FS KKR Capital Corp

Current report

We may be subject to risks associated with our investments in unitranche loans.

Current report

We originate and invest in unitranche loans, which combine characteristics of first lien, second lien and, in some cases, subordinated or mezzanine debt, generally within a single credit facility. In certain unitranche investments, another lender may hold the “first out” portion of the loan while we retain the “last out” portion, or we may otherwise structure a unitranche loan to provide for a waterfall of cash flow priority among lenders. Where a loan is structured in this manner, the “first out” tranche will generally receive priority with respect to payments of principal, interest and any other amounts due under the loan, while the “last out” tranche we hold is generally paid only after the “first out” tranche has been paid in full. In exchange for assuming this increased risk of loss, we typically expect to earn a higher effective yield on the “last out” portion than is earned on the “first out” portion or on a traditional first lien loan. The rights we may have with respect to the collateral securing a unitranche loan, including the ability to control enforcement remedies following a default, may also be limited under the agreement among lenders or similar arrangement governing the loan, and the holders of the “first out” tranche may be able to control such remedies even where our interests as the “last out” lender are adversely affected.

Current report

Unitranche loans may also rank junior to other debt instruments of the portfolio company and may provide for a significant portion of principal to be repaid in a lump sum at maturity, which increases the risk of loss if the portfolio company is unable to repay or refinance that amount when due. As a result of these features, our unitranche loan investments may involve a greater risk of loss than investments in more senior, traditionally structured first lien loans, and any such losses could have a material adverse effect on our business, financial condition and results of operations.

Current report

We and the Adviser could be the target of litigation, and extensive regulation of the Adviser’s and its affiliates’ business may impede its ability to effectively manage our portfolio companies, which could materially and adversely affect our business.

Current report

We and the Adviser have become, and could in the future become, the target of securities class action litigation or other similar claims, including if the market price of our common stock fluctuates significantly or for other reasons. The proceedings could continue without resolution for long periods of time and the outcome of any such proceedings could materially adversely affect our business, financial condition, and/or operating results. Any litigation or other similar claims could consume substantial amounts of our management’s time and attention, and that time and attention and the devotion of associated resources could, at times, be disproportionate to the amounts at stake. Litigation and other claims are subject to inherent uncertainties, and a material adverse impact on our financial statements could occur for the period in which the effect of an unfavorable final outcome in litigation or other similar claims becomes probable and reasonably estimable. In addition, we could incur expenses associated with defending ourselves against litigation and other similar claims, and these expenses could be material to our earnings in future periods. See also “Note 10.

Current report

In addition, the Adviser’s and its affiliates’ business is subject to extensive regulation, legislative focus and regulatory scrutiny, and their respective compliance with laws and regulations is subject to frequent examinations, inquiries and investigations by U.S. federal and state as well as non-U.S. governmental agencies and regulators and self-regulatory organizations in the various jurisdictions in which the Adviser and/or its affiliates operate around the world.

Current report

Any of these governmental and regulatory authorities may challenge the Adviser’s, its affiliates’ and their respective employees’ compliance with any applicable laws and regulations, and the Adviser, its affiliates and its employees could become subject to civil or criminal proceedings or other sanctions brought by them for such noncompliance.

