Non-diversified, closed-end management investment company FS KKR Capital Corp. announced on Monday a reduction of its second-quarter dividend by 6.7% to $0.42 per share, down from the previous quarterly dividends of $0.48 and $0.45 per share. The new dividend will be paid on July 2 to shareholders of record as of June 17.
This dividend reduction is closely tied to the company's first-quarter financial performance. The earnings report showed that FS KKR's net investment income for the quarter was $0.42 per share, falling short of the market expectation of $0.43 per share. More concerning, the company reported realized and unrealized losses of $2.00 per share, leading to a sharp decline in net asset value from $20.89 to $18.83, representing a quarterly drop of 9.9%. Concurrently, the proportion of loans no longer accruing interest increased from 3.4% to 4.2%.
Facing performance pressure and a stock price persistently trading at a discount, the company's major shareholder, KKR & Co LP, announced two significant support measures. First, KKR will invest $150 million to purchase convertible preferred shares with an initial conversion price of $18.83, offering a dividend rate of 5% in cash or 7% if paid in kind. Second, KKR will initiate a $150 million fixed-price tender offer at $11 per share.
Additionally, the company's board of directors approved a $300 million share repurchase program. KKR has also agreed to waive its share of 50% of the subordinated income incentive fees for the next four quarters. CEO Michael Forman stated that these actions demonstrate confidence in the long-term value of FS KKR Capital.