Fitch Cuts FS KKR Capital to Junk as Asset Quality Weakens

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.