Current report

For instance, on January 14, 2025, the Antitrust Division of the U.S. Department of Justice, or the DOJ, filed a civil antitrust complaint, or the DOJ Complaint, in the U.S. District Court for the Southern District of New York against KKR & Co. and various KKR-sponsored investment entities, or the KKR Defendants, alleging violations of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, or the HSR Act. The DOJ Complaint requests various relief for the alleged violations of the HSR Act by the KKR Defendants, including civil penalties in an amount to be determined and various equitable relief, including disgorgement and enjoining future violations of the HSR Act. On January 14, 2025, KKR & Co. and its subsidiaries filed a complaint, or the KKR Complaint, in the U.S. District Court for the District of Columbia against Doha Mekki in her official capacity as Acting Assistant Attorney General of the United States for the Antitrust Division, the DOJ, the Federal Trade Commission, or the FTC, and the United States of America pertaining to the HSR-related investigations conducted by the DOJ. On January 16, 2025, KKR & Co. voluntarily dismissed the KKR Complaint filed in the U.S. District Court for the District of Columbia and re-filed it in the U.S. District Court for the Southern District of New York as related to the DOJ Complaint. The KKR Complaint requests various forms of relief, including declaratory judgments that: (i) KKR & Co. did not violate the HSR Act; (ii) the DOJ’s and FTC’s interpretations of the HSR Act are unconstitutionally vague; and (iii) the DOJ seeks an excessive fine in violation of the U.S. Constitution. KKR & Co. filed a motion to dismiss the DOJ Complaint on April 17, 2025. The DOJ filed its motion to dismiss the KKR Complaint on April 23, 2025, and KKR & Co. and the DOJ agreed to dismiss one count of the KKR Complaint and to stay the rest of the DOJ’s motion to dismiss pending resolution of KKR & Co.’s motion to dismiss the DOJ Complaint. On August 26, 2026, KKR & Co. entered into a Stipulation and Order (the “Stipulation”) with the DOJ to resolve the DOJ Complaint. Pursuant to the Stipulation and contingent on a proposed final judgment becoming effective, the DOJ would release all defendants from claims made in the DOJ Complaint, and KKR & Co. would pay $250.0 million to the DOJ. Additionally, the DOJ notified KKR & Co. that it has terminated all of its related investigations against KKR & Co. and its affiliates. The Stipulation and a proposed final judgment were filed with the U.S. District Court for the Southern District of New York on August 26, 2026. The proposed final judgment is subject to judicial approval under the Antitrust Procedures and Penalties Act, 15 U.S.C. § 16, for the limited purpose of determining whether the proposed final judgment is in the public interest. In addition, KKR & Co. is currently, and may from time to time become, subject to other investigations by the Antitrust Division of the DOJ and ot…

Excerpt shortened here; the source contains the full paragraph.

Current report

Any resolution of claims brought by a governmental and regulatory authority may also require an admission of wrongdoing or result in adverse limitations or prohibitions on the Adviser’s ability to conduct its business. In addition, the adverse publicity, costs relating to legal defenses, and reputational harm relating to the regulatory activity or imposition of these sanctions could be significant.

Previous report

We issued the Convertible Preferred Stock on June 29, 2026 and may in the future determine to issue additional preferred stock, which could adversely affect the market value of our common stock.

Previous report

On June 29, 2026, we issued and sold 6,000,000 shares of the Convertible Preferred Stock, at a price of $25.00 per share, for gross proceeds of $150.0 million, pursuant to the Purchase Agreement. The Convertible Preferred Stock ranks senior to our common stock with respect to the payment of dividends and the distribution of assets upon liquidation. The Convertible Preferred Stock has a liquidation preference equal to $25.00 per share, plus any accumulated but unpaid dividends to, but excluding, the date of distribution.

Previous report

The Convertible Preferred Stock is convertible, in whole or in part, at the option of a holder, after the six-month anniversary of the issue date, into shares of our common stock at an initial conversion price of $18.83 per share, subject to certain anti-dilution adjustments as set forth in the Articles Supplementary; provided that in no event will the conversion price be less than the NYSE Minimum Price (as defined in the Articles Supplementary). At any time on or after the three-year anniversary of the issue date, upon Board approval (including a majority of our independent directors), and provided that the volume weighted average price of our common stock on the NYSE for the 30 consecutive trading days preceding our notice of redemption equals or exceeds the then-applicable conversion price, we may also redeem the Convertible Preferred Stock by delivering shares of our common stock in lieu of cash.

Previous report

The issuance of the Convertible Preferred Stock and any additional preferred stock with dividend or conversion rights, liquidation preferences or other economic terms favorable to preferred holders could adversely affect the market price of our common stock by making an investment in our common stock less attractive. Dividends on the Convertible Preferred Stock are cumulative and must take priority over any dividends or other payments to our common stockholders. Holders of the Convertible Preferred Stock are not subject to any of our expenses or losses and are not entitled to participate in any income or appreciation in excess of their stated preference (other than through conversion into shares of our common stock). Under the 1940 Act, the Convertible Preferred Stock constitutes a “senior security” for purposes of the 150% asset coverage test.

