted prior quarters, certain new non-accrual assets, and the impact of market-driven spread widening,” CEO Michael Forman and President Daniel Pietrzak said in a release.
“We believe FSK’s current stock price underappreciates the long-term value associated with FSK’s investment portfolio and the KKR Credit platform,” they added.
FSK loans that are no longer generating income jumped to 8.1% by the end of the first quarter from 5.5% at yearend, the fund said.
Further to fall?
Besides cutting its credit line, the JPMorgan-led group also raised interest rates on the remaining facility and gave the fund more room to absorb losses without triggering a default.
The latter move, lowering the minimum shareholders’ equity floor from $5.05 billion to $3.75 billion, gives FSK more breathing room. But it also indicates that lenders believe the firm’s assets have further to fall.
The FSK credit facility was funded by a syndicate of banks led by JPMorgan as administrative agent, a role that typically includes coordinating lender communications and amendment negotiations. ING Capital served as collateral agent, while the other participating lenders were not named in the filing.
JPMorgan, the largest U.S. bank by assets, has made broader moves to insulate itself from private credit turmoil, in part by marking down the value of private credit loans held as collateral on its own books, CNBC reported in March. Many of those marked-down loans are to software companies facing possible disruption from artificial intelligence.
Besides the $300 million that KKR is spending to support FSK, the fund’s board also authorized a separate $300 million share repurchase program, and KKR agreed to waive half its incentive fees for four quarters.
FSK, which lends to private, middle-market U.S. companies, became the second-largest publicly traded business development company, or BDC, when it was formed through a merger of two predecessor funds in 2018.
The fund’s largest single category of loans is for software and related services, which made up 16.4% of exposure at yearend.
