Fitch Cuts FS KKR Capital to Junk as Asset Quality Weakens
Fitch Ratings downgraded FS KKR Capital to BB+ citing rising non-accruals and risks from AI disruption in software portfolios. The outlook remains negative.
Fitch Ratings has downgraded the credit rating of FS KKR CAPITAL CORP to junk status, moving the fund from a lower-medium grade of BBB- to a non-investment grade of BB+. The ratings agency cited a continued deterioration in asset quality and maintained a negative outlook, signaling potential further downgrades in the future.
The private credit industry in the United States is entering a challenging phase as borrower defaults are expected to rise. A primary concern for Fitch is the impact of artificial intelligence on software companies, which constitute roughly 16% of the portfolio managed by KKR & CO INC and its partners. The agency warned that AI-driven disruption could significantly pressure the business models and creditworthiness of these borrowers.