Previous report

Our common stockholders may experience dilution upon the conversion of the Convertible Preferred Stock.

Previous report

If we deliver shares of our common stock upon a conversion of the Convertible Preferred Stock at a time when our net asset value per share exceeds the conversion price then in effect, our common stockholders may incur dilution. Our stockholders will also experience dilution in their ownership percentage of common stock upon our issuance of common stock in connection with the conversion of the Convertible Preferred Stock. In addition, to the extent that we elect to redeem shares of the Convertible Preferred Stock by delivering shares of our common stock pursuant to our stock redemption right, our common stockholders will similarly experience dilution. Any dividends paid on our common stock will also be paid on shares of our common stock issued in connection with a conversion of the Convertible Preferred Stock after such issuance.

Previous report

Holders of the Convertible Preferred Stock have the right to elect members of our Board of Directors and have class voting rights on certain matters, which may limit our ability to pursue certain actions that might otherwise be in the interests of our common stockholders.

Previous report

Holders of the Convertible Preferred Stock are entitled to vote on an as-converted basis on each matter submitted to a vote of our stockholders. In addition, for so long as we are subject to the 1940 Act, the holders of Convertible Preferred Stock, voting separately as a single class, have the right to elect two members of the Board at all times, and the balance of directors is elected by the holders of our common stock and the Convertible Preferred Stock voting together. If at any time accumulated dividends on the outstanding shares of Convertible Preferred Stock equal to at least two full years’ dividends are due and unpaid, or if holders of any other preferred stock become entitled to elect a majority of our directors under the 1940 Act, the number of directors constituting the Board will automatically increase and holders of the Convertible Preferred Stock and any other preferred stock will have the power to elect such additional directors to constitute a majority of the Board, voting separately as a class. Furthermore, holders of the Convertible Preferred Stock have class voting rights on certain matters, including amendments to our charter that materially and adversely affect the rights of the Convertible Preferred Stock, increases or decreases in the authorized number of preferred shares or issuances of additional preferred stock, and the creation of any new class or series of shares ranking senior or on parity with the Convertible Preferred Stock with respect to dividends or liquidation.

Previous report

In addition, upon the occurrence of a Change of Control (as defined in the Articles Supplementary), at the option of holders of a majority of the then-outstanding shares of Convertible Preferred Stock, we will be required to redeem all of the then-outstanding shares of Convertible Preferred Stock upon 60 days’ notice following the announcement or occurrence of such Change of Control, for cash consideration equal to the Liquidation Preference plus accumulated but unpaid dividends. These provisions may limit our ability to pursue strategic transactions or other actions that might otherwise be in the best interests of our common stockholders. Restrictions imposed on the declarations and payment of dividends or other distributions to the holders of our common stock and preferred stock, both by the 1940 Act and by requirements imposed by rating agencies or the terms of our credit facilities or other financing arrangements, might also impair our ability to maintain our qualification as a RIC for U.S. federal income tax purposes.

Previous report

Dividend payments on the Convertible Preferred Stock are not guaranteed.

Previous report

Although dividends on the Convertible Preferred Stock are cumulative, the Board must approve the actual payment of dividends. The Board can elect at any time, and for an indefinite duration, not to pay any or all accrued dividends. The Board could elect to suspend dividends for any reason, and may be prohibited from approving dividends in the following instances:

Previous report

•poor historical or projected cash flows;

Previous report

•the need to make payments on our indebtedness;

Previous report

•concluding that payment of dividends on the Convertible Preferred Stock would cause us to breach the terms of any indebtedness or other instrument or agreement; or

Previous report

•determining that the payment of dividends would violate applicable law regarding unlawful distributions to stockholders.

Previous report

Our ability to pay dividends on and/or repurchase shares of Convertible Preferred Stock may be limited by Maryland law, the 1940 Act and the terms of our debt facilities as well as future agreements we may enter.

Previous report

Under Maryland law, a corporation may pay dividends on and repurchase stock where authorized by the Board and as long as, the Board is able to determine that, after giving effect to the dividend payment or repurchase, (i) the corporation is able to pay its debts as they become due in the usual course of business (the equity solvency test), and (ii) except in limited circumstances, the corporation’s total assets exceed the sum of its total liabilities plus the amount that would be needed, if the corporation were to be dissolved at the time of the dividend payment or repurchase, to satisfy the preferential rights upon dissolution of stockholders whose preferential rights on dissolution are superior to those receiving the dividend or whose stock is being repurchased (the balance sheet solvency test). If we are insolvent at any time when a repurchase of shares of Convertible Preferred Stock is desired or required to be made (or such repurchase would render us so under either of the above tests), we may not be able to effect such repurchase. Furthermore, the terms of our debt facilities or other financing arrangements may restrict our ability to repurchase shares of Convertible Preferred Stock for cash during an event of default, and we expect to enter into agreements in the future that may similarly restrict our ability to repurchase in cash in such instances.

Previous report

In addition, under the 1940 Act, we may not (1) pay dividends or distributions (other than dividends payable in our common stock) to holders of any class of our capital stock, including the Convertible Preferred Stock, or to purchase any such capital stock, if our “senior securities representing indebtedness” fail to have an asset coverage of at least 150% (measured at the time of declaration of such distribution or at the time of any such purchase, and accounting for such distribution or purchase price) or (2) pay dividends or distributions (other than dividends payable in our common stock) to our common stockholders, or to purchase any shares of our common stock, if our “senior securities that are stock” fail to have an asset coverage of at least 150% (measured at the time of declaration of such distribution, or at the time of any such purchase, and accounting for such distribution or purchase price). If the value of our assets declines, we might be unable to satisfy these asset coverage requirements.

Previous report

Purchases of our common stock under the Company Share Repurchase Authorization may have the effect of maintaining the market price of our common stock at levels above those that would otherwise prevail in the open market.

Previous report

Repurchases under the Company Share Repurchase Authorization may have the effect of maintaining the market price of our common stock or retarding a decline in the market price of our common stock, and, as a result, the price of our common stock may be higher than the price that otherwise might have existed in the open market.

Previous report

There is no assurance that the Company Share Repurchase Authorization will result in repurchases of our common stock or enhance long-term stockholder value, and repurchases, if any, could affect our stock price and increase its volatility and will diminish our cash reserves.

Previous report

There can be no assurance that any repurchases will occur under the Company Share Repurchase Authorization, or, if they occur, that they will enhance stockholder value. In addition, any repurchases under the Company Share Repurchase Authorization could have a material adverse effect on our business for the following reasons:

Previous report

•Repurchases may not prove to be the best use of our cash resources.

Previous report

•Repurchases will diminish our cash reserves, which could impact our ability to finance future growth and to pursue possible future strategic opportunities.

Previous report

•We may incur debt in connection with our business in the event that we use other cash resources to repurchase shares, which may affect the financial performance of our business during future periods or our liquidity and the availability of capital for other needs of the business.

Previous report

•Repurchases could affect the trading price of our common stock or increase its volatility and may reduce the market liquidity for our stock.

Previous report

•Repurchases may not be made at the best possible price and the market price of our common stock may decline below the levels at which we repurchased shares of common stock.

Previous report

•Any suspension, modification or discontinuance of the Company Share Repurchase Authorization could result in a decrease in the trading price of our common stock.

Previous report

•Repurchases may make it more difficult for us to meet the diversification requirements necessary to qualify for tax treatment as a RIC for U.S. federal income tax purposes; failure to qualify for tax treatment as a RIC would render our taxable income subject to corporate-level U.S. federal income taxes.

Previous report

•Repurchases may cause our non-compliance with covenants under our financing agreements, which could have an adverse effect on our operating results and financial condition.

Previous report

•To the extent we use proceeds from the Convertible Preferred Stock to fund repurchases, the amount of capital available for portfolio investments may be reduced, which could adversely affect our net investment income and ability to pay distributions to our common stockholders.

Previous report

On June 29, 2026, the Company issued and sold 6,000,000 shares of Convertible Preferred Stock to the Purchaser pursuant to the Purchase Agreement at a price of $25.00 per share. The Company intends to use the gross proceeds to the Company of $150.0 million from the sale of Convertible Preferred Stock for general corporate purposes including, without limitation, funding any repurchase program relating to shares of the Company’s common stock or debt repayment. In connection with the issuance of the Convertible Preferred Stock, the Company filed the Articles Supplementary with the State Department of Assessments and Taxation of the State of Maryland. The Convertible Preferred Stock is a series of the Company’s preferred stock, par value $0.001 per share.

Previous report

The Convertible Preferred Stock ranks senior to the Company’s common stock with respect to all liquidation, winding up, dissolution, dividend and distribution rights. The Convertible Preferred Stock has a liquidation preference equal to $25.00 per share, or the Liquidation Preference, plus an amount equal to all accrued but unpaid dividends, if any, accumulated to (but excluding) the date fixed for distribution or payment, whether or not earned or declared by the Company, but excluding interest on any such distribution or payment. Dividends on the Convertible Preferred Stock will be payable on a quarterly basis in an initial amount equal to 5.00% per annum of the Liquidation Preference per share, payable in cash or, at the Company’s option, 7.00% per annum of the Liquidation Preference per share payable in additional shares of Convertible Preferred Stock; provided that the Company shall be prohibited from paying dividends in additional shares of Convertible Preferred Stock if the conversion feature at the time of issuance of such additional shares is equal to or greater than 10.00% of the value of the Convertible Preferred Stock. After the 5.5-year anniversary of the issue date, the dividend rate will increase annually by 1.00% per annum. There is no cap on such 1.00% per annum increases.

Previous report

The shares of Convertible Preferred Stock were offered and sold in reliance on Section 4(a)(2) of the Securities Act. These securities have not been and will not be registered under the Securities Act or any state securities laws and, unless so registered, may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, as applicable.

Previous report

Affiliated Purchaser Programs

Previous report

(3)Includes amounts purchased by KKR Alternative Assets L.P., a Delaware limited partnership, in connection with its tender offer to purchase up to $150.0 million in aggregate amount of our common stock at a price equal to $11.00 per share, less any applicable withholding taxes and without interest, upon the terms and subject to the conditions set forth in the Offer to Purchase dated May 12, 2026 and in the related Letter of Transmittal, which, together with any amendments or supplements thereto, are collectively referred to as the KKR Tender Offer. Following the expiration of the KKR Tender Offer at 11:59 p.m., New York City time, on June 11, 2026, KKR Alternative Assets L.P. publicly disclosed that it accepted for purchase 13,636,363 shares of the Company’s common stock validly tendered and received, and not properly withdrawn at or before the expiration date, at a purchase price of $11.00 per share for an aggregate purchase price of approximately $150 million, excluding fees and expenses relating to the KKR Tender Offer. In light of the oversubscription of the KKR Tender Offer, KKR Alternative Assets L.P. accepted the shares on a pro rata basis based on a final proration factor of 75.779%.

Previous report — wording carried elsewhere

On May 6, 2026, the Board approved the Company Share Repurchase Authorization, which authorizes the repurchase of up to $300.0 million in aggregate of our outstanding common stock in the open market, by tender offer or in privately negotiated purchases in compliance with the Exchange Act and other applicable law. The Company Share Repurchase Authorization is scheduled to expire on June 1, 2027, unless extended, or until the aggregate repurchase amount approved by the Board has been expended. Pursuant to the Company Share Repurchase Authorization, we are authorized to repurchase shares of our common stock at prices below our most recently reported net asset value per share, including in accordance with the guidelines specified in Rules 10b-18 and 10b5-1 under the Exchange Act, and we will determine, in our discretion, the timing, manner, price and amount of any repurchases based upon the evaluation of economic and market conditions, stock price, available cash, applicable legal, contractual and regulatory requirements and other factors. The Company Share Repurchase Authorization does not require us to repurchase any specific number of shares and may be suspended, extended, modified or discontinued at any time, subject to applicable law.

Previous report — wording carried elsewhere

June 30, 2026. Dollar amounts in the table below and the related notes are presented in millions, except for share and per share amounts.